Owners of immovable property should be aware when granting a mandate to rental/selling agents to find suitable tenants for their properties.
Most estate and rental agencies include clauses in their standard lease agreements providing that in the event of the owner and tenant concluding a sale agreement after the expiry of the lease, the agency will earn the commission on the selling price.
A similar clause would read as follows:
“In the event that the tenant/occupier in terms of the lease agreement purchases the property, 007-Agencies will be entitled to a 5% (Plus VAT) agent’s commission on the sale of the property, based on the selling price and payable by the Landlord”
Not all owners are aware, but such a clause is prohibited by the EAAB’s Code of Conduct and is not enforceable, unless agreed to in writing by the Landlord.
What is allowed and enforceable is to create an ordinary open mandate in this manner from which the estate agency can eventually benefit. As the Consumer Protection Act applies to the relationship between landlords and agents and requires open and fair dealing by service providers, the agency should point out this clause to the landlord, failing which it may constitute grounds for the landlord to deny that he is bound by that provision.
In other words, an owner who gives a mandate to an agency to obtain a tenant, is not obliged to accept such a clause in a lease agreement and must delete as part of the agreement. If, however, the Landlord signs the lease agreement with such a clause included, he/she will be bound to the payment of the commission to the agency in the event of a sale. There is an obligation on the agent to discuss and disclose the provisions of such a clause.
Wietz Viljoen, WVA-INC.
This article is for general information purposes and is aimed at advising the public. It should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice