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Estate Agent's Commision

If a property was sold through the efforts of an estate agent (registered as such with the Namibian Estate Agents Board), the agreement should provide for the agent’s commission.

It should be the seller’s responsibility to pay agent’s commission and in practice it is paid out of the proceeds of the sale against registration of transfer of the property in the name of the purchaser. This is also the reason why a claim for commission by the agent would most likely be addressed towards the seller.

A “separate agreement” between the purchaser and the agent whereby the purchaser agree to pay commission “directly” to the agent in order to “keep costs down” and to “safe on Transfer Duty” would be illegal (Section 6 of the Transfer Duty Act).

There are no prescribed tariffs by law for commission; the normal (negotiable) “rate” is anything between 3% and 7% of the purchase price (if VAT is not specifically excluded is regarded to be included). It is recommended that the amount of commission should be agreed upon (with detail in writing) between the seller and the agent at the very beginning of the sale process – when the agent is instructed to market the property – however it should be agreed upon before the seller accepts the offer from the purchaser.  This way many misunderstanding can be avoided, such misunderstandings often leads to sellers accusing agents of “wanting to steal from them”. The best way to ensure this doesn’t happen is for both seller and agent to agree in writing on the price, gross and nett, commission percentage and whether VAT is included or not. Sellers should also understand that if the buyer offers less than the asking price, the agent still receives the same percentage agreed upon.

Sellers should also ensure that the mandated estate agent will not exclude other agents from their property (mandate) by not offering them a 50/50 split but an unequal split of the commission, such as 60/40 and up to 80/20. An unequal split will make it less acceptable to other estate agents to introduce their buyers to the property - a less than 50 percent commission offer to other estate agents will most likely drive more agents and their buyers away from the seller’s property.


Rental property and estate agents' commission

Commission on a rental property is based on the monthly amount of rental income achieved for the landlord over the period of the lease. This “letting fee” (commission) is paid on receipt of rental on a monthly basis and could also be paid out as a lump sum – depending on the agreement between the owner and the agent. This monthly fee could be as much as 8 to 10 percent plus VAT of the monthly rental amount payable to the landlord by the tenant. The agent mostly remains responsible as liaison between tenant and owner and is furthermore responsible for collection of rent and maintenance matters on the property.


Some estate agents work for a placement fee (as suppose to a monthly fee), normally equal to the first month’s rental income. This commission on rental is paid on receipt of rental on a monthly basis and paid out as a lump sum if the landlord lets the property. In this case, the rental agent only sources and pre-qualifies a tenant for the owner, but will not further be involved in the monthly management of the property (maintenance). The contractual relationship (and payments) will in future remain directly between the landlord and the tenant.



Commission Disputes

Sellers often grant an agent a mandate to sell properties for a specific price. These mandates may be given verbally or in writing. It may happen that sellers along the line have a change of heart and decide that they no longer wish to sell the property or perhaps sell to someone else. This often leads to disputes between sellers, buyers and agents.

The most frequent enquiries are based on the following scenario:

An agent (A) initially introduced a buyer to a seller’s property (a deal is later on concluded between the same buyer, seller and in respect of the same property but for a different price and probably involving another agent), A’s commission claim will most likely be rejected on two grounds:

Although the buyer was – at the time of the introduction- keen to make an offer, he was unable to purchase because -

(a) the price was too high; and
(b) of other financial commitments.

Should a second agent (“B”) eventually successfully negotiate a transaction with the same buyer and seller, after -

(a) the seller reduced the price, and
(b) the buyer’s financial obstacles was out of the way,

the seller would most probably pay B her agreed commission, and refuse to pay A any commission. Depending on the merits of the case, the seller may end up paying “double commission”.



The current law in Namibia is as follows.

“An estate agent claiming commission on the sale of an immovable property must prove both (1) a contractual and (2) a casual relationship to succeed;

•    a contractual relationship mandating the agent to find a willing and able purchaser for the seller and
•    a casual relationship between the agent’s mandated efforts and the property’s sale or purchase”


It is well established in our law that the plaintiff bears the burden to prove her case on a balance of probabilities.

Therefore, A would need to prove a mandate from the seller. If she is unable to provide any evidence of an express mandate, and instead relies on a silent/implied mandate, the reality is that a court may find that A is unable to prove the terms of such mandate – specifically that the seller had indeed agreed to the commission rate she alleged – her claim may fail at this early stage.

If A can furthermore not prove that she was the “effective cause” of the sale her claim would further fail on this second ground. At the time of the introduction by A, the buyer might have been interested, willing and keen, but not “able” to buy. Based on that, A might not be the effective cause.

Should the buyer at a later stage become “able” (through another intervention not caused by A, perhaps through bank/finance approval, removal of barriers due to negotiations of another agent that leads to the successful conclusion of the deal) A could find herself in a situation where “the further intervention became conclusive and dominating in effecting the eventual sale and she would be unable to prove her claim successfully.

However: Where nothing intervenes to prevent the introduction from leading on to the sale, the introduction efforts (of A) may still be regarded as the effective cause. This would depend on the circumstances and mandate from the seller.

The General Rule:
In the absence of evidence to the fact that the second agent agents efforts was conclusive and dominating in effecting the eventual sale, the efforts of the “introductory agent” would most likely be regarded as the effective cause making the introductory agent the agent who “brought about” the eventual sale.



Case Law
(see attachments)

Attachments:
Download this file (Estate agents' commission effective cause explained 1.pdf)Effective Cause 1[ ]243 Kb
Download this file (Estate agents' commission effective cause explained 2.pdf)Effective Cause 2[ ]242 Kb
Download this file (No 1 Estates v Baard.pdf)Baard[ ]49 Kb
Download this file (Wakefields.pdf)Wakefields[ ]47 Kb