"Effective cause" Wording in mandates still causing arguments

Controversy still surrounds the terminology “effective cause of the sale”, which is regularly used in real estate property mandate documents, says Lanice Steward, Managing Director of the Cape Peninsula estate agency, Anne Porter Knight Frank.

“Sellers,” said Steward, should take note that property attorneys in South Africa have given different interpretations to these words. If this factor is ignored, the seller could find himself in trouble.”

One interpretation, said Steward, is that any agent who introduced the buyer to the property or to the seller can claim to be the effective cause of the purchase if and when that same person eventually buys the property, whether or not they have kept in contact with the buyer.

“Many attorneys have said that even if the sale is achieved by another agent, the agent who brought the buyer and seller together initially can sue for full commission – in addition to any sums paid to the agent who brought about the sale agreement. In many instances, therefore, the seller would be liable for two commissions.”

Some mandates, said Steward, contain a clause emphasising that if a sale takes place without the agent who brought the buyer and seller together, commission is payable three months after the sole mandate has expired.

“This clause is essential,” said Steward, “because it is only too easy for a dishonest seller to wait until the sole mandate has ended and then do a private deal with the buyer - and this has happened more than once.”

When such cases have been taken to court, said Steward, the ruling has almost always been in favour of the agent who was the initial effective cause of the sale.

Another interpretation of the contentious words, said Steward, has been that only the agent who actually got the deal signed can be deemed to be the effective cause. This interpretation, although often put forward, according to Grant Gunston Attorneys, has never yet been supported by the courts and if it were it could lead to all sorts of nefarious practices.

Article by: www.anneporter.co.za