High Court rules no FFC no commission

Jan 9, 2019 | Features, Local Property

Romy Tarboton, director Signature Real Estate and sales partner Amanda Fenner-Solomon.

Estate agents should do all they can to ensure the EAAB issue them with valid FFC’s

No FFC no claim to sue for commission ruled acting Cape Town High Court judge Diane Davis on 12 December 2018 – a ruling that has thousands of agents worried as this directly impacts their income while still awaiting the Estate Agency Affairs Board (EAAB) to issue their FFC’s for 2019.

There are many estate agents who say they can relate to the frustrating ordeal that Romy Tarboton, director of Signature Real Estate in Cape Town recently went through. In a nutshell, Signature lost out on R13 440 in commission in addition to spending ‘hundreds and thousands of rands’ in legal fees because the Estate Agency Affairs Board (EAAB) was tardy in the issuing of fidelity fund certificates (FFC’s) to the company and its estate agents.

Background

According to Tarboton last April one of Signature’s estate agents brokered a joint rental deal on a home in Hout Bay with Godelieve Koelma from Atlantic Seaboard Realty. A 50/50 commission split was agreed upon but upon receipt of Signature’s FFC’s, incorrectly issued by the EAAB in the name of Signature’s former name, Koelma refused to pay them their share. She contended that Signature were not entitled to receive commission on the lease as at the time when the lease was signed Signature and their agents were not in possession of the correct FFCs.

Tarboton told the court that the EAAB was informed already in May 2017 of the company’s name change and conversion from Hidocol CC to Signature Real Estate Pty. The Board was requested to register the changes and issue revised FFC’s reflecting the new details but come 1 January 2018 the EAAB issued their new FFC’s in the name of Hidocol CC.

In a widely circulated ‘open letter’ Tarboton alleged that they lodged 57 queries via the MyEAAB portal and eventually was calling the EAAB office every day. Only in May did the Board issue corrected FFC’s in the name of Signature Real Estate and in August that year issued revised FFC’s to Signature and its agents that were backdated to 1 January 2018 as the date of issue.

Joseph Sakoneka, a registration manager with the EAAB, submitted an affidavit where in he states that Signature and its directors “were entitled to be issued with Fidelity Fund Certificates (FFCs) on 1 January 2018, but as a result of an oversight of the Estate Agency Affairs Board (EAAB), the FFCs were only issued in May 2018”.

Tarboton continues that they reported the dispute with Atlantic to the EAAB who apparently said they see no need to investigate, hence Signature took legal action and approached the Western Cape High Court.

Get court to order ‘tardy’ EAAB to fulfil its duty says judge

Judge Davis said in her view it is irrelevant that Signature and its directors were entitled to be issued with FFC’s on 1 January 2018 as Section 34A of the Estate Agency Affairs Act makes very clear that it doesn’t “require a mere entitlement to be issued with a valid FFC to be able to claim commission; it requires a valid FFC actually issued at the time when the commission is earned”.

She has sympathy for the predicament of the estate agent who timeously submitted an application for a renewed FFC but wasn’t issued one on 1 January said judge Davis. She said estate agents should do all they can to ensure the EAAB issue them with valid FFC’s, by monitoring them and even take legal action by applying to court for a mandamus to order the EAAB to comply with its statutory duty to issue the necessary FFC’s.

A mandamus is the legal term for a court order to a public agency or governmental body to perform an act required by law when it has neglected or refused to do so (read more here).

Judge Davis dismissed Signature’s application that Atlantic pay them 50% of the commission on the shared rental deal. She also dismissed Atlantic’s counter-application that sought a declaration that Signature and its agents weren’t entitled to act as estate agents during the period of 1 January 2018 to 7 May 2018.

Judge Davis further said she found it “disturbing, to say the least, that an employee of the Board saw fit to issue backdated FFC’s”. She said the EAAB can’t escape their obligations by issuing backdated FFC’s.

“Indeed the very notion of a backdated FFC is antithetical to the values of transparency, accountability and public protection which the Board is duty bound to uphold,” said judge Davis.

She continued the date of issue of the FFC is important for estate agents as they operate lawfully and earn commission without the necessary certificates.

“It is therefore incumbent upon the Board to ensure that FFCs are timeously issued to all compliant estate agents, and that the particulars reflected on the certificates, including the date, are accurate,” judge Davis said.

Tarboton this week announced and shared on social media that Signature intends to appeal the ruling by judge Davis.

What are your thoughts on the ruling by judge Diane Davis? Email your comments to editor@propertyprofessional.co.za.