MAIN IMAGE: Deonay Scholtz, attorney at PH Attorneys
Deonay Scholtz
Writing for PH Attorneys, Deonay Scholtz explores how and when an estate agent could still claim a commission on a property sale if the sale falls through after an Offer to Purchase has been signed.
Any party who fails to comply with or withdraws from a valid and binding Offer to Purchase without good reason is in breach of such an agreement. Where a property transaction was facilitated by an estate agent, one of the usual consequences for withdrawing from a binding agreement (depending on the contract wording) is that the agent can claim payment of their commission regardless of whether the transaction was registered in the Deeds Office.
It is quite standard for an Offer to Purchase to contain a provision that the agent’s commission can be claimed from the party responsible for the agreement’s cancellation. Buyers can overlook this provision as it is assumed that the general rule is that it is the seller’s responsibility to pay the agent’s commission.
The case of Naidoo and Another v Wakefields Real Estate
To take an example from our case law. In the recent case of Naidoo and Another v Wakefields Real Estate (Pty) Limited (AT638/17) [2023] ZAKZPHC 95, Wakefields Real Estate instituted action against Mr and Mrs Naidoo after they failed to carry out their obligations in terms of the Offer to Purchase. A few days after signing the Offer to Purchase, Mr and Mrs Naidoo notified the agent that they no longer wished to proceed with the purchase as it was no longer financially feasible.
The Offer to Purchase contained a provision that the agency would be entitled to claim its commission from the purchasers if the latter failed to comply with their obligations in terms of the agreement. In response to Wakefield’s claim, Mr and Mrs Naidoo argued that they were unaware of the said provision; it was never explained to them or brought to their attention, so they cannot be held liable.
The Pietermaritzburg High Court relied on the cavaet subscriptor-rule which states that a party who signs an agreement, consents to the contents of the document even if it subsequently turns out to be unfavourable to them. The Court found that Mr and Mrs Naidoo had sufficient time to read the agreement before signing, and by signing the agreement, they automatically agreed to all the provisions, regardless of whether they understood the terms thereof.
The Court then ordered them to pay Wakefield’s commission for the property even though they were no longer buying it. On appeal, the Supreme Court of Appeal upheld the decision of the High Court.
