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The activities of estate agents are regulated in terms of the provisions of the Estate Agency Affairs Act No. 112 of 1976 ("the Act"). The primary goal of the Act is to regulate the activities of estate agents in the public interest. Implicit in this goal is the protection of members of the public against the activities of unconscionable estate agents. One of the key features of the Act is the establishment of the Estate Agency Affairs Board and the Estate Agents Fidelity Fund.

The Estate Agency Affairs Board ("EAAB") is the main regulatory body for estate agents and the estate agency industry. Its objects are to maintain and promote the standard of conduct of estate agents and to generally regulate the activities of estate agents.  

The Estate Agents Fidelity Fund ("the Fund") is a fund which was established in terms of the Act and which receives payments from estate agents as required in terms of the Act. These payments consist of contributions payable for fidelity fund certificates in terms of section 15 of the Act and levies as contemplated in section 9 of the Act.

These contributions are utilised in terms of the Act inter alia to further the estate agency industry through grants and other payment. However, the most important aim of the Fund is to reimburse members of the public who have suffered losses from the theft of trust money by estate agents. Such claims are administered by the EAAB in terms of the Act.

All estate agents are required in terms of section 16 of the Act to apply to the EAAB for fidelity fund certificates on an annual basis and to pay the prescribed contributions to the Fund. This is a prescriptive statutory requirement which all estate agents must comply with.

This prescriptive requirement in section 16 of the Act is furthermore expressed in prohibitive terms in section 26 of the Act, which provides that no person shall perform an act as an estate agent unless a valid fidelity fund certificate has been issued to him or her.

Section 34A of the Act contains a novel mechanism to further ensure that estate agents comply with the requirement in terms of section 16 of the Act. Section 34A provides that no estate agent shall be entitled to any remuneration or other payment in respect of an act unless at the time of performance of such act a valid fidelity fund certificate has been issued to him or her.

Estate agents are usually remunerated for their services in the form of commission which is calculated as a percentage of the proceeds from the sale of the property in question. Situations may arise where an estate agent is not paid to commission due to him or her, and which necessitate summons to be issued to recover the amount of the unpaid commission.

Generally speaking, an estate agent must allege and prove the following averments in order to sustain a claim for commission (as noted in the matter of Tyrone Selmon Properties (Pty) Ltd v Phindana Properties 112 (Pty) Ltd [2006] 1 All SA 545 (C)):

  1. The estate agent must allege and prove that he or she has duly complied with the provisions of the Act in respect of fidelity fund certificates and fidelity insurance (which is a contribution payable by estate agents to the Fund). An estate agent is required to show that a valid fidelity fund certificate was issued to him or her at the time that he or she "earned" the commission.
  2. The estate agent must allege and prove that a mandate existed in terms of which he or she was mandated to find a purchaser of seller for the property in question. Generally speaking, either the seller or the purchaser can mandate an estate agent. However, estate agents are usually appointed by the seller to search for prospective buyers.
  3. The estate agent must allege and prove due performance with the terms of the mandate. What constitutes "due performance" is a question of fact and is determined by the terms of the mandate. Generally speaking, an estate agent has discharged his or her mandate upon the successful conclusion of a transaction between the purchaser and seller;
  4. Finally, the estate agent must allege and proof the amount of commission which is payable. The percentage of commission is usually stipulated in the deed of sale.

The effect of section 34A of the Act is clear. An estate agent will not be entitled to the commission on the sale of a property if at the time of the sale a valid fidelity fund certificate has not been issued to him or her. It can be seen from the above that an estate agent will not be able to succeed with a claim for commission where he / she was not in possession of a valid fidelity fund certificate and the effect of section 34A of the Act is unassailable.

It should be noted that the scope and effect of section 34A of the Act is somewhat limited in respect of commission which has already been paid. It was held by the Supreme Court of Appeal in the matter of Taljaard v TL Botha Properties [2008] 3 All SA 453 (SCA) that section 34A of the Act does not invalidate the terms of an estate agent's mandate (i.e. agreement for commission) per se, but merely precludes a claim for commission. The effect of this judgment is that commission which has already been paid cannot be recovered from an erstwhile estate agent on the basis that he or she did not have the required fidelity fund certificate.

Estate agents should heed the provisions of the Act and particular note of the effect of section 34A of the Act when claiming unpaid commission.