Avoid double commission  risks with the right sales mandate

Choosing a sole mandate for the sale or rental of your property will not only impact how long it takes to sell and the price achieved, but can vitally avoid the risk of double commission, says Samuel Seeff, chairperson of the Seeff Property Group.

The double commission risk usually arises in cases where two or more property agents claim to be the “effective cause” of a property sale which could significantly reduce the seller’s net proceeds from the sale.

A written mandate is legally required by the Property Practitioners Act (PPA), and establishes a contract, authorising the registered agent to act on behalf of the seller or landlord to market and sell, or to let the property. It defines the terms of engagement, including the agreed price, commission payable, and duration of the mandate along with particulars of the property and owner or landlord, conditions of sale, and a Condition of Property Report.

The mandate contract formalises the property agent’s commitment to dedicate resources to marketing the property, mitigating against legal risks such as potential double commission claims, and provides a structured framework for the transaction process.

There are essentially three types of sales mandates, being either open, joint, or a sole mandate. An Open Mandate allows several agents to market the property simultaneously. While sellers usually hope that this may facilitate a quicker sale and higher price, the reality is that agents may be less committed and the process could become more complicated for the seller, including potential double commission risks.

With a Joint Mandate, two agents are usually appointed to work jointly on marketing the property. While offering the potential for broader exposure compared to a sole mandate, it may also lead to reduced effort and increased administrative complexity, especially when it comes to viewings. This type of mandate is sometimes preferred in the case of high value or specialised properties.

In the case of a Joint Mandate, two agents are appointed to market the property jointly which could offer wider exposure, but may also reduce effort and increase administrative complexity. Inevitably, the agents may give more effort to their own sole mandates.

With a Sole Mandate, only one agent is exclusively appointed. It ensures maximum commitment, focused marketing, and simplified communication and processes. Since the commission is secured upon a successful sale, the agent is incentivised to invest all their efforts to get the property sold for the best possible price, rather than competing for a quick sale at any cost.

Seeff says, however, that choosing the right agent is as important as selecting the appropriate mandate. Sellers should not choose an agent based on a promise of an unrealistically high price. The correct mandate, coupled with an agent who provides an accurate, market-related valuation, is the key to a successful outcome.

Issued by Gina Meintjes