This week the Property Poser panel looks at the ramifications of a situation where the conveyancing attorney paid out an estate agent’s commission before he was entitled to do so.
A reader writes that he paid a deposit into the attorney’s trust account, which was earmarked for transfer costs. The attorney instead used the money to pay the agent’s commission and, when confronted by the reader, admitted that he paid the agent “prematurely”.
The inappropriate payment of monies held in trust by a conveyancing attorney, or any attorney for that matter, is viewed in a very serious light, says Grant Berndt from Abdo & Abdo Attorneys in East London.
“The nature of the attorney’s trust account is that funds are held for a specific purpose on behalf of another party. The attorney can only act on the instructions of the party who paid the monies.”
Berndt says the other part of the problem here revolves around the fact that an estate agent earns commission on fulfilment of his or her mandate.
“Unless the mandate stipulates differently, this is when a binding agreement of sale takes place between the seller and a willing and able purchaser, culminating in the transfer of ownership.”
The payment of the said commission therefore takes place on the date of registration of transfer, says Berndt.
“In terms of the Estate Agents’ Code of Conduct, an agent may not receive any commission on a sale that is subject to a suspensive condition until that condition is met.”
Berndt says examples would be a mortgage loan approval or the sale of another property. “The agreement only becomes binding once the suspensive condition has been fulfilled.”
The same applies where the agreement contains a resolutive condition, which means the sale can still fall away before transfer, says Brian Kinnear, principal of Fresh Lifestyle Properties in East London.
“In the event that the parties should agree to payment before conditions have been met, this must be consented to by the party liable for payment of commission in a written document, separate from the agreement of sale.”
Kinnear says this document must contain a written explanation of the implications and financial risks associated with such conduct and must be signed by the one liable for the payment and the estate agent.
“In this instance, there does not appear to be any consent for the agent’s fees to be paid prior to finalisation of the transfer.”
The client also did not authorise the attorney to make payment from the deposit made into the trust account, says Kinnear. “There may therefore be ramifications for both the attorney and the estate agent in this instance.”
If the reader is unable to resolve the matter directly with the attorney concerned, he would do well to approach the local law society for assistance regarding the remedies available to him, says Kinnear.
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