Estate Agents’ Commission and the FFC

Estate Agents’ Commission and the FFC

Estate Agents who are forced to trade without a valid Fidelity Fund Certificate (FFC), as a result of the negligence or reluctance to comply by the Estate Agency Affairs Board (EAAB), are now entitled to their commission on transactions.

After eighteen months and an estimated R400 000.00 in legal costs, the Supreme Court of Appeal upheld Signature Real Estate’s appeal on 10 June 2020. The Appeal was against the so-called ‘No FFC no commission’ ruling made by the Cape Town High Court in 2018. The Cape Town High Court ruled that an agent or agency is not entitled to claim commission if they do not have a valid FFC on the date and time that the transaction is concluded and the commission was deemed to be earned.

In this case, Signature Real Estate (Signature), claimed commission from another estate agency, Atlantic Seaboard Realty (ASR), after jointly facilitating a lease agreement. ASR argued that Signature Real Estate was not entitled to the commission, since Signature was not in possession of a valid FFC at the time of the conclusion of the agreement.  Signature argued that Signature Real Estate CC (trading name) was converted to a company. They informed the EAAB of this conversion and had complied with all of the EAAB’s requirements to allow the EAAB to effect an amendment to Signature’s FFC. On 1 January 2018, the EAAB erroneously issued the certificates in the name of Hidicol CC (Signature’s registered name) instead of Signature. The EAAB was made aware of these errors and on 8 May 2018 reissued the certificates and later replaced these certificates with backdated certificates (dated 1 January 2018).

In the Cape Town High Court, the Court ruled that the backdated certificates were not compliant with Section 34 of the Estate Agency Affairs Act (the Act), which requires that an agent must be in possession of a valid FFC when commission is earned.

The Supreme Court of Appeal, in a unanimous decision, found in favour of Signature. This means that although the Act has clear directives with regards to FFC’s and the provisions in terms of Section 26 and 34A are pre-emptory, once it is proven that the agent or agency has complied with all the EAAB’s and the Act’s formalities to be issued a proper FFC, but the EAAB is negligent or reluctant to issue a valid and correct FFC, the agent or agency will be entitled to claim their commission, despite not being in possession of the correct certificate.