No FFC? - Agents may still claim

Estate agents may now claim commission when the issue of their Fidelity Fund Certificate is dalayed - the decision in Signature Real Estate v Charles Edwards Properties overturned on appeal - Signature Real Estate (Pty) Ltd v Charles Edwards Properties and Others (415/2019) [2020] ZASCA 63

We all know that estate agents cannot lawfully trade and cannot claim commission if they do not hold a valid Fidelity Fund Certificate (FFC). But what if the FFC was not issued because of a lapse by the Estate Agency Affairs Board?

In January 2019 we reported on a judgment of the Cape Town High Court, where the relevant sections (26 and 34A) of the Estate Agency Affairs Act were interpreted in a very strict way. In this case, Signature Real Estate was deprived of their right to recover their commission when they did not have a valid Fidelity Fund Certificate (FFC), even though they had done everything to obtain their FFC in good time, and a FFC had even been issued, but in the wrong name. Everyone accepted that it was the inefficiency of the Estate Agency Affairs Board (EAAB) that had prevented them from being compliant.

Herewith a link to our article on that judgment.

In a nutshell: Signature had applied for their FFC, but because of an error at the EAAB the FFC was only issued some months into the new financial year. Prior to the correct FFC being issued, Signature assisted in the conclusion of a lease agreement with another agency (B) and the full commission was paid to B. B then refused to pay Signature’s share. B’s defense was that Signature was not in possession of a valid FFC at the time the commission was earned.

Technically B was correct, and the Cape Town High Court at that time ruled that section 34 of the Estate Agency Affairs Act, as read with section 26, means strictly what it says: No FFC, no commission, full stop!

We are pleased to report however that yesterday, 10 June 2020, the decision of the Cape Town High Court was reversed by the Supreme Court of Appeal and Signature is now legally entitled to be paid their commission.

In finding for Signature the Court held that to interpret Sections 26 and 34A so strictly, so as to refuse an agency’s claim for commission, where the delay in issuing the FFC lay squarely on the shoulders of the EAAB, was contrary to the spirit and object of our Bill of Rights, more specifically the rights enshrined in our Constitution that entitle us to engage freely in a trade, occupation or profession. Furthermore, the Court found that the strict, literal interpretation of the relevant sections in the circumstances of this case, was not consistent with the purpose that the law was intended to achieve.

This is a very positive judgment for estate agents, MANY of whom struggle to get their FFC’s issued in time due to the inefficiency of the EAAB. The judgment has recognized that to refuse a claim for payment of commission by an agent, who has submitted a proper application for an FFC in good time, and who has not received it simply because of inefficient administration, is contrary to that agent’s constitutional right to trade.

This judgement is long overdue, and we are extremely pleased to be able to share this with you all.

On a cautionary note, the judgment did emphasize that the facts of this case did fall within a “narrow compass” and that the decision was made on the basis that Signature was considered to be in possession of a valid FFC at the relevant time. The judgment also went on the mention that the decision should not be seen as an invitation to adopt a liberal approach to the application of section 34A of the Act, which will obviously be strictly applied in other circumstances. If your application was late, or defective in any way, or if you have done nothing to get errors in the FFC corrected, this judgment will not come to your assistance.

Deon Welz & Robert Krautkramer
Miltons Matsemela Inc
June 2020

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