Important news for all estate agents



That's right. It is now illegal to publish commission tariffs, even if they are merely guidelines or recommendations. The Institute of Estate Agents, and organisations in the legal and medical professions, have learned this the hard way, as a result of investigations by the Competition Commission. The CC has determined that publishing tariffs is a form of "price fixing" and a "restrictive horizontal practice", and therefore a contravention of the Competition Act 1998. The Institute has just emerged from a CC investigation, and may now have to pay a substantial fine for having published recommended tariffs in the past. Many years ago, the Institute compiled a set of guidelines on estate agent fees and commissions. It was intended primarily for Institute members, but we never had any objection to non-members making use of it too, and we made our tariff books available to anyone who cared to buy them. We updated the tariffs from time to time, and they were last published in 2002. Earlier this year, after we became aware that the CC was taking action against the legal profession and the medical profession for publishing tariffs, we resolved not to publish ours again. So, our tariff guidelines are now historical. Where does this leave our industry? Well, as we all know, commissions are, and always have been, negotiable. Since 1993, it has been an offence under the EAAB Code of Conduct (clause 8.2) for you as an estate agent to tell people that your commission rate is prescribed by law, or the EAAB, or the IEA, or anyone else. Well, now it is now evidently also an offence for you as an estate agent to tell anyone that the commission is recommended by the IEA, or your referral network, or by anyone else. Whatever fees your firm charges are now entirely according to your firm's policy – the buck stops at your principal's desk. Certainly the Institute of Estate Agents may not recommend or endorse any commission rates. Where to from here? During our meeting with the CC in September, we were told that they would like our industry to change over from the existing percentage-based system to some kind of cost-based system. They want us to help the industry to make the change, and as our mission is to support the industry, we will be happy to oblige. Presumably this will not be before next year, and we have no further details as yet. Considering that such a change would affect the whole industry, we would expect that the EAAB would also need to become involved, especially if it became necessary to make such a change compulsory. For the time being, then, existing fee structures remain in place, but they must be the tariffs of individual firms, not of associations or groupings of firms. We would therefore advise anyone whose mandates or contract forms refer to the "IEASA tariff" to delete those references as they are now obsolete and cannot be backed by the Institute. We would also advise any grouping, such as a referral network or a mini-listing group, to scrap any rules or agreements, whether formal or informal, which it may have regarding commission rates. The penalty for engaging in "price fixing" can be as much as 10 percent of your income for last year. Bill Rawson President: Institute of Estate Agents of South Africa