Letters of Authorization to sell in Real Estate: Importance to an agent and Example
Letters of authorization
are prepared by a property owner
authorizing another party to sell a property on their behalf. An authorization letter is
legally accepted and can act as proof of agency relationship in case of a dispute.
A letter of authorization gives a real estate agent the authority to list,
market the property and get a commission when the property is sold. This letter helps to
protect the real estate agent from the buyers and sellers trying to circumvent paying a commission by conducting the
transaction outside of the real estate agent’s auspices.
A letter to sell is different from a letter to find a property. You can read more about a letter to find property in this blog. Letter to Source a property.
You can read this article to learn more about
the commission
payable to real estate agents.
We have also seen Kenyan courts highlighting the
importance of having an agreement. In the civil case no. 94 of 2016 three parties who had been engaging in the business of real estate were
seeking Kshs. 46,250,000.00 as commission from the defendants in court. As the
plaintiffs admitted that there was “no written agreement on
commission payment”, the court was ‘not convinced that in a sale involving such a high-end, lucrative property issues would be handled by the defendant in so casual a
manner’.
When seeking an authorization letter, you must ensure that the letter is simple,
precise, and to the point. There should be no scope for ambiguity
or confusion in this letter and all
the duties and responsibilities should be clear and specific. The property owner must put all the points in a crisp and simple language to safeguard you against any arguments and any litigations that may arise in the event of
a misunderstanding. A sample letter is below.
Sample Authorization Letter to Market and Sell a
Property
Mr. John Doe
Address
Contact No: + 123456789
Subject: Authorization to
Market {Property Description}
I, the undersigned, herein
referred to as the owner of {Property Description} hereby authorize {Real
Estate Agent/Real Estate Company}, to list, market, present the property to any
prospective buyers. Before making a commitment to a potential buyer, a final
call must be made to me including agreeing to the terms and conditions of the
sale.
Taking into consideration
the terms of this letter, I, the owner of the property hereby agrees to furnish
the potential buyer with the merchantable title and related documents according
to the Kenyan laws.
This authorization letter
shall remain in effect from this date until the property is sold or if any
party sends a letter in writing terminating the authorization.
If the {Real Estate
Agent/Real Estate Company} sells the property with terms acceptable to me, I
agree to pay remuneration as set in law or otherwise agreed in writing.
In case
you have any doubt regarding this authorization letter, kindly reach me at [Email/contact number].
Signature
Date:00/00/2022
When you are an agent and have a buyer, please ask to see
this letter from the selling agent. We have come across cases where parties
purport to have authority to sell while in real sense, they do not.
As you continue engaging in real estate,
remember to register with the Estate Agents Registration Board(EARB). This way, you have legal protection in case the
seller does not meet their obligations. We have had some colleagues settling
for a low commission than what the law mandates since they were not registered
as real estate agents in Kenya. If you are not registered, you risk losing the commission
and lack good legal support and you could face legal penalties.
Learn more about how to register as a real estate agent in Kenya.
The court in the same civil case no. 94 of 2016 held that the Plaintiffs, having engaged in practice as Estate
Agents contrary to the law they cannot file a suit and expect to be awarded
commission arising from their illegal activities.
Section 18 of
the Estates Agents Act Cap 533,
Laws of Kenya provides as follows: –
“1. After the expiration of six months from
the commencement of this Act or such further period as the Minister may, by
notice in the Gazette, allow either generally or in respect of any particular
person or class of person: –
(a) No individual shall practice as an
estate agent unless he is a registered estate agent;
(b) No partnership shall practice as
estate agents unless all the partners whose activities include the doing of
acts by way of such practice are registered estate agents;
(c) …
(2) Any person who contravenes subsection (1)
shall be guilty of an offence and liable to fine not exceeding twenty thousand
shillings or to imprisonment for a term not exceeding two years or to both.”
While the above is developed for a general understanding, it is not meant to be legal advice. Do not hesitate to contact your advocate for legal help or call us on 0726982982
Lets assume a seller tells you to sell a property for Ksh 20M and you find a buyer willing to buy at Ksh 25M. What would you do? Tell us in the comment section below.