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Navigating the Maze: Negotiating Restraint of Trade for Estate Agents

Posted by IOL Property on February 29, 2024

In the ever-evolving landscape of real estate, estate agents face a myriad of challenges, including when transitioning between employers. One crucial aspect that demands careful consideration is the presence of restraints of trade imposed by former employers, says Antonie Goosen, principal and founder of Meridian Realty.

“Our industry is highly competitive, and it’s not uncommon practice for employers to include restraint of trade clauses in contracts to safeguard their business interests, sometimes to the point of those restrictions being very onerous on the estate agent,” notes Goosen. “When joining a new company, estate agents are well advised to ensure that they understand and are comfortable with the provisions of restraint of trade clauses an employer may wish to include in their employment agreement, in order to mitigate legal consequences down the line.  As with most things, prevention is better than cure, and estate agents should avoid signing one sided restraint of trade clauses, or at least negotiate acceptable terms from the start.”

Goosen emphasises the impact of restraints on client-agent relationships. “Estate agents often build invaluable connections with clients and over time establish themselves as trusted advisors in the areas that they work in. Restraints of trade can hinder an agent’s ability to continue servicing these clients or working in their area of focus, which can directly affect the estate agents ability to earn a living.”

“Ignorance of contractual obligations is not an excuse in legal matters,” warns Goosen. “Failing to adhere to restraints can lead to lawsuits, financial penalties, and damage to professional credibility. It’s imperative for estate agents to be well-informed and seek legal advice when needed.”

Goosen says common pitfalls estate agents should look out for in restraint of trade clauses include ambiguous contract language, overreaching restrictions, penalties imposed on pipeline commissions and enforceability challenges. He advises agents to seek legal counsel and engage in open communication with employers to negotiate out of restrictive clauses effectively.

Regarding negotiation strategies, Goosen emphasises early communication, seeking legal counsel, and offering alternative solutions. “By addressing concerns with employers early on, consulting legal professionals, and proposing constructive alternatives, estate agents can potentially navigate their way out of restrictive clauses for a smoother transition,” he states.

Goosen says understanding the challenges faced by estate agents is crucial for the entire industry. “By sharing insights into navigating restrictions to trade, our aim is to empower our colleagues across the real estate sector and contribute to their continued success. It’s our commitment to fostering a collaborative and thriving environment for professionals in our field,” concludes Goosen.

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