R. EAAB Code of Conduct Explained

Definitions

In this code of conduct, unless the context otherwise indicates –

  1. “board” means the Estate Affairs.
  2. “candidate estate agents” means a person referred to in paragraph c (ii) of the definition of “estate agents” in section 1 of the Act who has subject to the provisions of Government Notice R 1469 of 29 June 1990 been exempted from the standard of training prescribed by Government Notice R I409 of 1 July I983;
  3. “client” means a person who has given an estate agent a mandate, provided that should an estate agent have conflicting mandates in respect of a particular immovable property, the person whose mandate has first been accepted by the estate agent, is regarded as the client;
  4. “estate agency service” means any service referred to in subparagraphs (i) – (v) of paragraph (a) of the definition of “estate agent” in section 1 of the Act:
  5. “estate agent” means a person defined in section 1 of the Act, including a candidate estate
  6. “franchise” means an agreement, arrangement or understanding between a franchiser and a franchisee estate agent in terms of which the latter is entitled or required to operate under a trading name which is owned by, or which is associated with the business of, the franchiser or any other person;
  7. “immovable property” means immovable property as defined in section 1 of the Alienation of Land Act.
  8. “mandate” means an instruction, or an authority given to an accepted estate agent to render an estate agency service.
  9. “sole mandate” means a mandate incorporating an undertaking on the part of the person giving the mandate, not to confer a similar mandate on another estate agent before the expiry of a determined or determinable.
  10. “the Act” means the Estate Agents Act, 1976 (Act ll2 of 1976).

Discussion:

  1. “Client”

In practice, estate agents obtain mandates not only from sellers of immovable property but also from prospective purchasers. In certain instances, this may cause an estate agent to hold conflicting mandates in respect of a particular property, and problems may then arise as to who the estate agent’s client is.  Consider the following example:

An estate agent is given a mandate by Seller A to sell a five-bedroomed home in Sandton for R250,000.00 negotiable. Two days later he is given a mandate by Purchaser B to find him a five-bedroomed home in the Sandton area for an amount of up to R240 000.00

Who is the estate agent’s client if he introduces B to A’s property?

Knowing who the estate agent’s client is in this situation is important because the Code provides specifically that an estate agent must at all times protect the interests of his client to the best of his ability (clauses 2.2). In the example given above, it will be impossible for the estate agent to equally protect the interests of both the seller and the purchaser since their interests clearly conflict – the purchaser wants to pay R240 000.00 while the seller’s asking price is R250000.00 negotiable.

This definition solves the problem by providing that the person whose mandate has first been accepted by the estate agent, is regarded as the estate agent’s client.  (A in the example given above).   The definition must be read together with clause 4.1.4 of the Code which provides that an estate agent may not perform or attempt to perform any mandate in respect of a property if a prior current mandate, which conflicts with the aforesaid mandate, has already been accepted by him unless he has disclosed that prior mandate to the person who has given the later mandate, and the fact that he will not be the estate agent’s client in respect of the property.

In the example given above, this means that the agent must, before he introduces B to A’s property, disclose to B that he has been given a mandate by A to sell the property and that B will not be his client in respect thereof. The effect is the following:

  • The estate agent must protect the interests of A to the best of his ability) with due regard to the interests of B (clause 2 of the code).
  • If the estate agent has fulfilled A’s mandate, he will have a common law claim for payment of commission against A (not B).

In practice, however, purchasers of immovable properties seldom give estate agents mandates to buy properties. A buyer usually enquires from an estate agent about properties which he has for sale and making such an enquiry is not tantamount to giving the estate agent a mandate to buy or find a property.

1. “Mandate”

It is important for an estate agent to understand what a mandate is, since he may not perform any work in respect of a property for a buyer or a seller unless he has been given a mandate to do so – clauses 3.1 and 3.2. A mandate is defined either as an instruction to render an estate agency service or an authority (power of attorney) to both render and perform the service. An instruction to market a property can be given in a number of ways such as, for example, by way of a request, an order, the granting of permission to market the property etc. The following are common examples:

  • “Will you please sell my house for me?”
  • “Find a buyer for my house please.”
  • “I would like your firm to sell my property for me.”

An estate agent who simply asks a seller whether or not his property is for sale should never assume that he has a mandate in respect of the property if the seller answers in the affirmative without giving any further indication that the estate agent may market the property. The estate agent will have obtained a mandate only if it is clear that the seller has in fact instructed him to sell the property.

As an instruction to an estate agent only becomes a mandate once the instruction has been accepted by the agent, and standard mandate forms should specifically make provision for acceptance.

A prospective purchaser who merely asks an estate agent whether or not a property is for sale does not in so doing grant a mandate to the estate agent to canvass the owner or the property.  Similarly, a person who asks an estate agent to show him certain properties which the agent has for sale does not thereby confer on the estate agent a mandate in respect of those properties.

An open mandate need not be in writing unless it also confers on the estate agent a power of attorney to buy or sell immovable property, in which event the mandate must be in writing to be valid. It is nevertheless sound business practice to record all open mandates in writing or at least acknowledge them in writing.

A sole mandate must be in writing, even if it does not confer a power of attorney – see the discussion on clause 3.3.1 below. A sole mandate conferring power of attorney must furthermore comply with clause 3.5.

2. “Sole mandate”

It is important for an estate agent to know what a sole mandate is because specific requirements are prescribed in respect of sole mandate: See clause 3.3

A sole mandate can be worded in a variety of ways, but the essential feature thereof is that the person conferring the mandate must undertake (expressly or implied)   not to appoint another estate agent, before the expiry of a determined or determinable period, to render the same estate agency service as that expected of the sole agent. The undertaking can be expressed in many ways, such as:

  • “I (seller) hereby confer on you (estate agent) the sole right to sell my property until (date)”.
  • “I (seller) hereby confer on you (estate agent) a mandate to sell my property. I shall not before (date) appoint another estate agent to market the property.”
  • “I (seller) instruct you (estate agent) to find a buyer for my property. I agree to pay commission to you should I personally or through another estate agent on or before (date)”.

A mandate which leaves a seller free to appoint other estate agents to market his property does not constitute a sole mandate.

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