R3. Duty to Disclose

4. Duty disclose

Code:

4.1       An estate agent shall –

4.1.1    convey to a purchaser or lessee or a prospective purchaser or lessee of immovable property, in respect of which a mandate has been given to him to sell, let, buy or hire, all facts concerning such property as are, or should be reasonably in the circumstances be, within his personal knowledge and which are or could be material to a prospecting purchaser or lessee thereof;

4.1.2    if he conducts his business in terms of a franchise, disclose clearly and unambiguously in all his correspondence, circulars, advertisements, and other written documentation that he operates in terms of a franchise and state thereon his name and the name of the franchiser;

4.1.3    if he conducts his business under a trade name or style other than his name, clearly disclose his full name in all correspondence, circulars, and other written documentation.

4.1.4    not perform or attempt to perform any mandate in respect of a particular property if a current prior mandate, which conflicts with the aforesaid mandate, has been accepted by him unless he has disclosed to the person who has given the later mandate the existence of such prior mandate, and the fact that he will not be the estate agent’s client in the respect of that property.

4.2       No estate agent shall purchase directly or indirectly for himself, or acquire any interest in, or conclude a lease in respect of, any immovable property in respect of which he has a mandate, without the full knowledge and consent of the person who conferred the mandate or sells or let his own immovable property or any immovable property in which he has any direct or indirect interest, to any prospective purchaser or lessee who has retained his services, without that purchaser or lessee having full knowledge of his ownership of, or interest in, such immovable property.

Discussion:

4.1.1

A prospective purchaser or lessee introduced to the property by an estate agent expects that that agent will convey to him all material facts concerning the property. Of particular importance would be defects on the property such as leaking roofs, dampness, beetle infestation, etc. and other factors which may influence the value of the property or its use to the purchaser, including developments planned on adjacent properties, the proclamation of main roads in the vicinity, etc. Clause 4.1.1 obliges the estate agent to disclose all material facts (i) of which he is personally aware (such facts disclosed to him by the seller personally) or (ii) of which he should reasonably in the circumstances have been aware.

When it can be said that an estate agent should “reasonably in the circumstances” have been aware of certain facts? No hard and fast rules can be laid down in this regard. Each case will depend on the circumstances surrounding the particular property and the transaction in question. Important considerations are the following:

An estate agent cannot be expected to know everything about a property. He is not expected to be a construction expert or to be acquainted with all the technicalities relating to property development and township establishment. The crucial question is – what knowledge can be reasonably be expected of an estate agent in particular circumstances?

Regulations framed under the Estate Agents Act draw a clear distinction between full status and candidate estate agents while a candidate estate agent must act under the active supervision and control of a principle a full status estate agent need not do so. To establish whether an estate agent has breached this clause the objective test applied will not necessarily be whether a purchaser dealt with a full status estate agent (whether a principal or an employee) and a candidate estate agent acting under the active supervision control of a principal estate agent, are regarded, in respect of their levels of experience, as possessing equal knowledge and skills. If, however, a prospective purchaser is aware that a candidate estate agent is acting independently of his principle’s supervision he cannot be heard to complain if he chooses to accept the representation or advice of such candidate estate agent. Members of the public, therefore, need to be aware of this situation and the Board will accordingly highlight it in publications

Clause 4.1.1 does not require an estate agent to actively uncover latent defects. For example, an estate agent is not obliged to climb into the roof of a house, dig up foundations or have walls examined for dampness for no apparent reason. On the other hand, it is reasonable to expect an estate agent to undertake a visual inspection of a property and to be put on guard by a reasonably apparent defect. An estate agent cannot, therefore, ignore reasonably obvious defect.

The clause does not specifically place an obligation on the estate agent to inspect the building plans or title deeds before marketing a property. It is clearly reasonable for an estate agent to assume that buildings on a property have been erected per approved building plans. However, if upon inspection of a property it is reasonably apparent that certain additions are structurally so unsound or badly constructed that they could not have been approved by a local authority, then the estate agent should be on guard and either make full enquiries or disclose his concern to the prospective purchaser.

The ease and degree of difficulty that the estate agent will encounter in obtaining information about a property must be considered. If, for example, certain facts can only be obtained after making expensive and complicated enquiries, it cannot reasonably be expected of the estate agent to obtain or possess such information. The lack of enquiry should nevertheless still be disclosed.

An estate agent may generally rely on representations and statement made to him by the seller of the property, but this does not necessarily absolve him from making further enquiries.

For example, if an estate agent is told by a seller of a house that the roof does not leak he may accept this to be true unless there are clear indications to the contrary. This means that the estate agent must still undertake a visual inspection of the property. If a leak problem is not apparent (for example the ceiling is not stained) he need not make further inquiries. He can then convey to a prospective purchaser that the seller has told him the roof is leak-free and that he has no reason to believe otherwise.

4.1.2 – 4.1.3

The purpose of these clauses is to ensure that members of the public doing business with an estate agent know precisely with whom they are dealing.

4.1.4

See the explanation under the definition of “client” above.

Code:

4.2       No estate agent shall purchase directly or indirectly for himself, or acquire any interest in, or conclude a lease in respect of, any immovable property in respect of which he has a mandate, without the full knowledge and consent of the person who conferred the mandate or sells or let his own immovable property or any immovable property in which he has any direct or indirect interest, to any prospective purchaser or lessee who has retained his services, without that purchaser or lessee having full knowledge of his ownership of, or interest in, such immovable property.

Discussion:

This clause embodies the common law principle that an estate agent should at all times guard against a conflict of interest. Obviously, if an estate agent wishes to buy a property in respect of which he has the mandate to sell, there will be a conflict of interest between him and his client. The estate agent would want to buy the property at the lowest price possible while in acting for the seller, he must try to obtain the highest price.

 

The same considerations apply to where the estate agent sells his own property to a purchaser who has given him the mandate to find a property. Clause 4.2 does not prohibit the conclusion of such transactions, but requires an estate agent to prohibit the conclusion of such transactions, but requires the estate agent to disclose his interest in the property to the seller or purchaser (as the case may be).

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