R5. Duties in Respect of Offers and Contracts

6. Duties in respect of offers and contracts

Code:

6.1       No estate agent –

6.1.1    who has a mandate to sell or purchase immovable property shall willfully fail to present or cause to be presented to the seller or purchaser concerned, any offer to purchase or sell such property unless the seller or purchaser (as the case may be) has instructed him expressly not to present such offer;

6.1.2    who has the mandate to sell immovable property, may present competing for offers to purchase the property in such a manner as to make the seller accept any particular offer without regard to the advantages and/or disadvantages of each offer for the seller;

6.1.3    shall amend any provision of a signed offer, prior to rejection thereof, or a written mandate or any contract of sale or lease, without the knowledge and express consent of the offeror or the parties to the contract, as the case may be.

Discussion:

6.1.1   

An estate agent with a mandate to sell or buy a property cannot selectively withhold offers and must present all offers received by him to his client until the property has been sold. A seller when conferring a mandate may, however, specifically instruct the estate agent not to submit certain offers (for example, offers below a certain price) and in such case, the estate agent would be under no ethical obligation to submit such an unacceptable offer.

An offer can be presented to a seller either personally or through his nominated representative. It is preferable to present an offer personally, but if this is not possible the offer can be presented through the post, be faxed, etc. An estate agent may telephone a seller to inform him that he has a written signed offer in respect of the property (see clause 5.7 discussed above), but then must convey all the material terms of the offer to the seller.

6.1.2   

An estate agent holding a mandate to sell a property must at all times be mindful of the fact that in such case the seller is his client. In practice it often happens that an estate agent spends much more time with the prospective purchasers than with the seller and as a result becomes emotionally involved in a particular purchaser’s quest to find a home, losing sight of the fact that the seller is his client. An estate agent may not, however, allow personal considerations to cloud his judgement. Take the case where an intending purchaser has made an offer on a property.

One week later, before the expiry of the first offer, a second intending purchaser also makes an offer on the property through the same estate agent. The estate agent favours the first buyer because he knows how desperately the purchaser wishes to buy the property. The estate agent may not, however, when submitting the second offer, make favourable comments on that offer which are not true, simply to induce the seller to accept the first offer. The estate agent must remain objective at all times and give the seller unbiased advice.

Code:

6.2       An estate agent shall –

6.2.1    explain to every prospective party to any written offer or contract negotiated or procured by him in his capacity as an estate agent, prior to signature thereof by such party, the meanings and consequences of the material provisions of such offer or contract, or, if he is unable to do so refer such party to a person who can do so;

6.2.2    if he knows that an offer submitted by him as an estate agent to any party has been accepted, or has not been accepted by the expiry date thereof, forthwith notify the seller or of such fact;

6.2.3    without undue delay furnish every contracting party with a copy of an agreement of sale, lease, option or mandate with which he is concerned as an estate agent, provided that the foregoing shall also apply in respect of an offer to purchase or lease if the offeror specifically requests a copy thereof.

Discussion:

In practice most estate agents use standard pre-printed contract documents for mandates, offer to purchase, sale agreements, etc. Sellers and buyers negotiating through estate agents rarely consult their attorneys before signing such documents. Documents are also sometimes signed without being read or their terms understood. This is largely due to the fact that buyers and sellers blindly place their trust in estate agents and do not expect them to use documents that do not adequately safeguard the interests of the parties.

To prevent disputes and misunderstanding concerning the terms of an offer, estate agents are required by clause 6.2.1 to explain to every prospective party to a written offer or contract negotiated by the estate agent, the meaning and consequences of the material provisions of such offer or agreement. The explanation must be furnished prior to the signature of the offer document or agreement by the party concerned. If the estate agent is unable to give the necessary explanation, he must refer the party to a person who is able to do so. Such a person need not necessarily be an attorney and may even be another estate agent.

The following points should be noted:

  • In certain instances, an estate agent’s explanation of the offer or contract document can be brief, while in other cases it may have to be given more fully. For example, if a contracting party has a legal background or has wide experience in property transactions, a brief explanation of the terms of the agreement will suffice. If on the other hand, the contracting party is totally inexperienced, the explanation will necessarily be more detailed. If a party to a contract is not interested in an explanation an estate agent can clearly not oblige him to listen to one.

 

  • Only the material provisions of an offer or contract must be explained. For the purposes of clause 6.2.1 of the Code, the following are regarded as material terms:
SALE LEASE
Description of property and movables included in the sale Description of premises and furniture/household goods included in lease
Purchase price and method of payment thereof Rental and deposit and method of payment thereof
Specific contractual obligations of the buyer/seller Specific contractual obligations of the lessor/lessee
Suspensive / resolutive conditions Suspensive / resolutive conditions
Amount of commission and when payable Additional payment by the lessee (Levies/Electricity/Telephone etc.)
The situation regarding defects to the property (“Voetstoots clause”) Lessor’s obligations to pay commission
When the risk of accidental damage to or destruction of the property passes to the purchaser Responsibilities concerning defects and maintenance
“Special conditions” specifically added to the agreement “Special conditions” specifically added to the agreement

Documents to be explained are offers to purchase/sell/let/hire: agreements of sale and lease; written mandates and written options/rights of the first refusal. Loan application forms are excluded.

6.2.2   

A person who has submitted an offer on a property through an estate agent is entitled to know whether or not the offer has been accepted. If the estate agent is aware of the fate of the offer, he must forthwith notify the purchaser thereof which can be done verbally or in writing.

6.2.3   

A party to an agreement is entitled to a copy thereof. This clause obliges an estate agent to furnish a copy of a written mandate to his client and to give a copy of an agreement of sale, lease or option which he has negotiated, to each contracting party. Such copies must be given without undue delay, or in other words, as soon as possible.

An estate agent need not give a copy of an offer to purchase or lease to the offeror unless the latter specifically requests that he be given such a copy. However, if the offer is accepted a binding agreement of sale or lease is thereby concluded and a copy must then be given to all contracting parties.

The provisions of the Stamp Duties Act must be observed in so far as they apply to agreements. No stamp duty is payable on mandates or agreements of sale of immovable property (or copies of such agreements) but all written lease agreements must be stamped.

A copy of a written mandate and an agreement of sale or lease must be given to every contracting party, whether or not such contracting party specifically requests a copy.

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