Are You a Serious Seller of Property?
Category Sellers
Are You a Serious Seller of Property? If so, it is imperative that you are aware of these interesting facts!
If you need or choose to sell your property, you definitely need to ensure that you are clued up to the following very important facts in order to ensure an uncomplicated and smooth sale. In fact, your chosen estate agent should provide with the necessary guidance in respect of the following:
- In whose interest is your estate agent acting?
- Crucial information to provide to your estate agent
- What type of selling mandates exist and what are their implications?
- Does the Consumer Protection Act apply to the sale of your property?
- In which entity do you own your property and what does this imply when selling?
- What can you expect from your chosen estate agent in terms of service?
- What are estate agents' prescribed ethical obligations towards their clients?
In this article we will only be discussing the first four of the abovementioned salient points. The last three will make up the content of our next article. If you intend selling your property it is important that you keep both these articles at hand.
- In whose interest is your estate agent acting?
As we are all aware an estate agent deals with two parties with opposing interests. The seller wants to sell at the 'best' possible price and the purchaser wishes to buy at the 'best' possible price....and the estate agent is stuck in the middle!
In terms of the Estate Agents Code of Conduct (CoC)...
an estate agent shall protect the interests of his client at all times to the best of his ability, with due regard to the interests of all other parties concerned
The question now arises: Who is the client? Buyer or seller? Here the common law rule 'First in time, first in line' applies. The agent's client in terms of the CoC is the mandator. In the majority of cases the first mandator is the seller who gave the agent a mandate to sell his/her property. It can, however, in specific instances be a purchaser who mandates an agent to find him/her a specific property to buy that is not mandated to the agent by the owner thereof. (Like a piece of land with development potential or a house that he/she has always fancied that is not on the market). The agent then convinces the owner to sell to his mandator (the purchaser). Obviously in such an instance, the purchaser is the mandator/client.
- Crucial information to provide to your estate agent
Any competent and professional estate agent will require the following information from a potential seller in order to ensure a smooth sale: (These specific aspects are not discussed fully, but are emphasized to enlighten sellers to the importance of this knowledge).
- Who is the rightful owner of the property? This needs to be disclosed as the owner whose name appears on the title deed may not have the right to sell the property in certain circumstances. Individuals, minors, married persons according to different marriage systems (see below), being married to a foreign individual, insolvent persons, deceased estates are all regulated differently with different rights, obligations and authorised persons when it comes to selling a property.
- Is the seller married, and if so, according to which system? This is one of the important factors to consider when selling a property in order to ensure a valid and binding agreement of sale. The seller can either be unmarried, married in community of property, in terms of an Ante-Nuptial Contract, in terms of the Civil Unions Act, by Muslim or Hindu Rights, in terms of a Foreign Marriage or a Customary Marriage. Each of these possibilities requires its own set of rules to ensure validity of a selling mandate and a sale agreement.
- Is the seller a VAT vendor? If the owner is a VAT vendor and selling the property belonging to the VAT registered entity or person, the selling price needs to include VAT that will be paid to SARS on the sale and the purchaser will not be liable for Transfer Duty. (The VAT entity could also be utilising a portion of the house for his/her office or professional practice that would result in a pro rata portion of the purchase price being subject to VAT). When a VAT vendor's property is advertised and the price does not state that it includes VAT, it is deemed to be included in the advertised price.
- Is the seller a SA Resident? In the event that the seller is a non-resident, he/she must be informed in respect of Withholding Tax obligations. Should he/she not be informed, the estate agent and the conveyancer can be held liable by SARS for payment.
- Has the seller made use of a mortgage loan? Outstanding value? Should the property be bonded it is important to ascertain whether the outstanding amount will be covered by the selling price. It must also be noted that the mortgagor must give the bank (the mortgagee) the required notice that the property is for sale so that the mortgage bond can be cancelled timeously in order to prevent the payment of penalties.
- If the property is held by a legal entity/trust, who has the right to sign a mandate? In the event that the property that is to be sold, is owned by an existing Close Corporation (CC) any member may sign documents on behalf of the CC. If a property is owned by a company, the Companies Act, its Memorandum of Incorporation and possible registered company rules will prescribe who is authorised to act on behalf of the company. A trust is NOT a legal entity per se, and as such can only confer a mandate once it is in existence. This means that the letters of authority must be issued authorising the appointment of its trustees by the Master of the High Court before conclusion of any mandate.
- Is the owner aware of any defects in the property? All defects whether patent or latent need to be disclosed to the estate agent when the property is listed. Most professional agencies provide a 'declaration by the seller' document to the seller to be filled in and signed when taking a mandate to sell the property on behalf of the seller. This is very important as it will ensure that all potential purchasers will be informed to the exact position of the seller with regards to his/her knowledge regarding defects. The voetstoots clause in the sale agreement means that the purchaser is buying the property 'as is' and that a reasonable inspection of the property has been undertaken. The voetstoots clause will however, NOT protect the seller from latent defects (those that cannot be detected during a reasonable inspection) of which he/she is aware and are purposefully being withheld in order to defraud the purchaser.
- Verified personal information as required by the Financial Intelligence Centre Act (FICA) A huge responsibility lies on the shoulders of all accountable institutions (estate agencies, conveyancers and financial institutions) in respect of the prohibition of money laundering, terrorist activities and tax evasion. We MUST keep records of all our clients and verify their particulars (certified copy of ID and proof of domicile), assess any risks in dealing with them, report suspicious activities as well as all cash transactions above R25 000 regardless of being suspicious or not. Money laundering is deemed to be ANY practice in terms of which a person deals with money to obscure its illegitimate origins.
- What type of selling mandates exist and what are their implications?
There are basically 3 types of mandates that a seller can give to an estate agent:
- An open mandate: When more than one agency is given the same mandate by the same client in respect of the same property, the mandate is an open one. It must contain an instruction, which the agent must accept. It can be verbal.
- A sole mandate: 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 period. This clearly does NOT exclude the seller from selling the property himself during the course of the "sole mandate"... it only excludes other estate agents.
- An exclusive sole mandate: Should the intention be to exclude the seller as well as other estate agents, the sole mandate must be worded as an EXCLUSIVE SOLE MANDATE. The legal consequences of such a mandate must be explained in writing in the mandate, i.e. that the seller will be liable for payment of damages in the event that this undertaking is breached. (Either sells himself, or through another estate agent)
- Does the Consumer Protection Act apply to the sale of your property?
The Act regulates the relationship between suppliers and consumers. A "supplier" is defined as any person who supplies goods or services in the ordinary course of business. "Business" means the continuous marketing of goods (including property) or services to consumers. The fact that they are probably registered with SARS as VAT vendors is a good (but not conclusive) indication.
Suppliers in the property industry would thus include:
- Property developers
- Investors letting properties on a continuous basis
- Investors/speculators who buy, renovate and sell houses as a business
- Estate agents
- Conveyancers
The CPA does NOT apply to the following:
- Sale or lease agreements where the seller is not selling or letting a property "in the ordinary course of their business"-- such as individuals who occasionally sell or let properties. There is thus no 'supplier' as per the Act definition.
- In terms of Section 5 (2)(b) this Act also does not apply in terms of which the 'consumer' is a juristic person whose asset value or annual turnover equals or exceeds R2 million at the time of the transaction, but it does apply to all natural persons as consumers immaterial of their annual income if they are buying from or utilizing the services of a defined supplier.
All sellers of property should take note of the pertinent information above, and should they need further clarification (as an article of this nature cannot contain all the relevant facts) not hesitate to call Pam Snyman on 082 8000 867 or any of the estate agents operating in your area.
Pam Snyman CPRE (NQF Level 7)
(Cert Dir, Mphil, Dip Advanced Property Practice, Dip Property Investment & Valuation)
Author: REDZetc
