R2. Mandates

2. Mandates

No property practitioner shall –

Code: 

3.1   offer, purport or attempt to offer any immovable property for sale or to let or negotiate in connection therewith or canvas or undertake or offer to canvass a purchaser or lessee thereof unless they have been given the mandate to do so by the seller or lessor of the property, or their duly authorized practitioner: 

3.2   on behalf of a prospective purchaser or lessee, offer, purport or attempt to offer to purchase or lease an immovable property or negotiate in connection therewith or canvass, or undertake or offer to canvass a seller or lessor thereof unless they have been given a mandate to do so by such prospective purchaser or lessee as the case may be or their duly authorized practitioner; 

Discussion: 

The purpose of these two clauses is to protect a seller’s right to privacy of their home and property and also to avoid misinterpretation to a purchaser by a property practitioner.

No property practitioner shall –

Code: 

3.3   accept a sole mandate, or the extension of the period of an existing sole mandate, unless – 

3.3.1   all the terms of such mandate (or extension, as the case may be) are in writing and signed by the client; 

3.3.2   the expiry date of the mandate (or extension, as the case may be), which shall be expressed as a calendar date, is specifically recorded in the written sole mandate (or extension, as the case may be); 

Discussion: 

The purpose of this clause is to avoid disputes and uncertainty about the content and duration of sole mandates. The following points should be noted:

• The Code does not prescribe a time limit in respect of sole mandates. It must be remembered, however, that a sole mandate in effect confers on the sole practitioner an exclusive right coupled with a moral obligation to market the seller’s property. When negotiating the period of the sole mandate, a reasonable time should be allowed within which to implement an appropriate marketing effort. An unduly lengthy period will obviously not be in the interest of the seller (the property practitioner’s client), and when fixing the period of the sole mandate, a property practitioner must therefore be careful not to contravene clause 2.2 of the Code (see the discussion above). What constitutes a reasonable period will depend on the circumstances of each case.
• All the terms and conditions of the mandate must be in writing and signed by the client. Although it is not expressly required by the Code, it is recommended that the property practitioner also sign the mandate document.
• The expiry date of the mandate, expressed as a calendar date, must be stated, for example, 30 July 1992. It is not permissible to state that the mandate will terminate/expire after a certain period from the date of signature thereof. A sole mandate on a property expressed to continue “until sold” is clearly not allowed.

Code: 

3.4   accept a sole mandate which contains a provision conferring upon them – 

3.4.1   an option to extend the sole mandate for a certain period after the expiry of the sole mandate; or 

3.4.2   a mandate to continue to render the same property practitioner service referred to in the sole mandate, after the expiry of the sole mandate, 

Unless – 

(aa)     the client has prior to their signature of the sole mandate expressly consented in a written document executed independently of the said sole mandate, to the inclusion of such provision or provisions (as the case may be); and 

(bb)     such document contains an explanation of the reasons for and implications of the inclusion of such provision; and 

(cc)     such document is signed by both the client and the **property practitioner** in question: 

Discussion: 

The purpose of this clause is to avoid double commission disputes. Unless the written consent of the client has been obtained, a property practitioner is prohibited from including in a sole mandate document provisions which confer upon them –

• an option to extend the sole mandate for a certain period after expiry of the sole mandate; or
• an open mandate to render the same property practitioner service referred to in the sole mandate after expiry thereof.

The client’s consent may not be contained in the sole mandate document but must be set out in a separate document, which must explain the reasons for, and implications of, the property practitioner. The obvious reason for the automatic extension of a sole mandate or the continuation of an open mandate on the expiry of a sole mandate is to enable the practitioner to continue their marketing effort.

Note that a property practitioner is not prohibited, after the expiry of a sole mandate, from negotiating afresh a further mandate (open or sole) in respect of the property in question. If an open mandate is conferred, it can be accepted verbally.

1. Extension of a sole mandate

In terms of clause 3.4.2 (bb), the implications of a sole mandate containing a clause conferring on a property practitioner an option to extend the sole mandate after its expiry must be explained to the client. The implications of conferring such an option on a property practitioner are of a legal nature and are as follows:

• The property practitioner may in their sole discretion extend the sole mandate period, in which event the seller will not be able to revoke the mandate unilaterally, nor will they be able to appoint other practitioners to market their property until the expiry of the extended sole mandate period, unless they are prepared to face a double commission dispute.
• If the seller appoints other practitioners on expiry of the initial sole mandate period to market their property without first ascertaining from the sole practitioner whether or not the option to extend the sole mandate period has been exercised, they may expose themselves to a double commission dispute.

2. Continuing open mandate on expiry of a sole mandate

In terms of clause 3.4.2 (bb), the implications of a sole mandate containing a clause conferring on the sole practitioner an open mandate after the expiry of the sole mandate must be explained to the client. The implications of continuing an open mandate on the expiry of the sole mandate are also of a legal nature and are as follows:

• The sole practitioner may continue to market the property until their new open mandate is revoked. On termination of the initial sole mandate, they need not specifically approach the seller for the grant of an open mandate.
• On termination of the sole mandate, the seller should not confer a sole mandate on another property practitioner before revoking the new open mandate. Should they fail to do so, they may be in breach of their obligations towards the new sole practitioner, as the first practitioner, now having an open mandate, will be marketing the property in competition with the sole practitioner.

Code: 

3.5   accept a sole mandate which also confers upon them a power of attorney to act on behalf of the person conferring the mandate unless the intention and effect of such power of attorney are fully explained in the document embodying the sole mandate: 

Discussion: 

A property practitioner’s mandate does not usually confer a power of attorney on the practitioner. For example, a property practitioner with the mandate to sell a property is usually not empowered or authorised to enter into a contract of sale on behalf of the seller. There may be situations where it is appropriate to confer an authority of this nature on the property practitioner, but this happens only in exceptional circumstances.

The clause does not prohibit a property practitioner from including a power of attorney in a sole mandate document but imposes a duty on the property practitioner in such a case to explain the intention and effect of the power of attorney in the sole mandate document. In other words, it must be made clear to the seller that they are not simply conferring a usual or ordinary mandate on the sole practitioner, but are in fact giving them the right to conduct an agreement on the seller’s behalf without the latter’s knowledge or further consent.

Sole mandate documents used by property practitioners headed “Sole Authority to Sell” usually stipulate that the seller authorises the property practitioner to sell the property on the terms and conditions set out in the mandate. In such cases, the property practitioner is clearly given a power of attorney to conclude the contract on the seller’s behalf and sole mandate documents of this nature must always comply with the requirements of clause 3.5.

Code: 

3.6   include, or a clause to be included, or accept the benefit of, any clause in a contract of sale or lease of the immovable property negotiated by them, whereby a sole mandate is directly or indirectly conferred upon them to sell or let the said immovable property at any time after the conclusion of the said contract: 

Discussion: 

This clause prohibits a property practitioner from including a clause in an agreement of sale or lease whereby a sole mandate is conferred upon them authorising them to sell or let the property at any time after the conclusion of such agreement of sale or lease. The reason for this is that a purchaser, when entering into an agreement of sale, does not normally consider the immediate resale or letting of the property and hence does not apply their mind to the question of whether or not they would wish to confer a sole agency should they ever want to sell or let the property in the future, or even which property practitioner they would choose to appoint in such an event.

A purchaser should at all times be free to select the property practitioner of their choice should they wish to resell or let the property they have bought and should not be deprived of their right of free choice by being bound to an obligation imposed by a reprinted clause in the sale/lease agreement which they had signed. Such freedom of choice promotes free and fair competition amongstproperty practitioners.

The same consideration applies to lease agreements. A lessor who has let their property through a particular property practitioner should be free, if they wish, to re-let or sell the property in the future and to decide at that stage whether or not to appoint a sole practitioner to do so.

Is it permitted to include a clause in a lease agreement that entitles the letting practitioner to a sales commission should the lessee purchase the property during the currency of the lease or within a certain period thereafter? The answer is yes, provided it is clear that the letting practitioner initially had the mandate to sell and the lease was entered into merely as a bridging or interim arrangement pending the conclusion of the intended sale.

Clause 3.6 does not prohibit the inclusion of clauses in the sale or lease agreements conferring open mandates (i.e., not sole mandates) to sell or let.

Code: 

3.7   accept any mandate for instructions of work in respect of immovable property if their interest therein would compete with their obligations towards an existing client in respect of the same immovable property without first disclosing such interest in writing to such client; 

Discussion: 

A property practitioner is expected to use their best endeavours in the performance of their mandate. A prospective purchaser, for instance, is entitled to be informed if the property practitioner wishes to accept a competing mandate from someone else.

3.8 Misrepresentation of Market Value or Rental Income

No property practitioner shall knowingly or negligently make a material misrepresentation concerning the likely market value or rental income of an immovable property to a seller or lessor thereof, in order to obtain a mandate in respect of such property.

Discussion: 

It is clearly not in a seller’s interest to be induced to confer a mandate (particularly a sole mandate) on a property practitioner due to misrepresentation concerning the market value of their property. Such dishonest practices not only prejudice the seller but also restrict free and fair competition amongst property practitioners.

The following points are relevant: 

• The clause prohibits a property practitioner from misrepresenting the likely market value (i.e. selling price) or rental income of a property. It is important to distinguish between a seller’s asking price and the likely market value of their property. The clause does not prohibit a property practitioner from advising a seller on setting an asking price (which may or may not reflect the likely market value) to test the market. However, the property practitioner must take care not to lead the seller to believe that the asking price is necessarily the same as the likely market value.
• A property practitioner contravenes clause 3.8 only if they make a material representation regarding the likely market value of the property, either knowingly or negligently. While property practitioners are not required to be registered valuers, they are expected to provide an opinion based on proper and adequate research. The general expectation is that a property practitioner should not concoct a figure but should base their opinion on facts. If the property practitioner conducts proper research, such as a comparative market analysis or another recognized valuation method, they will not be found in contravention of this clause—even if the actual market value differs significantly from their opinion.
• If a property practitioner has not researched the value of a property and does not know its likely market value, they should not offer an opinion, even if the seller asks.

3.9 Competence and Specialization

No property practitioner shall accept a mandate in respect of any immovable property if the performance of the mandate requires specialized skill or knowledge outside their field of competence, unless they will be assisted by a person who has the required skill or knowledge, and this fact is disclosed in writing to the client.

Discussion: 

The purpose of this clause is to protect the public from loss due to incompetence on the part of property practitioners. Whether a mandate requires specialized skill or knowledge outside of the property practitioner’s field of competence will depend on the facts of each individual case.

A practical example would be where an experienced residential property practitioner is approached by a seller of a business property to sell that business. If the property practitioner has never handled such a transaction, they may lack the necessary practical experience. However, the property practitioner can still accept the mandate provided they are assisted by someone with the necessary expertise, such as an attorney, an auditor, or another experienced property practitioner. The assistance must be disclosed in writing to the seller.

The person assisting the property practitioner could provide guidance on the sale and structure of the transaction, and it would be advisable for that person to also review the contract of sale before it is signed by the seller or purchaser.

In some cases, the mandate may not require specialized skill or knowledge, even if it involves a technical transaction or a field in which the property practitioner has no prior experience.

3.10 Sole Mandates

No property practitioner shall accept a sole mandate to sell or let immovable property unless they have explained in writing to the client: 

3.10.1 the legal implications should the client, during the currency of the sole mandate or thereafter, sell or let the property without the assistance of the property practitioner, through the intervention of another property practitioner; and 

3.10.2 what specific obligations in respect of the marketing of the property will be assumed by the property practitioner in their endeavour to perform the mandate; provided that such explanations, if contained in a standard pre-printed or typed sole mandate document, shall be in lettering no smaller than that generally used in the remainder of the document.

Discussion: 

Consumers who confer sole mandates are often unaware of the commission implications and the specific marketing efforts they can expect from the property practitioner. This clause aims to clarify commission implications and the responsibilities that the property practitioner will undertake in the performance of the mandate.

The following aspects are important:

• In the terms of clause 3.10.1, a property practitioner must explain to the client the commission implications should the client sell or let the property himself (or through the intervention of another property practitioner) during the currency of the sole mandate, and if he sells it after the termination of a sole mandate to a person introduced to the property by the sole practitioner during the currency of the sole agency. The nature of the implications will, in the first place, depend on the express terms of the sole mandate. Some sole mandates prohibit a seller from marketing the property himself during the same mandate period while others contain no such restriction. Furthermore, sole mandate provides that should the seller sell his property after the expiry of the sole mandate, he (the seller) remains liable for payment of the commission whether or not the property practitioner is the effective cause of such a sale.

Clauses of this nature are often rather technically worded, making it very difficult for the layman to grasp the significance. Clause 3.10, therefore, requires that a property practitioner give a clear and easily understandable written explanation of the commission implications of the sole mandate. The explanation can be contained in a letter, fax, telegram, the sole mandate document itself, or any other document. The following is suggested as being a suitable explanation:

• Explanation of mandate:
• During the currency of this sole mandate, you (the seller) may not sell the property yourself or through the intervention of any other property practitioner. If you do, you will owe me (the property practitioner) the full commission in addition to any other commission payable to other practitioners.
• You (the seller) may not appoint another property practitioner during the currency of the sole mandate. If you do, I (the property practitioner) may cancel the mandate and claim damages equal to the commission.
• For a period of [X] weeks after the mandate expires, you may not sell your property to any purchaser introduced by me (the property practitioner). If you do, you will owe me the full commission as stipulated in the mandate, in addition to any obligations with other practitioners.

In terms of clause 3.10.2, the property practitioner must specify the obligations they will assume in the performance of the mandate. This clause does not prescribe specific obligations but leaves this matter to be negotiated with the client. A sole mandate typically confers an exclusive right to market the property, so it is reasonable for the property practitioner to take on certain marketing obligations. For example:

1. Holding a show-house on specified dates.
2. Placing advertisements in specified newspapers a minimum number of times.

• Maintaining ongoing contact with the seller and providing regular updates on marketing progress.

These obligations must be recorded in writing, either in the sole mandate document or a separate document.