R5. Duties in Respect of Offers and Contracts

6. Duties in respect of offers and contracts

6. Duties in respect of offers and contracts

Code:

6.1 No property practitioner – 

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 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

A property practitioner 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 property practitioner not to submit certain offers (for example, offers below a certain price), and in such cases, the property practitioner 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, faxed, etc. A property practitioner 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

A property practitioner holding a mandate to sell a property must at all times be mindful of the fact that, in such a case, the seller is his client. In practice, it often happens that a property practitioner 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. A property practitioner 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 property practitioner. The property practitioner favours the first buyer because he knows how desperately the purchaser wishes to buy the property. The property practitioner 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 property practitioner must remain objective at all times and give the seller unbiased advice.

Code:

6.2 A property practitioner shall – 

6.2.1 explain to every prospective party to any written offer or contract negotiated or procured by him in his capacity as a property practitioner, 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 a property practitioner to any party has been accepted, or has not been accepted by the expiry date thereof, forthwith notify the seller or purchaser 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 a property practitioner, 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 property practitioners use standard pre-printed contract documents for mandates, offers to purchase, sale agreements, etc. Sellers and buyers negotiating through property practitioners 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 property practitioners and do not expect them to use documents that do not adequately safeguard the interests of the parties.

To prevent disputes and misunderstandings concerning the terms of an offer, property practitioners are required by clause 6.2.1 to explain to every prospective party to a written offer or contract negotiated by the property practitioner, 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 property practitioner 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 property practitioner.

The following points should be noted: 

• In certain instances, a property practitioner’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, a property practitioner 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:

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

6.2.2 

A person who has submitted an offer on a property through a property practitioner is entitled to know whether or not the offer has been accepted. If the property practitioner 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 a property practitioner 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.

A property practitioner 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 insofar 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.