A Mandate is an instruction or authority from a client to an estate agent, to render a particular estate agency service. It is a legally binding contract between the estate agent and his client, that need not be in writing unless in the case of a sole and exclusive mandate, or a power of attorney to conclude certain transactions on behalf of the client. It is always a good idea to record all mandates in writing anyway.
There are different kinds of mandates:
Many different estate agents can have a mandate to market your property, meaning that one estate agent cannot claim to have the sole right to market it.
Giving an estate agent a sole mandate to market your property, means that you cannot confer a similar mandate on another estate agent before the expiry of a determined period. If another estate agent sells or lets your property during this period, the estate agent with the sole mandate can claim damages from you, which may be equal to the commission that he could have earned if he sold the property.
However, you can sell or let the property yourself without any implications during this period as long as you make sure the wording in the mandate does not state that the estate agent has 'sole and exclusive selling rights' or 'sole right to sell' or 'sole authority to sell'.
Sole and Exclusive Mandate
Nobody (including you), except for the estate agent holding the sole and exclusive mandate, is allowed to market your property before the expiry of the determined period of the mandate. This means that should anyone other than the mandated estate agent sells your property, you will still have to pay commission to that estate agent.
The estate agent, to whom the sole- or sole and exclusive mandate was given, is still entitled to his commission if he introduced a buyer to your property during the mandated period, depending upon the wording of the mandate document, and this buyer only purchases your property after the expiry of the mandate, perhaps through you as the owner or through another estate agent. It is important that you read and understand the terms and conditions of the mandate document.
There are benefits to signing a mandate with an estate agent:
It provides the estate agent with time to secure the highest price.
It is safer to have a limited number of people through your home and the estate agent with your mandate will ensure to their best ability that the prospective buyers are "for real".
It creates a moral commitment between the agent and the seller and motivates the agent to sell your property.
The agent will most likely provide you with regular activity reports.
The agent is more eager to spend his advertising budget on your home.
You avoid the risk of double commission claims.
In the case of a Multiple-listing, you would normally give a certain estate agent the sole and exclusive mandate to sell your property for a certain period, after which this agent, the "listing agent", lists the property with a computerised central service. The information is then available to other participating agents who are free to sell your home. The selling agent and the listing agent are then in agreement that the agent's commission is shared between them. You do not pay more agents' commission. It remains the same amount agreed upon, but the agents share it between themselves.
Does the Consumer Protection Act apply to Estate Agents?
In typical sale transaction the estate agent is instructed by the seller to sell his property. Therefore the agreement is between the agent as the supplier and the seller as the consumer. The service that the agent offers and performs as well as the agreement (the mandate), which is "in the ordinary course of his business for consideration" is governed by the provisions of the CPA. This also applies in instances where the purchaser appoints an agent to source a suitable property.
The question arises whether the sale agreement (offer to purchase document ) itself that results from an estate agent's marketing efforts, and which in most instances in practice, is embodied in a pre-printed form furnished by the estate agency falls under the scope of the CPA. The answer appears to be 'no' since the contractual relationship that is ultimately formed remains essentially a private once-off transaction between two ‘consumers’ (the buyer and the seller – as long as the seller is not a property dealer, such as a developer or speculator). The content of the contract is the result of negotiation between a once-off home seller and once-off home buyer, notwithstanding the fact that a pre-printed from may have been used as basis for formulating the agreement.
This article originally appeared in Property Power 11th Edition Magazine. To order your copy at the discounted price of R120 click here.