Oral mandates: A risky business

Oral mandates: A risky business

MAIN IMAGE: Marlon Shevelew, director Marlon Shevelew and Associates.

Marlon Shevelew

The saying goes ‘A man’s word is his bond’ but when it comes to the sale of property, it is important to remember that it is a legal requirement that all agreements for the sale of immovable property must be in writing and signed by both parties. And any sole mandate given to an estate agent must be in writing. These rules are non-negotiable and must be complied with.

When selling a property, the wide array of administration involved therein can seem overwhelming, and this can lead people to take shortcuts. While some shortcuts can make life easier, cutting corners in the process of trying to sell a home can have serious repercussions down the line.

Formalities are not to be sniffed at

It is important to remember that in terms of the Alienation of Land Act 68 of 1981, all agreements for the sale of immovable property must be in writing and signed by both parties. And any sole mandate given to an estate agent must be in writing. These rules are non-negotiable and must be complied with.

Aside from these, there are a wide range of situations that are less clear-cut. One of them is the granting of an oral mandate other than a sole mandate to an estate agent, and the acceptance of such a mandate by an agent. This will be discussed here below.

Pather v Wakefields Real Estate

A recent judgment of the High Court in Pietermaritzburg evidences the difficulties which can arise if no written mandate is given to an estate agent. The case is Pather v Wakefields Real Estate (Pty) Limited (AR82/2016) [2020] ZAKZPHC 16 (29 May 2020) and was an appeal against a decision handed down in the Magistrate’s Court. The agent had successfully sued the seller of a property for commission and the seller had lodged an appeal against the judgment of the Magistrate.

The facts of the case were that the seller had orally requested the agent to try and find purchasers for the property. No written mandate had been signed. The agent introduced the eventual purchasers to the property. The agent subsequently found that the seller had sold the property but had not informed the agent and did not intend to pay the agent commission. Upon realizing that the seller had sought to cut the agent out, the agent went to the purchasers and provided them with letters to sign confirming that they had been introduced to the property by the agent. The seller denied that there had been any oral agreement and claimed that the agent had lied about being mandated to find purchasers.

The court had to consider the evidence led by both the seller and the purchaser and evaluate what was essentially a “he said, she said” situation. Eventually the court accepted that the seller’s version was improbable, and that the agent’s version had to be accepted. In making this finding the court said:

“[64]…there was direct evidence by Ms Gunpath that the purchasers signed the letters she produced to them in her presence. That evidence remains unchallenged or contradicted by any evidence as to any other document having been presented to the purchasers by Ms Gunpath or her, Ms Gunpath, having forged any signatures. This court has no hesitation in accepting Ms Gunpath’s version of the letters.

[65] The acceptance of Ms Gunpath’s and Mr Lomax’s evidence in respect of the letters inevitably leads to the compelling conclusion that the appellant’s evidence on the meetings between him and Ms Gunpath can be rejected as false.”

The court dismissed the appeal, confirming the decision of the magistrate who had initially ruled on the matter. The seller was therefore liable to pay the commission. In making this finding the court commented that the seller appeared to be under the mistaken impression that as long as no written mandate was concluded, that no commission would be payable to the agent.

When this judgment is read, it becomes evident how difficult it is to determine after the fact what happened in the absence of a written agreement and when confronted with mutually destructive versions. Essentially the finding that the seller’s version was improbable and had to be rejected was as a result of the fact that the agent had obtained the letters signed by the purchasers. If the agent had not had the presence of mind to obtain these, the outcome of the case may have been different.

For agents

The case demonstrates the importance of obtaining a written mandate for estate agents. It will reduce the chance of an unscrupulous seller trying to avoid paying commission, and if it becomes necessary to sue for commissions, will make proving the case so much easier. If there had been a written mandate concluded in the Pather v Wakefield case, the agent may not have had to run a whole trial and an appeal in order to obtain payment of the commission.

The legal fees which may need to be incurred to recover commissions can easily be in excess of the amount claimed, and cases can take years to finalise. Appeals are equally expensive and time-consuming. Ensuring that a written mandate is signed will help avoid the costs and delays caused by litigation in a large percentage of cases.

For sellers

Prospective sellers should be very clear in any discussions with agents regarding the sale of a house that if there is no written mandate concluded, then the agency will not be entitled to any commission. An invitation by a seller to bring prospective purchasers to view the property could be taken by an agent to constitute a mandate.

And a dispute could also arise around what rate commission should be paid. In such a case a court may have to decide whether a mandate was concluded and on what terms in the face of a “he said, she said” situation like the one above.

If the agent in the above case had insisted on a written mandate at the point where the agent believed that the seller was giving the oral mandate, the whole dispute might have been avoided. The agent could have been provided with an unambiguous mandate, and the seller could have avoided the whole situation.

Conclusion

In summary it is a best practice for estate agents to insist on written mandates. Taking the time to obtain a written mandate will go a long way to ensuring that commissions are paid timeously and will avoid disputes with the seller down the line regarding the terms of the mandate and whether such a mandate existed. It should be borne in mind that an estate agent renders a service to the seller and that service is, in my opinion, best rendered when a written mandate is insisted on.

The practice of insisting on written mandates increases the transparency of the whole process and will result in a better service being offered by the agent. It will reduce the risk of disputes and hopefully in most cases result in better outcomes for both sellers and agents.

About the author: Marlon Shevelew is the director of law firm Marlon Shevelew and Associates Inc. Shevelew is a well-known expert authority on residential property law in South Africa.

Comments
  • Magreth Gerber
    Reply

    What happens if the purchaser reacted to your advertisement and you gave him the address and he went behind your back to view the property and he bought it directly from the owner? Was I stupid to give him the address in good faith?

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