Who has greater risk: Buyer or seller?

Who has greater risk: Buyer or seller?

MAIN IMAGE: Tess Rodrigues, principal Property Factor; Eduan Milner, Eduan Milner Attorney.

It is standard practice that the seller appoints the transfer attorney during a property transaction. If this status quo were to be challenged, what would be the implications?

There is no law that prescribes that a seller must be the one to appoint the transferring attorney with the sale of their home. According to Tess Rodrigues, principal of Property Factor, it is the buyer that is parting with their hard-earned money and usually also incurring a long-term debt – therefore the buyer is at greater risk than the seller. Therefore, the latter should appoint the conveyancer.

In the debate this sparked in the media, there were many who disagreed saying that it is the seller, who is most often parting with their single biggest asset their home, who bears the greater risk and should therefore be entitled to appoint the transferring attorney.

Conflict of interest

According to Eduan Milner of Eduan Milner Attorney a strong argument is made out for the buyer to appoint the conveyancer as he is the one doing the paying and running the financial risk. However, he finds that it is specially because of this last fact, that he believes the transferring attorney should be a conveyancer representing the seller, rather than the buyer.

Milner explains: “If the buyer should appoint the transferring attorney, this creates a situation where a conflict of interest could very easily arise for the conveyancer if he has been appointed by the buyer. If for example, the sale is subject to the sale of the buyers’ property and there is a delay with that transaction, what does the conveyancer do? If he is also attending to the bond of the buyer, I can assure you he will do his utmost to rescue both transactions. How will that influence the advice he gives the seller in such a situation? Will he be as strict and impartial in such a situation as when he is representing the seller?”

It is true that the conveyancer must at all times act in the best interest of both parties and ensure that each party fulfils his / her obligations in terms of the contract of sale. However, Milner continues that he thinks it is naïve to assume that a conveyancer will not be influenced to a certain extent by his own client’s interests, especially if it has been a long-standing client of his.

Greater risk of delay on buyer’s side

There are many more factors on the buyer’s side that could delay a transaction, than from the seller’s side says Milner. He explains that from a financial point of view, the only thing that the seller has to do beforehand is to pay the rates. If he has insufficient funds at that time, bridging finance is arranged by the transferring attorney. On the other hand, the buyer has to pay the transfer costs (which could include transfer duty) as well as the bond registration costs. If he did his calculations wrong or if his financial position has changed, he has a problem (it is alarming to find how many buyers sign an offer without checking the precise amount of costs involved or simply relying on the estate agent’s calculations).

Secondly, the procedure relating to the bond instruction could also cause a delay. In August he had a transaction where the bank withdrew the home loan when the transactions were at prep in the deeds office because the purchaser’s financial position had changed in lockdown says Milner. “Would a conveyancer appointed by the buyer have been able to give the same advice to the seller as I did, having been appointed by the seller?,” he asks.

“In my opinion, the fact that the buyer has the greater financial responsibility when it comes to the transfer of a property, is the very reason why his attorney should not attend to the transfer. It creates too much of a potential conflict of interest,’ Milner concludes.

Importance of a proper sales agreement

One point that was repeatedly made by all parties including Rodrigues in the debate was the importance of a properly drawn up sales agreement. In the aftermath of the lockdown others have also seen the devastating loss that either party could be left with. PJ Veldhuizen of legal firm Gillan and Veldhuizen says he is often left aghast at the ‘cut and paste’ type property deals he sees passing his desk. “The problem is that many offers to purchase have either been over-edited or are simply not comprehensive,” he warns. “Many do not go further than the mere approval of the bond as a clause. For instance, they don’t require the actual bond to be ultimately registered in order to fulfil the suspensive condition, i.e. the approval of the mortgage. Buyers may find themselves in the scenario where either the agent or the seller wishes to hold them to the sale or for damages or, in the case of the agent, to the payment of the commission.”

In conclusion, it is clear that all parties involved stands to benefit by making sure that due attention is given to ensure that the sales mandate is drawn up properly.

  • Clive Valentine, Valentine Attorneys

    I agree wholeheartedly with Eduan Milner. There is no doubt in my mind, based upon over 30 years experience as a conveyancer, that the seller should appoint the conveyancer. However, there may well be merit in the suggestion that the seller rather than the buyer should pay the costs. I would perhaps go further and propose that the buyer should be responsible for the transfer duty which is laid down by law and non-negotiable and for the bond registration costs and the seller, who appoints his conveyancer to effect the transfer, should be responsible for the transfer fees and various disbursements incurred by the transferring attorney.

    Furthermore, as regards the agreement of sale, I am of the view that the drawing up and finalisation of the agreement should be reserved work for attorneys. The agreement of sale is a legal document and in most instances deals with an individual’s most valuable asset. The conveyancing process merely flows from the agreement. It has long amazed me how such an important legal document can be left to persons who are not legally qualified and yet the conveyancing process is reserved to attorneys. As attorneys we are frequently called upon to resolve disputes arising from poorly drawn agreements by non-qualified persons. Both the conveyancing process and the drawing up of agreements of sale should be reserved for the legal profession. This would in my view be of benefit to the consumer as it should reduce the amount of disputes. At the same time this will not deny the estate agent of earning their commission but will rather free the agent up to do what he/she does best which is to concentrate on marketing of the property and finding the most suitable buyer.

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