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Property Investor Advice: Part 3 and 4

Property Investor Advice: Part 3 and 4

Part 3
6 Things to Know About Mandates

Giving an agent an instruction or ‘mandate’ to sell your property means there is a contract between the two of you. Make sure you understand all the implications.

Home sellers must first decide whether they want to award an open mandate, which means they can ask more than one agent to market the property, or a sole mandate, in which case their selected agent will have the sole right to market the property for the duration of the agreed mandate period.

Sellers must keep in mind that a mandate does not have to be in writing in order to be binding. An agent is entitled to regard a verbal instruction to sell a property as a mandate, and problems can arise if the seller has already awarded a sole mandate to another agent. For instance, in cases where the verbal mandate leads to a sale while the sole mandate is still in force, the seller will be liable for damages equivalent to the agreed commission to the sole agent, in addition to paying commission to the selling agent.

A further caveat with regard to a sole mandate is that the holding agent may be entitled either to commission or to damages equivalent to that commission, should the owner find a buyer off his own bat during the period in which the sole mandate is in force.

The third thing for sellers to note is that double commission may also be payable on an open mandate if, for example, the property is sold through an agent who did not introduce the buyer to the property. The selling agent as well as the agent who introduced the buyer will have a valid claim for commission.

Sellers can, however, protect themselves against potential ‘double commission’ claims by making sure they award all mandates in writing, and include a clause that stipulates that commission will be shared if the situation arises in which the selling agent is not the same as the listing agent.

It is important to note that in terms of the Estate Agency Affairs Act, sole mandates must in any event be in writing.

Sellers should make it a condition of their mandate that all potential buyers must be prequalified for bond finance before viewing the property. This is to ensure that they will be able to secure the necessary finance to buy the property and have enough financial resources to pay the additional costs, such as legal fees, transfer duties and registration costs. Many a transaction has dragged on and on because buyers’ finances were not in order. In some instances, transactions have had to be cancelled, which means a lot of wasted time and energy for the seller.

Sellers should also be wary of awarding a mandate if they don’t really have any intention of selling but just want to ‘test the market’.

The danger inherent in this practice is that they may be liable to pay compensation to an agent who fulfils the mandate by introducing a willing buyer who can afford the property and matches the asking price or makes a reasonable offer to purchase.

Finally, sellers anxious to conclude a quick sale should resist any urge to change a sole mandate to an open mandate, because instead of speeding up the process, much of the marketing effort already put in by the sole agent will go to waste, and the newly appointed agents will have to start from scratch to drum up interest in the property.


Tip: Double commission may be payable on an open mandate


Part 4
The Ins and Outs of Compliance Certificates

Having all the paperwork to hand before listing your property for sale can speed up the transaction and give you enough time to address any problems.

The first step for homeowners who want to sell is to establish which compliance certificates are required in their area.

The electrical certificate of compliance (ECOC) is a legal requirement in all property transactions, as are the separate certificates stating that all gas installations and electrical fencing installations comply with prescribed safety standards.

Certain cities and regions may require additional certificates. In Cape Town, for instance, home sellers must now obtain a plumbing certificate as well as the electrical and gas certificates, which must be lodged with the attorney handling the transfer of the property. In many cases, they will also need to supply a beetle-free certificate in order for prospective buyers to be able to obtain a home loan.

A beetle-free certificate is also generally required in KwaZulu-Natal and other coastal areas where borer beetles can be a problem in exposed woodwork and roof rafters. Usually this beetle-free certificate only specifies two types of borer beetles, Hylotrupes bajulus and Oxypleuris nodieri, but other wood-destroying insects, such as the Anobium punctatum beetle and various species of termites, are actually more common in many parts of South Africa, so buyers should ensure that these are also included.

Electrical and gas certificates of compliance are intended to ensure that the property’s electrical system is safe to use and that any gas appliances, such as stoves and fireplaces, have been properly and safely installed.

What many owners may not realise, however, is that the ECOC is now valid for a maximum of two years only, and that they are also required by law to present such certificates to an inspector on request – not only when they are selling their property. Existing certificates are also invalidated if any alterations are undertaken, and a new certificate will have to be issued once work is complete.

Aside from it being a legislative requirement, there are two reasons why it is important for homeowners to have a valid ECOC: it should mean that the home’s electrical system and any further installations are safe for the occupants; and if a property incurs any damage as a result of an electrical fault, the insurance company will require the owner to provide a valid ECOC and could dismiss a claim if there isn’t one.

When it comes to obtaining the ECOC, homeowners should take care to appoint a reputable electrical company registered with the Electrical Contractors’ Board to inspect the installation and issue the certificate. Cases have been reported where unscrupulous contractors stipulate unnecessary modifications or ‘repairs’ in order to inflate their fee.

When in doubt, check the credentials of the contractor and also make sure beforehand how much he will charge for the electrical inspection. If the fee sounds too high, obtain additional quotes. Take similar precautions when obtaining any of the other certificates you may require.

Once the property has been transferred, the new owners should obtain and safely file copies of all relevant certificates. Then, if any problems occur they will be able to contact the person or company that issued the certificate, who will be responsible for rectifying the matter. If they approach any other contractor at that stage, any work done will be for their own account and the validity of the original certificate will be negated.


Next issue: What is a comparative market analysis (CMA)? And newly built versus pre-owned homes


Text: Hess Cumming
Images: iStock


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