The following guidelines are issued by the Estate Agency
Affairs Board to assist estate agents in discharging their
legal and ethical duties when negotiating a transaction which
is subject to the cooling off right provided for by the Alienation
of Land Act 68 of 1981 (‘the Act’). Clause 2.1
of the Code of Conduct states that an estate agent may not
‘do or omit to do any act which is or may be contrary
to the integrity of estate agents in general’, while
in terms of clause 2.2 an estate agent must protect a client’s
interests to the best of his or her ability, with due regard
to the interests of all other parties concerned. Failure to
comply with the guidelines may constitute a contravention
of these clauses, and/or the other clauses of the Code of
Conduct referred to in the guidelines specifically.
1. If a purchaser enjoys a cooling off right, every offer
and/or sale agreement signed by such purchaser must state
that the purchaser is entitled to revoke the offer or terminate
the sale agreement (as the case may be) in terms of s 29A
of the Act. Estate agents must ensure that their offer/sale
documents comply with this requirement. The Board does not
prescribe any specific wording for the relevant clause, except
that the expiry date of the cooling off right must be stated
together with an explanation of how the date is calculated.
The following clause serves as an example:
Purchaser’s cooling off right
1. This clause only applies if s 29A of the Alienation of
Land Act, 68 of 1981, is applicable to this offer/agreement.
2. Notwithstanding any other clause in this document, the
purchaser has the right to revoke this offer or terminate
this agreement by written notice to be delivered to the seller,
or his/her agent, within five days after he/she (the purchaser)
has signed the offer or agreement. The five day period is
calculated with the exclusion of the day upon which the purchaser
signed the offer or agreement (as the case may be), and of
any Saturday, Sunday or public holiday. If the purchaser wants
to exercise the aforesaid right, the notice must therefore
be delivered to the seller on or before midnight on ___________________
(date). This notice will have no effect unless it
( i) is signed by the purchaser or his/her agent acting
on his/her written authority;
( ii) refers to this offer or agreement as the offer or agreement
that is being
revoked or terminated, as the case may be; and
(iii) is unconditional.
Stating the expiry date is undoubtedly the best way of avoiding
confusion as to when the buyer’s cooling off right expires.
An estate agent must therefore take care to fill in the expiry
date correctly.
2. In terms of clause 6.2.1 of the Code of Conduct an estate
agent must explain to both the buyer and seller the meaning
and consequences of the material provisions of an offer or
sale agreement, before such offer or agreement is signed by
the buyer/seller. If the estate agent is unable to furnish
the explanation, the buyer/seller must be referred to a person
who can explain the document. A buyer’s cooling off
right is a material provision of an offer / sale agreement
and estate agents will have to explain to both a buyer and
seller what the cooling off right entails, before the buyer/seller
signs the document; alternatively, if an estate agent is unable
to explain the implications of the cooling off right, the
respective parties must be referred to someone who can furnish
the necessary explanation. What must be explained are the
following:
(a) The fact that the buyer has the right to revoke the
offer or terminate the sale
agreement within five days after he signed it.
(b) How, and by when, the buyer must exercise the cooling
off right, should he
wish to do so.
(c) The fact that the offer or sale agreement in question
will no longer have any
legal effect and will not be binding on any of the parties
if the buyer has
exercised the cooling off right in the prescribed manner.
3. Clause 6.1.1. of the Code of Conduct imposes a duty on
an estate agent to present to a seller every offer received
by the estate agent before the sale of the seller’s
property has been finalised. The only exception is if the
seller has specifically instructed the estate agent not to
present a particular offer. This means that if an estate agent
obtains an offer from a purchaser who enjoys a cooling off
right, such offer must be presented to the seller unless the
seller has specifically instructed the estate agent not to
present any offer which is subject to a buyer’s cooling
off right. If an estate agent has such instructions, he may
hold back the offer until the cooling off period has expired.
In such cases the estate agent must
(a) explain the position to the buyer; and
(b) check the expiry date of the offer to make sure that the
offer will still be valid
when it is presented to the seller.
An estate agent who is instructed not to present certain
offers to a seller, is advised to obtain such instructions
in writing to avoid misunderstanding and disputes.
4. A purchaser who wishes to exercise a cooling off right,
must deliver a written notice to this effect to the seller
or his or her agent within the prescribed five day period.
An estate agent acting for a seller is not necessarily the
seller’s agent for the purposes of receiving a cooling
off notice from a buyer. This is a matter for negotiation
between the seller and the estate agent. If the seller appoints
the estate agent as his or her agent for the aforesaid purpose,
and the estate agent accepts the appointment, the buyer will
be entitled to deliver the cooling off notice to the estate
agent and the estate agent will then be obliged to accept
such notice on the seller’s behalf. This must be disclosed
in the relevant offer or sale agreement and details must be
given of where and how the cooling off notice must be delivered
to the estate agent. Should the buyer deliver a cooling off
notice to the estate agent, a receipt stating the time and
date of receipt of the notice must be given to the buyer.
The estate agent must then forthwith inform the seller of
the fact that the buyer has exercised his or her right to
cool off.
If an estate agent is not the seller’s agent for the
purposes of receiving a cooling off notice, this fact must
be disclosed in the relevant offer or sale document and details
must be given in such document where and how the buyer can
contact the seller for the purposes of delivering the cooling
off notice. It must be stated clearly that delivery of a written
cooling off notice (which complies with the requirements specified
in the Act) will be deemed to be a valid delivery if it is
delivered in the manner and/or at the address stated in the
offer or sale document.
The following clause serves as an example of how the disclosures
referred to above may be worded:
The estate agent is/is not* authorised to accept a cooling
off notice for or on behalf of the seller. Such notice will
be deemed to have been validly delivered if it is delivered
or tendered to the seller or the estate agent* personally
or to any person over the age of 16 years that resides or
is employed at the seller’s or estate agent’s*
address stated in this offer/agreement. The seller/estate
agent* shall on demand provide the purchaser with a receipt
in respect of the cooling off notice referred to herein.
* Delete if not applicable
(This clause assumes that the estate agent’s name and
address, and the address of the seller, are stated in the
offer/agreement. If this is not the case, the necessary details
must be recorded in the clause itself.)
5. In terms of the Act a buyer does not enjoy a cooling off
right if he or she has reserved the right to appoint a nominee.
The inclusion of a standard nominee clause in a pre-printed
sale document will therefore have the effect that no buyer
who signs such document will have a cooling off right. Estate
agents are not prohibited from including nominee clauses in
their pre-printed documents, but the Estate Agency Affairs
Board does not recommend the use of standard nominee clauses
in offer or sale documents which are subject to a cooling
off right. A nominee clause may be included in such documents
only if
(a) good cause exists, ie there is a good reason why the
clause must be
included; and
(b) the clause is contained in a separate addendum to the
offer/agreement,
signed by the parties; and
(c) such addendum clearly states that the inclusion of the
nominee clause has
the effect that the buyer no longer enjoys a cooling off right.
The effect of the nominee clause must be explained to the
buyer before he or she signs the relevant document (clause
6.2.1 of the Code of Conduct).
6. A sale agreement which is subject to a cooling off right
‘hangs in the air’ until the buyer has exercised
the cooling off right or the right has expired (whichever
occurs first). An estate agent is not prohibited from including
a clause in a sale agreement to the effect that the seller
may continue marketing the property during the cooling off
period and that if a better offer is received during this
period, the sale agreement will terminate unless the buyer
is prepared to buy the property on the terms stipulated in
the better offer. If such a clause is included, the meaning
and practical implications thereof must be explained to both
the seller and the buyer (clause 6.2.1 of the Code of Conduct).
7. The Act states clearly that a purchaser cannot be made
to pay any penalty or fee should he or she exercise the cooling
off right. An estate agent may not impose an administration
fee or levy for handling or submitting an offer which is subject
to a cooling off right.
8. In terms of the Act there is no cooling off right for
a buyer if the seller and buyer have previously concluded
a similar transaction in respect of the same property on substantially
the same terms. This means that if a seller and buyer cancel
a sale agreement and thereafter enter a fresh agreement on
similar terms, the buyer will not have a cooling off right
in respect of the second agreement. An estate agent who negotiates
the second transaction must, if he or she is aware (or ought
to be aware) that the seller and buyer have cancelled an earlier
agreement in respect of the same property, explain to the
buyer that the cooling off right no longer applies.
The Estate Agency Affairs Board considers it to be a species
of fraud for an estate agent to assist in cancelling a sale
agreement and to draw up a fresh agreement for the parties,
if this is done purely to bypass the buyer’s cooling
off right. If a buyer enjoys a cooling off right in respect
of a particular transaction, an estate agent may assist in
cancelling that transaction and negotiating a fresh agreement
for the parties on similar terms only if
(a) there is a sound reason why the agreement has to be
cancelled and cannot
merely be amended; and
(b) the estate agent discloses to the buyer in writing, before
the agreement is
cancelled, that he or she will not have a cooling off right
in respect of the
second transaction if the terms thereof are similar to the
cancelled
transaction.
9. An estate agent who has closed a transaction may show
the buyer other properties and advise the buyer to cool off
in respect of the first transaction, should the buyer wish
to do so. The estate agent must, however, disclose to the
seller that he or she will be showing the buyer other properties
during the buyer’s cooling off period and that there
may be a possibility that the buyer could cool off in respect
of the (first) sale. It is not necessary for the estate agent
to obtain the seller’s consent before showing the buyer
other properties; all that is required is that the seller
must be informed before the estate agent endeavours to find
the buyer an alternative property.
10. An estate agent who is asked by a buyer whether or not
a cooling off right should be exercised, may advise the buyer
in good faith even if the result would be that this would
scuttle his own or a competitor’s deal. However, the
estate agent must remain objective and base his advice on
facts. Great care should be taken to weigh up all relevant
considerations and not to make misrepresentations or hide
material facts.
11. The Act states that a buyer who buys, or makes an offer
on, a property (referred to below as the ‘second property’
) within the five day cooling off period after having bought
another property, is deemed to terminate the first transaction
except if the buyer in good faith intends buying both properties.
The first seller therefore has a material interest in the
second transaction. In terms of the Code of Conduct an estate
agent who negotiates the second transaction must protect the
interest of the first seller, if such seller was the estate
agent’s client in respect of the first transaction;
if he was not the estate agent’s client, the estate
agent must nevertheless have ‘due regard’ to his
interests and the interests of the buyer. Accordingly, an
estate agent who negotiates a sale of land (as defined in
the Act) must comply with the following requirements:
(a) The estate agent must ask the buyer if he or she has
within the previous five
day period (calculated in the manner stated in the Act) concluded
a
transaction in respect of which he or she has a cooling off
right. If the
answer is no, this should be recorded in the offer or sale
agreement
relating to the second property so that there is at least
some record of
the buyer’s statement.
(b) If the answer to the aforesaid question is affirmative,
the following applies:
(i) The estate agent must advise the buyer that disputes can
easily arise
as to whether he (the buyer) has cooled off in respect of
the first
transaction by entering into the second deal. The crucial
question will be
whether or not the buyer in good faith intended to buy both
properties.
Accordingly it is in the buyer’s best interest to advise
the first seller
in writing within the relevant cooling off period whether
or not the second
transaction (ie the offer or sale agreement relating to the
second property)
has terminated the first
(ii) If the estate agent who negotiates the second transaction
acted for the
seller in closing the first sale, the estate agent must protect
the interests of
his client (the first seller) by informing him that the buyer
has within five
days of the first transaction bought, or has made an offer
on, another
property. The estate agent must also convey to his client
whether or
not he knows that the buyer in good faith intends buying both
properties,
or whether the second transaction or offer had the effect
of terminating
the first.
To avoid uncertainty and disputes in this regard, estate
agents may consider including the following clause in every
sale agreement in respect of which a buyer enjoys a cooling
off right:
If the purchaser buys a second property whilst still having
a cooling off right in respect of this agreement, the purchaser
shall forthwith upon signature of the second agreement inform
the seller and the estate agent whether or not he or she intends
in good faith to buy both the properties referred to in this
agreement and the second agreement. Should the purchaser fail
to notify the seller, and this agreement is later deemed to
have been terminated by reason of the fact that the purchaser
entered into the second agreement, such failure shall constitute
a breach of this agreement and expose the purchaser to whatever
remedies the seller and/or the estate agent may have in respect
of such breach.
12. If more than one party sign an offer or sale agreement
as purchaser, the cooling off right can be exercised only
by all those parties acting jointly. It is not possible for
one party to cool off, leaving the other(s) as the purchaser.
This applies also where an offer or sale agreement was signed
by a husband and wife as joint purchasers. However, where
one spouse married in community of property signed the document
as purchaser, the other spouse having consented thereto in
writing, it is arguable that the cooling off right can be
exercised by the spouse who signed, without having to first
obtain the other spouse’s written consent to do so.
The Matrimonial Property Act 88 of 1984 does not expressly
require any spouse to obtain the other’s consent before
terminating an agreement or revoking an offer. The matter
is nevertheless not entirely clear. To avoid disputes or uncertainty
a spouse married in community of property who wishes to exercise
a cooling off right in respect of an offer or sale agreement
by him or her, is best advised to first obtain the written
consent of the other spouse, signed by two competent witnesses.
|
