With recent Estate Agency Affairs Board (EAAB) investigations into agencies’ dealings revealing everything from operating without licences to abusing trust accounts, consumers have a right to ask if their agents are reliable.
The recent Wendy Machanik Properties saga has made headline news in recent weeks. According to risk management firm Pasco’s investigations into Wendy Machanik Properties (WMP), R25-million was drawn from the agencies trust accounts between March 2007 and February 2010, but only R10-million was repaid into the account. The EAAB brought an urgent application against WMP and Machanik herself, while Standard Bank has since said it was going to court to have the company liquidated and a curator appointed.
According to the bank, Machanik herself received a R3-million overdraft by Standard Bank, bank guarantees of R40 000 as well as a corporate credit card with a R55 000 limit. She was on the board of the national regulator, advising other agencies about rules and regulations. If Machanik is found guilty of having misused trust funds, how do customers know if their trusted agents are in fact what Trade and Industry Minister Rob Davies has called industry “bad apples”?
Andrew Golding, president of the Institute of Estate Agents of South Africa (IEASA), is adamant that the majority of agents can be trusted, despite rumours of widespread industry corruption.
“This is unfortunately not the first time that trust funds are seemingly being misused,” he said. “But the overwhelming majority of real estate agencies administer their trust accounts correctly. Despite the Wendy Machanik Properties allegations, estate agency trusts accounts have over the years been at least as safe a place to lodge deposits as conveyance trust accounts.”
However, if you’re still worried about your agent, there are rules you can check up on that they must adhere to.
According to Portia Mofikoe, head of marketing and communications at the Estate Agency Affairs Board, agents must be registered with the board to practice. “They must have a valid Fidelity Fund Certificate or a licence to practice as an agent for the calendar year in question. The agent should, at the outset, be requested to show the consumer this certificate, issued by the board,” said Mofikoe. This is in compliance with the Estate Agency Affairs Act (EAAA).
Other important considerations to bear in mind are:
- When a sales agreement requires a deposit that is forfeited if the sale does not go through, make sure that deposit is paid to you, not the agent. Some agents keep it as “lost” commission, but you should rather agree that the deposit is paid to you and that the agent in return receives the mandate to put the house on the market again.
- The buyer will generally be required to pay a deposit, either when making an offer to purchase or once the offer has been accepted by the seller. Although the deposit is usually held in a trust account by the estate agent, it’s sometimes held by the attorney attending to the registration. You can opt for this if you prefer.
- Unless the agent’s been given a specific, written instruction that all interest earned on the deposit must be paid by the buyer, 50% of that interest will be paid to the Estate Agents Fidelity Fund and 50% will be retained by the agency as a contribution to the costs of opening and maintaining a trust account (this Fidelity Fund, administered and controlled by the EAAB, is the guarantee that if the agent steals or misuses the deposit, that money will be refunded to the buyer after due investigation). If there’s any well-founded suspicion that trust monies are being misused, contact the EAAB.
- An estate agent for the seller is not permitted to negotiate on behalf of the prospective purchaser, disclose the principal’s bottom line or reveal any other confidential information. Remember that if the agent is working for the seller it’s wise to not tell him or her anything you wouldn’t want the seller to know.
- Sale agreements can be subject to suspensive conditions (“subject to” clauses), which set out specific conditions that must be met before a sale can go through. Remember that the contract is legally binding once signed by both parties, so go over it thoroughly before you sign. The fewer suspensive clauses the better, but look out for those that stipulate the satisfactory professional building inspection of the home, arranging the necessary financing to purchase the home, selling the present home, and, if the home’s in a sectional title unit, a satisfactory review of all relevant sectional title documents.
- Remember that when making an offer to purchase that has suspensive conditions, the prospective buyer is actually asking the seller to take the home off the market during the period while the buyer is endeavouring to fulfil those conditions. Make sure this is the case.
- If you have complaints about an estate agent and the agency’s services, first discuss these with the estate agent concerned. If matters can’t be resolved, approach one of the principal estate agents managing the relevant enterprise. Most concerns can be settled in this way. If not, the EAAB can offer guidance — though not furnish legal advice, nor grant civil redress or relief. The consumer can also lodge a formal complaint against the estate agent concerned, especially regarding any breach of the Act or the Code of Conduct for Estate Agents.
If an estate agent is found guilty of improper conduct, appropriate sanctions are imposed, from a reprimand to a fine of R25 000 per individual account or, in the most compelling of cases, the withdrawal of a Fidelity Fund Certificate, which effectively puts that estate agent out of business.
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