19 Jun Code of Conduct – Part 5
Posted at 03:48h
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We continue with our discussion of the Code of Conduct. This week, we turn our attention to Regulation 34.4, which deals with the PP’s duty in respect of offers and contracts.
A summary of Regulation (Reg) 34.4 follows below:
- Reg 34.4.1 – a PP, who holds a mandate from a seller to sell their property, must present all offers received by a purchaser to the seller, unless the seller has instructed the PP not to present such offer. Let us say for example, that the mandated price that the seller has agreed with the PP is R800 000 and the seller has also indicated to the PP that he (the seller), will not entertain any offers below R750 000. If the PP receives an offer in writing from a potential purchaser for R760 000, the PP, in terms of Reg 34.4.1, MUST present this offer to the seller. The PP cannot decide that they will not present the offer of R760 000 to the seller, in the hope that they may receive a higher offer, which will also mean that the PP earns a greater commission. However, if the PP receives an offer for R720 000, then they do not need to present this offer to the seller, as the seller has instructed the PP not to present any offers below R750 000.
- Reg 34.4.2 – a PP may not present competing offers to their client in such a way that the PP is trying to unduly influence the seller to accept one of the offers, UNLESS the PP has explained the advantages and disadvantages of each offer to their seller. As an example, let us say that the PP has received a cash offer for R750 000 and a second offer for R850 000 which is subject to the potential purchaser selling their own property and obtaining finance, then the PP must explain to their client that the cash offer would probably be better to accept as it is a cash offer and that the second offer has a likelihood of falling through, due to the conditions that the offer is subject to. This is notwithstanding that the PP may prefer their seller to accept the offer of R850 000, as the PP would earn greater commission.
- Reg 34.4.3 – a PP may not amend a signed offer or written mandate or any contract of sale or lease, without the knowledge and express consent of the parties to the contract. This Reg is designed to prevent any illegal changes, made by the PP, to the offer, mandate, sale or lease.
- Reg 34.5.1 – a PP is required to explain to the parties to a written offer or contract, before they sign such offer or contract, the meaning and consequences of the material provisions of that offer or contract. It is therefore the PP’s responsibility to explain the various clauses and provisions of the offer or contract. If the PP is unable to do so, then the PP must refer the parties to someone who can explain the relevant material clauses and provisions.
- Reg 34.5.2 – if an OTP has been accepted or not been accepted, the PP must notify the person who made the offer of the acceptance or non-acceptance, as the case may be, as soon as possible.
- Reg 34.5.3 – a PP must provide every contracting party with a copy of the agreement of sale, lease, option or mandate, as the case may be.
Next week we will discuss the PP’s duties in respect of commission.
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