Experience and training is needed when entering into property transactions

18 August 2014

There are certain agents who are complaining about the stringent requirements now necessary to enter the real estate industry, which will necessitate new agents becoming interns for at least a year, completing their NQF4 in real estate, a logbook for a year which is assessed through the Estate Agency Affairs Board and a final four hour open book exam. In addition to this, agents will have to gain Continuing Professional Development (CPD) points each year through various means, says Lanice Steward, managing director of Knight Frank Residential SA.

A recent court case highlighted in a Smith Tabata Buchanan Boyes property law update, shows just how all this training for agents becomes necessary. This case was between Moola's City Properties CC v Naidoo and Others, where Mr Naidoo concluded a written agreement - ‘a Confirmation of Purchase’, in terms of which Naidoo sold his property to Moola’s for R2,7 million. When this document was signed they agreed that a detailed contract would be prepared by an attorney and signed at a later date, which was done. After inspecting the property a second time, which was necessary as the first one was not done thoroughly for various reasons, Moola renegotiated the price he would offer down to R2 million, saying that the building was in a poor condition and that he was not sure that the bank would grant a bond, and at this meeting Naidoo told him “he had a deal”.

A second purchase agreement was signed for the sum of R2 million but at a later stage Naidoo sold the property to another party for R2,7 million. Moola’s case was that his agreement was valid and superceded any other agreement entered into.

There are various problems with the case above, said Steward, in that the contract should not have been signed without examining the property extensively beforehand. The buyer should have been able to see the whole property on the first viewing if he wanted to. Secondly the price of R2 million was questioned, and if Naidoo wanted the R2,7 million, he should not have signed the offer for R2 million and then be swayed by another buyer offering the higher price later.

“Agents might be bucking against the extensive training and assessments they have to go through but this is all for the greater good,” said Steward. This is to protect the public because they are signing binding contracts and agents are acting as paralegals, particularly if more complex clauses have to be constructed and inserted into contracts. There are many aspects of properties for sale that are covered, such as the condition of the property, fixtures and fittings, possible exclusions, etc., and one does not want to get into a situation where the validity of any section of a contract is in question.

This is why it is necessary for agents to have ongoing training and to be kept up to date with possible changes in legislation, so that they are able to do their jobs competently. The public should, as a matter of course, ask for a valid Fidelity Fund Certificate from a prospective agent to ensure that they are qualified and registered to transact in property. This is probably a person’s largest asset, and buyers and sellers must take some steps to protect themselves. As an added indication of the professionalism of an agent, the public should check if the agent is registered with one of the associations that represent real estate agents such as the Institute of Estate Agents or the National Property Forum.

“If your agent cannot produce a valid FFC, there is no commission payable, and he should not be able to transact without the necessary certification,” said Steward.