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The estate agent's duty to disclose
Duty to disclose
4.1 An estate agent shall -
4.1.1 convey to a purchaser or lessee or a prospective purchaser or lessee of immovable property in respect of which a mandate has been given to him to sell, let, buy or hire, all facts concerning such property as are, or should reasonably in the circumstances be, within his personal knowledge and which are or could be material to a prospective purchaser or lessee thereof;
4.1.2 if he conducts his business in terms of a franchise, disclose clearly and unambiguously in all his correspondence circulars, advertisements and other written documentation that he operates in terms of a franchise and state thereon his name and the name of the franchisor;
4.1.3 if he conducts his business under a trade name or style other than his own name, clearly disclose his full name in all correspondence, circulars and other written documentation;
4.1.4 not perform or attempt to perform any mandate in respect of a particular property if a current prior mandate, which conflicts with the aforesaid mandate, has been accepted by him, unless he has disclosed to the person who has given the later mandate the existence of such prior mandate, and the fact that he will not be the estate agent’s client in respect of that property.
4.2 No estate agent shall purchase directly or indirectly for himself, or acquire any interest in, or conclude a lease in respect of, any immovable property in respect of which he has a mandate, without the full knowledge and consent of the person who conferred the mandate, or sell or let his own immovable property or any immovable property in which he as any direct or indirect interest, to any prospective purchaser or lessee who has retained his services, without that purchaser or lessee having full knowledge of his ownership of, or interest in, such immovable property.
4.1.1 A prospective purchaser or lessee introduced to a property by an estate agent expects that the estate agent will convey to him all material facts concerning the property. Of particular importance would be defects to the property such as leaking roofs or dampness, etc and other factors which may influence the value of the property or its use to the purchaser, including developments planned on adjacent properties, the proclamation of main roads in the vicinity, etc. Clause 4.1.1 obliges the estate agent to disclose all material facts (i) of which he is personally aware (such as facts disclosed to him by the seller personally) (ii) of which he should reasonably in the circumstances have been aware.
When can it be said that an estate agent should “reasonably in the circumstances” have been aware of certain facts? No hard and fast rules can be laid down in this regard. Each individual case will depend on the circumstances surrounding the particular property and the transaction in question. Important considerations are the following:
- An estate agent cannot be expected to know everything about a property. He is not expected to be a construction expert or to be acquainted with all the technicalities relating to property development and township establishment. The crucial question is – what knowledge can reasonably be expected of an estate agent in the particular circumstances?
- Clause 4.1.1 does not require an estate agent to actively uncover latent defects. For example, an estate agent is not obliged to climb into the roof of a house, to dig up foundations or to have walls examined for dampness for no apparent reason. On the other hand, it is reasonable to expect an estate agent to undertake a visual inspection of a property and to be put on guard by a defect which is reasonably apparent. An estate agent cannot therefore ignore reasonably obvious defects.
- The clause does not specifically place an obligation on estate agents to inspect building plans or title deeds before marketing a property. It is clearly reasonable for an estate agent to assume that buildings on a property have been erected in accordance with approved building plans. However, if upon inspection of a property it is reasonably apparent that certain additions are structurally so unsound or badly constructed that they could not have been approved by a local authority, then the estate agent should be on guard and either make further enquires or disclose his concern to the prospective purchaser.
- The ease or degree of difficulty that the estate agent will encounter in obtaining information about a property must be considered. If, for example, certain facts can only be obtained after the making of expensive and complicated enquiries, it cannot reasonably be expected of the estate agent to obtain or possess such information. The lack of enquiry should nevertheless still be disclosed.
- An estate agent may generally rely on representations and statements made to him by the seller of a property, but this does not necessarily always absolve him from making further enquiries. For example, if an estate agent is told by a seller of a house that the roof does not leak he may accept this to be true unless there are clear indications to the contrary. This means that the estate agent must still undertake a visual inspection of the property. If a leak problem is not apparent (for example the ceiling is not stained) he need not make further enquires. He can then convey to a prospective purchaser that the seller has told him the roof is leak free and that he has no reason to believe otherwise.
The following example further illustrates the application of this clause:
An estate agent has a mandate to sell a house. Adjacent to the property there is a large vacant site but the estate agent, being new to the area, is unaware that a large shopping complex is being planned for the site. The estate agent introduces a prospective purchaser to the property, but fails to disclose the proposed development to the purchaser. Had the estate agent made superficial enquiries by, for example, telephoning the local authority, he could easily have ascertained the necessary facts.
By not disclosing the development to the prospective purchaser, the estate agent will be in contravention of clause 4.1.1 as he should, in the circumstances, have been reasonably aware thereof.
4.1.2 The purpose of these clause is to ensure that members of the public doing 4.1.3 business with an estate agent know precisely with whom they are dealing.
4.1.4 See the explanation under the definition of “client” above.
4.2 This clause embodies the common law principle that an estate agent should at all times guard against a conflict of interest. Obviously, if an estate agent wishes to buy a property in respect of which he has a mandate to sell, there will be a conflict of interest between him and his client. The estate agent would want to buy the property at the lowest price possible while in acting for the seller; he must try to obtain the highest price. The same considerations apply where the estate agent sells his own property to a purchaser who has given him a mandate to find a property. Clause 4.2 does not prohibit the conclusion of such transactions, but requires the estate agent to disclose his interest in the property to the seller or purchaser (as the case may be).