08 Feb 2013
A Property24 reader asks:
Should a sole mandate be cancelled before the time period (for whatever reason), is the seller liable for anything? What must the seller do to clear their name/mandate?
Francois Venter, Director of Jawitz Properties advises:
The seller needs to first check the terms of the written sole mandate agreement. If the contract is for a fixed period then it is subject to the terms of the Consumer Protection Act (CPA) 68 of 2008. In terms of the Act, a cooling off period may apply, depending on how the estate agent and the seller made contact with each other. If the seller made contact with the agent, no cooling off period will apply once the agreement has been signed, but if the estate agent made contact with the seller, a five day cooling off period will stand from the day the sole mandate agreement was signed. If the seller chooses to cancel within the five day cooling off period, this will not trigger any financial or legal consequences. In other words, if the estate agent approached the seller directly, or used direct marketing tactics such as dropping off a leaflet in the seller’s mailbox and then a sole mandate was signed, the seller has five days to change his/her mind, no questions asked.
If the cooling off period has expired and the seller wishes to terminate, in terms of the Act, any fixed period contract may be cancelled with written 20 business days’ notice – this can be via fax, e-mail, letter or sms, but cancelling before the determined time period on the agreement can incur a penalty. The law states that this penalty should be fair. In terms of good practice, it should be specified in the contract. In a Jawitz Properties sole mandate agreement for example, the penalty is specified as 10% of the gross brokerage fee. This penalty is charged as the estate agency will have costs to recover such as marketing spend on the property.
Another critical point to remember is that fixed term contracts will renew automatically on a month to month basis after the expiry date, so if a seller wants to cancel the sole mandate agreement, he/shemust put in writing prior to the expiry date (again via fax, e-mail, letter or sms) that he/she does not wish to renew the mandate. So for example, if the mandate is a six month fixed contract, in month five, the seller would give notice should they wish to terminate at the six month mark. Failing to terminate will mean that the sole mandate agreement will stand for another month, which may delay the seller’s new plans. Further, if the seller forgets to terminate and does not put notice of cancellation in writing and permits another agent to sell their property, the original agency will be within their rights to sue for double commission.
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