Advice and Opinion

Full price should never be paid before transfer

Although agents are always to act in the best interest of the seller, as it states in the Estate Agency Affairs Board Code of Conduct, it is also their duty to be mindful of the rights of the purchaser, says Lanice Steward, managing director of Knight Frank Anne Porter.

In a recent case mentioned in a Smith Tabata Buchanan Boyes newsletter, Hlabane and Another v Sebotsa and Others, where the purchaser, the agent and the seller, agreed to transfer the full asking price prior to transfer, the buyer was accused of being in breach of the contract but in actual fact the estate agent had held the amount in trust on behalf of the seller. The court later found in favour of the purchasers – ordering the transfer of the property – as they were not technically in breach of the contract.

In this particular case, the Hlabanes signed an agreement of sale of a property owned by Sebotsa in Bloemfontein. The terms of the agreement were that the property would be sold for R324 000, inclusive of the agent’s commission, and the purchase price was to be paid after Sebotsa received the title deed from the municipality. At the time of the sale Sebotsa was waiting for the title deed from the municipality from whom he was to receive transfer of the property.

The full purchase price was paid to Retika, the estate agent, and a deposit of R150 000 paid over to Sebotsa, who confirmed that the balance should be paid over to him on receipt of the title deed from the municipality.

The property was transferred from the municipality to Sebotsa in August 2012 and in December he wrote to the Hlabanes demanding payment of the balance. He then, after 21 days, wrote to Retika asking for the cancellation of the agreement as he deemed the Hlabanes to be in breach of contract.

The Hlabanes, having paid a further R150 000 into a trust account of the conveyancing attorneys, were concerned that Sebotsa would alienate the property to a third party, approached the court for an order obliging Sebotsa to transfer the property to them.

It was then questioned whether or not payment of the purchase price to Retika (who had refused to pay it over to Sebotsa before transfer to the Hlabanes) constituted payment of the purchase price of the property.

In this case, Retika was wrong to withhold the money (according to the agreement they had signed) but Sebotsa was also in the wrong for demanding the money from the buyers.

It would be irresponsible in any situation for the entire amount to be paid to the seller before transfer, who could then deny transfer or abscond with the money, said Steward. This seemed a smaller amount but there have been cases where properties are R2 million or more, and buyers offer to pay the full amount upfront, she said.

Leave a Comment