Mandates to Brokers
One of the main issues we face as commercial property brokers in South Africa, and globally, is balancing the requirements of the regulatory environment with looking after the needs of our clients and practically managing the dynamic nature of business and property transactions in the current environment.
Owners will often not want to sign mandates, and while a mandate could even be verbal, to be able to prove the terms of the supply agreement, a signed document is most practical. A mandate is simply an instruction to a supplier to perform an action, in the property sales and letting industry it is an owner giving a broker authority to market and sell or let their property at a set fee and within a set time period. The need for an actual instruction is obvious, nobody could transact on your property without your express permission, so a mandate should not be ignored or feared.
In addition, a mandate details the terms of the supply agreement, in other words, what price you require, dates of occupation, specific marketing to be undertaken if proposed, commission to be paid and terms of that payment, amongst a number of other possible details. Mandates actually protect owners as they detail, usually very specifically, the terms of the relationship between the owner and broker as well as the marketing parameters for a property.
In certain instances, more in the residential space than the commercial property market, mandates can be “exclusive” or “sole, and while they can be a good choice for the right property, owners would be well advised to clearly understand the terms of the agreement and what is included. The main point is generally that only the relevant broker can conclude any transaction and would be due commission regardless of who did the deal, which can open the owner to double commission claims if the terms are not upheld.
Non-exclusive or “open” mandates are not restrictive in terms of who may conclude a transaction and are more prevalent in the commercial property space. An open mandate is simply an instruction to market while clarifying the terms of a successful transaction and should be of no concern to owners as they are actually a regulatory requirement. Open mandates can be as simple as an email or Whatsapp, provided it is traceable, clear as to the instruction and communicated between the parties. As always, owners should be aware of what they are signing, should read and understand or have terms fully explained, before committing.
Mandatory Disclosure
Section 67 (read with regulation 36) of the Property Practitioners Act 2019 states that a broker shall not accept a mandate from an owner without also obtaining a Mandatory Disclosure form. While this might sound daunting, the form is there to protect sellers, landlords, buyers, tenants and brokers. The standard “voetstoots” clause cannot be fully relied upon to protect sellers or landlords in damages claims as any latent (hidden or not reasonably discoverable) defect that may have been purposefully concealed or not disclosed by the owner can result in a damages case by the purchaser or tenant. The Act further allows the Property Practitioners Regulatory Authority to take action against the broker in such an event. To protect all parties the Mandatory Disclosure form simply details any defects the seller is aware of. It is not a guarantee by the seller that there are no defects, nor is it a commitment to repair any defects noted unless so stated. The prescribed form lists any defects if applicable and, in the event there are latent defects, the purchaser/tenant shall not have recourse to the owner and/or broker, unless it is discovered that the party was in fact aware of the defect and did not disclose it.
These mandate forms and disclosure forms are prescribed to certain degrees by the regulatory environment, and when being presented for signature by your broker, they are only looking after your best interests, so please be gentle with them. Hopefully this sheds more light on these documents adding to your admin load. Be assured that Oriprops are working hard on a document solution to ease the paperwork burden.
Should your broker not be able to explain or fully detail what you are signing and why, please make sure to work with commercial property specialists such as Oriprops, our only concern is to make sure that all parties are protected, and that your property transaction is smooth and as effortless as possible.
Sincerely
