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26 Sep 2019

DOES ACCEPTANCE OF AN OFFER TO PURCHASE HAVE TO BE COMMUNICATED TO A PURCHASER? THE LATEST CASE ON THE SUBJECT CASTS DOUBT!

The judgement in the matter of Terry and Terry v Solfafa and Others, which judgement was delivered in the Bloemfontein High Court on 29th of August 2019, has recently come across my desk.

In the matter, Mr and Mrs Terry were seeking an order compelling Ms Solfafa to transfer a property which they had bought into their name. Ms Solfafa raised three defenses to the claim.

Firstly, she argued that because Mr and Mrs Terry were married in community of property, and because only Mr Terry had signed the deed of sale, the agreement was invalid. It did not take the judge long to dismiss this argument. The Matrimonial Property Act leaves no doubt that either spouse who is married in community of property can bind the joint estate to purchase immovable property on their own. It is only when immovable property is sold (or mortgaged) that the written consent of both spouses is required.

Secondly, she argued that because the agreement was subject to the “successful sale” of the Terry’s property, and because it had not been transferred by the due date, the agreement had lapsed for want of fulfillment of this suspensive condition. Once again, the judge found against her and interpreted the term “successful sale” in this contract to mean simply the signing of a deed of sale, not the registration of transfer.

Thirdly, she argued that after signing the deed of sale, and before the acceptance of the offer had been communicated to the purchasers, she revoked her acceptance. On this point the judge found that her signature to the deed of sale alone was sufficient to bring about a binding deed of sale, despite the fact that her acceptance had not yet been communicated to the purchasers.

It was this last point that caught my interest. This is because our common law on the point is clear, and is against the learned judge. In terms of our common law, the general principle is that a contract only comes into being once acceptance of the offer has been communicated to the offeror. The reason for this is obvious. A person needs to know when they are bound by a contract. If they do not know they might do something which will prevent them from being able to perform in terms of the contract (like buy another house). Also, obligations in the contract might fall due for performance, and if a person does not know that they have obligations to perform they could easily fall into breach and become liable for damages.

There will obviously be some exceptions to this rule, for example, some deeds of sale specifically provide for communication of acceptance of the offer to be made to the estate agent. These exceptions should however only come about when the contract specifically provides for this or when circumstances clearly dictate.

In our case, the judge referred to a previous case which had decided that when an offer is made in writing, it will be easier to infer, “in the absence of any indication to the contrary”, that for the contract to arise, the acceptance required was no more than a signature.

The judge then leaped to the conclusion that Ms Solfafa’s signature to the offer to purchase was sufficient to bring about a binding deed of sale here.

While I have not read the contract in this case, and with respect to the judge, I found his reasoning to be weak. Nevertheless, it is a judgement of the High Court, and it will therefore have persuasive value in other cases on this point that might arise in the future. For this reason, I believe is important to check the wording of your deed of sale to ensure that there is no room for doubt.

We suggest that your deed of sale (or offer to purchase) should specifically provide that the contract will only come into existence once the seller’s acceptance has been communicated to the purchaser or the estate agent. This will make things clear, it will protect all of the parties, and it will ensure that there will be no dispute on the point in the future.

If you need help in amending your contract, or if you are not sure what to do, do not hesitate to contact one of our attorneys for guidance.

Miltons Matsemela Inc.
Deon Welz
September 2019

20 Sep 2019

PREFERENTIAL MARKETING AGREEMENTS BETWEEN ESTATE AGENCIES AND HOME OWNERS ASSOCIATIONS – ARE THEY LEGAL?

The legality of an agreement between a home owners association and an estate agency, conferring upon the estate agency preferential marketing rights in return for payment of a percentage of the sales value of the property, has recently been decided on by the Supreme Court of Appeal.

This decision was handed down on 16 September 2019 in the case of Atlantic Beach Home Owners Association and others v The Estate Agency Affairs Board (978/218 ZASCA 112).

In this matter, the Estate Agency Affairs Board (EAAB) had brought charges against the Atlantic Beach Home Owners Association (ABHO) and their CEO, Mr Harry White, along with a franchise of Pam Golding Properties (PGP) and their principal, Mrs Emarie Campbell, flowing from a “Property Partnership Agreement” that had been entered into between the ABHOA and PGP.

In terms of this agreement PGP were afforded special marketing privileges and marketing assistance on the Atlantic Beach Golf Estate, in return for which the ABHOA received a percentage of the sales value of any property sold.

Rival estate agencies in the area were obviously dissatisfied by this arrangement and complaints were lodged against PGP at the EAAB. Following these complaints, the EAAB instituted disciplinary procedures against PGP and their principal, and instituted criminal charges against the ABHOA and their CEO. These charges were premised on the assumption that the ABHOA was operating as an estate agency without a fidelity fund certificate, and that PGP were complicit.

In their defence, the ABHOA and PGP brought an application in the Cape Town High Court in which they asked the court:

  1. to declare that the ABHOA and their CEO were not estate agents as defined in the Estate Agency Affairs Act (and therefore did not need fidelity fund certificates); and
  2. to set aside the decision by the EAAB to institute disciplinary steps against the parties.

The ABHOA and PGP lost the case in the Cape Town High Court on a technical point, but they took the decision on appeal.

At the appeal hearing, the EAAB argued that because the Property Partnership Agreement placed an obligation on the ABHOA to carry out joint marketing and joint advertising initiatives to generate leads for PGP, and because they received a percentage of the purchase price from the sale as payment, the ABHOA fell within the definition of an estate agent and therefore required a fidelity fund certificate.

The court however did not agree. The court found that a person who merely carries out the functions of an estate agent does not automatically become an estate agent for the purposes of the Act unless they also hold themselves out or advertise, “for the acquisition of gain”, that they are doing this work. To put it another way, the ABHOA would only have fallen within the definition of an estate agent if they had, with the intention to make a profit, made it public that they were carrying out the work of an estate agent.

The court interpreted the ABHOA‘s obligations in terms of the Property Partnership Agreement to be nothing more than the provision of marketing benefits and it was in return for these marketing benefits that the ABHOA was to be paid.

The judge therefore upheld the appeal and set aside all the disciplinary charges that the EAAB had initiated against the ABHOA and PGP.

On the basis of this judgement, it would appear that the way is now clear for individual estate agencies to enter into these types of property partnership agreements with home owners’ associations or body corporates.

But please beware, arrangements of this nature may not be exclusive, i.e. they may not deprive other agencies of the right to sell property on the estate. This is because such an exclusive contract would fall foul of our competitions law.

Deon Welz
Miltons Matsemela Inc
September 2019

06 Sep 2019

A September to Remember!

We as South Africans sport a very rich cultural history that is rooted in the celebration of who we are, where we came from and more importantly, where we are going. Heritage month has arrived, and we are urged as a nation to reflect on our history that molded our presence, and which will pave the way for our future.

The South African Constitution supports and protects our country, our heritage and our culture. Our Constitution is regarded as one of the most progressive and fairest pieces of legislation in the world. Our legal system protects us and regulates the mechanisms that allow us to live in a free and fair environment. We are fortunate to be living in a country where our different cultures are celebrated and encouraged.

South Africa is in the middle of economic uncertainty and we are being judged by the world and exposed to opinions and accusations that influence our daily lives. Whispers are heard around every corner about people wanting to liberate their investments and run for the hills or hide money under mattresses. The current decreasing housing market is a big factor in the economy as property owners are focusing on the fact that their investments are not achieving ideal prices. If we look at this from a different angle, as perspective is one the most valuable traits a person can possess, we have arrived at a market more favourable for buyers. This is where first time buyers can get a foot in the door with a decreased prime interest rate and reduced sale prices. We are also experiencing a positive outcome from financial institutions when people are applying for bonds and other funding. The fact that our market is experiencing a dip creates opportunity for new investors and related service providers to inject our economy with fresh ideas. We have access to resources and we are players in a free market system, we need to stay true to our heritage and seek opportunities to rise above the hurdles.

It is important to note that South Africans are the most resilient people who have ever walked this earth and when a nation as powerful as ours is able to give way to differences and act together, there will be nothing that can stop us.

On Heritage Day the entire country will light the fires of hope and prosperity in celebration of OUR day and we should then take a moment and appreciate where we are, where we came from and where we are going. Let’s make this September one to remember.

CORNELIUS BOTHA
Attorney
September 2019

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