Code of Ethics
There is a government-issued Code of Conduct, which is enforced by the Estate Agency Affairs Board, (the industry’s regulating authority). All estate agents are bound by this Code. In addition, members of the Institute of Estate Agents of South Africa are bound by the IEASA’s Code of Ethical Standards
For the Institute of Estate Agents of South Africa’s Code of Ethics, click here:
By law, every estate agent and estate agency firm must be registered with the Estate Agency Affairs Board, and it is an offence to practise as an estate agent without being registered. Registration is subject to annual renewal (per calendar year). An estate agent who collects rentals must also register as a debt collector, with the Council for Debt Collectors. This registration is also subject to annual renewal.
Since July 2008, the entrance requirement has been a Certificate in Real Estate, coupled with a year-long internship in an estate agency firm, and culminating in a Professional Designation Examination. By the end of 2011, all existing estate agents must also have obtained the required certificate, through a Recognition of Prior Learning process. Compulsory “continuing professional development” is also on the cards, but no date has yet been announced for its introduction.
Every estate agency firm must have a trust account, and each principal/director must personally be qualified as an estate agent. The trust account must be audited annually, and if the auditor’s report is not submitted to the EAAB, the firm’s registration will not be renewed.
There are no restrictions for foreign ownership of property in South Africa. There has been significant foreign investment in South African residential property since the mid-1990s. The most popular areas appear to be the Western Cape, and the KwaZulu-Natal coastal region.
Non-resident investors should note that they will have to pay Capital Gains Tax when they later sell their properties. Under the present rules, introduced in September 2007, the purchaser of the property will be required to deduct a prescribed percentage from the proceeds of the sale and remit it directly to the South African Revenue Service before paying the balance to the seller.
Land Registration System
Property ownership is registered in regional Deeds Offices, situated in the major centres. Registration is the only means of obtaining legal title to a property, and a title deed issued by a Registrar of Deeds is the only valid proof of ownership. Mortgage bonds, and “long leases” (20 years or longer) are also registered in the Deeds Offices.
Being government departments, the Deeds Offices are accessible to the public, and anyone may consult the records, or obtain copies of documents, on payment of search and copy fees. Information is also available from an online database (“Deedsweb”) to which anyone can subscribe.
Other industry professionals
Only a registered estate agent may be paid for the actual sale or rental of a client’s property. However, other professions are involved in various aspects of the sale process:
- electrical inspectors, who inspect electrical installations and
- issue certificates of compliance which are required for transfer
- beetle inspectors, who inspect properties for beetle infestation
- home loan originators, who assist purchasers to obtain finance against security of mortgage bonds
- property valuers, who are employed by banks, in connection with home loan grants
- conveyancing attorneys, who attend to the registration of transfer in the Deeds Office.
Generally speaking, South African estate agents provide the following range of services:
- assisting property owners to sell their properties
- assisting landlords to find tenants for their properties
- collecting rentals, and managing rented properties
- assisting trustees of sectional title schemes (condominiums)
- to manage their schemes
- assisting business owners to sell their businesses.
It is believed that the majority of estate agents focus on sales, and that most deal in residential properties.
As far as sales are concerned, a “full service” would be regarded as:
- advising the seller on a market-related asking price
- advertising the property
- showing the property to prospective buyers
- checking that a prospective buyer can afford to buy
- writing up the buyer’s offer to purchase
- presenting the offer to the seller and, if necessary,
- negotiating terms to bring the parties to an agreement
Property Marketing Systems
Method of Sale:
Most properties are sold by private treaty, i.e. a signed contract between seller and purchaser, often negotiated by an estate agent. By law, a contract to buy and sell property must be in writing, and transfer of ownership from seller to purchaser becomes legal only when it is registered in the Deeds Office.
Sale by auction has become popular in recent years. Auctions are usually open to the public, and the property is sold, on the fall of the hammer, to the highest bidder. A written contract is then entered into between the seller and the successful bidder.
There is no single national referral system. However, there are networks of estate agency firms which exchange referrals around the country, and many which do so locally. Some networks trade under a brand name attached to the individual estate agency’s name, while others are less formal. Typically, an estate agency which sells a property as a result of a seller or buyer referral from another firm will pay that firm a percentage of the commission as a referral fee.
Relationship of Buyer/Seller to Practitioner
Agent’s Duty to Principal:
The relations between the estate agent and the client are determined by common law, by the terms of the client’s mandate to the estate agent, and by the provisions of the Code of Conduct.
Common law requires both parties to act in good faith towards each other. The estate agent is obliged to act in the client’s interests, and to avoid conflict of interest. .
Both parties are expected to honour the obligations which they assume in terms of the mandate, e.g. the seller may undertake not to impede the estate agent in the execution of the mandate, or to cancel it prematurely. If the estate agent performs the mandate successfully, then the client is obliged to pay the estate agent the agreed-upon remuneration. .
The Code of Conduct places specific obligations on the estate agent, e.g. to present all offers received, and not to disclose confidential information. .
The estate agent’s relationship is usually with the seller (or landlord), but there is no prohibition against an agent acting for a buyer (or tenant) instead. However, to avoid conflict of interest, he/she may not act for both in the same transaction, unless both have agreed to this in writing.
The relationship is not a contract, but a mandate, i.e. the client gives the estate agent an instruction to find a buyer or tenant, but if the agent fails to do so he/she is not in breach of contract. .
A sole mandate must be in writing, and it must contain prescribed details for the protection of the client, i.e. a definite expiry date (which may not be altered without the client’s consent), and a statement of the marketing methods which the estate agent proposes to use. However, an open or shared mandate, i.e. one given to more than one estate agency, need not be in writing. .
A mandate is essential. It is a punishable offence for an estate agent to advertise or offer a property for sale or to let unless he/she has been given a sole or open mandate to do so.
Payment is usually on commission, which is generally a percentage of the price which the agent obtains for the seller’s property. Alternatively, it can be a flat fee. For rental services, remuneration generally consists of a flat fee for procuring the tenant, plus a percentage of the rental collected each month. .
The client, i.e. the person who gave the estate agent the mandate, pays. In most cases, this is the seller or landlord. Commission on a sale is usually paid from the proceeds of the sale. Commission on a rental is usually deducted from the rental received. .
In terms of the Code of Conduct, payment for finding a buyer for a property may be made only after the buyer has been registered as the new owner, in the Deeds Office, unless both the buyer and the seller have agreed, in writing, to payment before transfer. Payment for procuring a tenant is usually made after the lease has been concluded. Payment for collecting rentals, or managing a client’s property, is usually made monthly. .
There are no statutory restrictions on remuneration, which is determined entirely by free market forces. In the past, the Institute of Estate Agents of South Africa published guidelines, in the form of a recommended tariff, but they were discontinued because of changes in competition laws.