Having been in the industry for just a little over 19 years, both as a bond originator and an estate agent, I have been privy to numerous property transactions. It has always intrigued me why nobody has challenged the standard practice of the seller nominating the transferring attorney, who is responsible for registering the transfer of a property from a seller to a buyer, when in fact, it is the buyer who pays the legal fees, parts with their hard-earned cash and usually incurs a 20 year or more debt to secure the transaction. The transaction is definitely riskier for the buyer, yet the seller nominates the attorney.
Where Did This Practice Originate?
The right of a seller of a property to nominate the transferring attorney dates back to a precedent set back in 1903, when a court declared “when a person is under a legal obligation to do something to complete a contract, and the circumstances necessitates the appointment of an agent to do it, then that person has the right to appoint his own agent”. Please note, it is a “right”, not a legal obligation.
In a property transaction the legal obligation of the seller is to present himself at the deeds office authorising the transfer of the property to the buyer. Due to all the complicated legalities pertaining to such transaction, the seller grants the transferring attorney a power of attorney (POA) to represent them at the deeds office.
The deeds office, one of the best property registry systems in the world, is meticulous in scrutinising the required documents, ensuring that all is verified and recorded correctly. Therefore, should the buyer nominate the transferring attorney, there is absolutely no risk to the seller in granting such an attorney a POA.
What Are the Limitations of the Transferring Attorneys?
We recently secured a home loan for a client in a complicated property transaction, which, after 8 months of back and forth negotiations, has not yet registered. When we approached the transferring attorney to please advise the buyer of their legal rights, the transferring attorney responded: “Please note that as the conveyancer (i.e. transferring attorney), we cannot act as the attorney of either party and each party must seek independent legal advice.”
In other words, the transferring attorney is merely responsible for maintaining the integrity of the sale agreement between the buyer and the seller. It cannot represent either party in resolving disputes and/or
providing legal advice.
What else is the transferring attorney responsible for:
- Receiving the deposit and placing it in an interest-bearing trust account for the benefit of the buyer (see undermentioned court case for the legal implications of this).
- Paying SA Revenue Service the transfer duty on behalf of the purchaser.
- Ensuring that the rates and taxes are up-to-date for the benefit and on behalf of the buyer.
The Most Important Court Case
In a March 2019 High Court judgement (Agu v Krige and Others (20763/2017) [2019] ZAWCHC 46) further affirms Tess Rodrigues’ conviction that the buyer should be the one appointing the transferring attorney.
As per the sale agreement, a buyer deposited the full purchase price amounting to R720,000 into the seller’s nominated transferring attorneys’ account. When it later became apparent that the conveyancer stole the money, the purchaser demanded transfer. The seller refused, as they would be without the property and without the money.
The seller lodged a claim against Legal Practitioners Fidelity Fund for the stolen funds, but this was rejected as it maintained that the money deposited was held for the benefit of the buyer and not the seller, therefore, the buyer incurred the loss.
The buyer refused to claim from the Legal Practitioners Fidelity Fund as they felt it wasn’t their loss. As they met their obligation under the sale agreement, they approached the courts to order the transfer of the property.
The court needed to establish whether the transferring attorney was acting as the agent for the seller. As the seller nominated the transferring attorney, the conveyancer was in fact the agent for the seller and having received the funds as the agent, it was as good as the funds having been paid to the seller directly.
The court ordered the transfer of the property to the buyer. The seller was left without a property and without money.
As this clearly demonstrates, there is absolutely no benefit, to either the seller or buyer, having the seller of a property nominate the transferring attorney. In fact, the above court case clearly highlights the risk of such practice. Furthermore, while the transferring attorney is granted the POA by the seller to affect transfer, the financial risk of the attorney’s obligation ways heavier on the home buyer. It is time that the industry examines how it does business in protecting the interests of all concerned.