Rely on a written mandate or risk a costly dispute

When it comes to paperwork in the property industry, people can be reluctant to conclude written agreements with many believing that it is easier to have your agreements concluded orally. Besides ease, the thought process is that you are reducing paper usage, saving your client time, and saving yourself from the endless filing of paperwork.

Whilst these might appear to be advantages of oral mandates, this seemingly idyllic transaction could turn into your worst nightmare! Recent South African case law has shed some light on the dangerous business practice of not concluding written mandate agreements.

Must a mandate be concluded in writing to be legally binding?

Firstly, we need to look at the legal requirement to have mandate agreements concluded in writing. Is this a legal requirement or not? Section 53 of the Property Practitioners Act states that a holder of a Fidelity Fund Certificate must in any agreement relating to property transactions (this includes rental and sales transactions) include the prescribed clause which ensures that the property practitioner warrants the validity of their certificate. Through this requirement, we can determine that this section creates the legal requirements to have all mandate agreements, rental or sales, concluded in writing.

Giffillan v Renico Construction (Pty) Ltd

In the recent Gilfillan v Renico Construction (Pty) Ltd case, a property practitioner (“Gilfillan”) and the owner of the property (“Renico”) entered into an oral mandate agreement for Gilfillan to sell Renico’s immovable property. Gilfillan introduced a prospective buyer to Renico and a sale agreement was concluded between Renico and the purchaser.

The sale agreement contained a clause that said Gilfillan was the effective cause of the sale and that the commission of R450 000,00 was payable to Gilfillan. However, the sale agreement was subsequently cancelled – Gilfillan sought the payment of her commission to her and Renico averred that there was no mandate in place specifying the details of the commission or the date of payment and accordingly, they are not liable for the commission. Due to disagreement, this dispute was referred to the High Court of South Africa for adjudication.

The Court finally held that an implied or tacit mandate agreement came into existence between the parties based on their communications, oral or written emails, and that the commission was accordingly payable to Gilfillan.

The real risk of oral mandates over time

Whilst it is a happy ending for Gilfillan, the issue remains around costs and time. This court action was issued in 2021 and was only concluded in 2024, an incredible 3 years of the property practitioner waiting for the court to confirm that the practitioner’s income is payable.

A further thorn in the practitioner’s side is the costs related to this action. Both parties employed the services of senior counsel and incurred high legal costs for 3 years. Such legal costs could also outweigh the initial claim amount making the action futile as the commission would go directly to your lawyers.

Avoid disputes and costly legal fees

Therefore, even without the legislated requirement to conclude mandate agreements in writing, a practitioner must have their mandate agreement in writing to specify the terms of the agreement, the commission payable and the date upon which the commission is payable. This avoids disputes, confusion, exorbitant legal costs, and plenty of time before the commission is ordered to be paid.

Protect your assets and your income with a TPN Mandate Agreement that was drafted to be used as a template specifically for property practitioners and landlords in South Africa.

Learn more about the TPN LeasePack and download your own Mandate Agreement here.

Written by Rowan Terry, Legal Counsel at TPN from MRI Software