Conveyancing attorneys may not pay agents for referral business
It is an accepted norm that it is the seller’s right to appoint the conveyancer to oversee the transfer of the property. If the purchaser insists on appointing the conveyancer, it must be entered as a condition in the offer and the seller can then either accept or decline the offer. I would, however, strongly recommend that the seller retains this right and appoint the conveyancer of his/her choice.
The question is where does the seller find the conveyancer? In many instances the seller will already know a conveyancer from previous property transactions; in other cases the seller knows a friend or family member who avers that they can help with the transfer. A lot of people are under the impression that all attorneys can attend to conveyancing work, but this is obviously not the case. In many other instances the seller does not know a conveyancer at all.
As is the case in many other commercial transactions the clients (seller) may rely on a referral. In property transactions it is thus not uncommon for the seller to ask the estate agent for a referral or even for the estate agent to suggest a conveyancer of their own accord. The prudent agent will enquire whether the attorney the seller wants to appoint specialises in conveyancing.
It needs to be emphasised that the agent cannot force the seller to use a specific conveyancer.
The question that needs to be asked is on what basis does the estate agent advise the seller regarding the appointment of the conveyancer? If the rationale behind the referral is based on commercial principles such as good service, transparency and feedback there is no problem. If the estate agent, however, makes a specific referral not because it is beneficial to the seller but to the agent per se it may become a problem.
Many estate agents are not aware of the fact that conveyancers are prohibited from soliciting conveyancing work from estate agents by direct or indirect payment of a portion of their fee to the estate agent (kickbacks), payment of any expenses (telephone, advertisements, rental etc.) of the estate agent or any other form of financial benefit to the estate agent like lavish entertainment and interest-free loans.
Soliciting conveyancing work in this manner is regarded as unprofessional conduct by the conveyancer and the estate agent, and tantamount to corruption in terms of the Corruption Act.
If the estate agent receives a benefit from the conveyancer which influences that estate agent to refer work to such conveyancer, it also falls well within the ambit of commercial bribery as set out by the Supreme Court in Extel Industrial (Pty) Ltd and another vs Crown Mills (Pty) Ltd.
Any estate agent or conveyancer who is brought before a court of law in this regard should not expect any mercy.
It is greatly important that the integrity of the property industry is upheld by conveyancers and estate agents alike.
Tiaan van der Berg is the founding director of M.C. van der Berg Incorporated, a legal practice specialising in property law. He is also the co-director of Mcademy Training Institute.