By Sibonelo Radebe
 
Estate agents are again in the spotlight after a damning ruling in the Cape high court. It implicates Seeff and Pam Golding Properties (PGP) franchises in the referral of conveyancing work to law firm Buchanan Boyes and of taking kickbacks in return.

After a complaint by the Cape Law Society, the director of the law firm, Andre Berrange, was found guilty of unprofessional conduct and suspended for two years.

With the principle that if there is corrupter there must a corrupted party still fresh in the public mind since the Schabir Shaik trial, the question is: what of the part played by estate agents in this seemingly widespread conduct?

Seeff and PGP were the only estate agents implicated in the proceedings. But they were not on trial.

Says Estate Agency Affairs Board legal manager Clive Ashpol: "Even though the agents were not on trial, we have taken a view that it takes two to tango."

Estate agents and their accomplices in the law fraternity have fiercely defended this practice as an innocent commercial engagement. But others say it undermines the freedom of buyers and sellers to appoint the attorney of their choice. It also stifles the market by denying sellers an opportunity to bargain on the transfer fees. And it goes against every principle of a free market.

The estate agents' code of conduct clearly stipulates in regulation 7 that: "No estate agent shall without good and sufficient cause, directly or indirectly in any manner whatsoever, solicit, encourage, persuade or influence any party or potential party to a pending or a complete transaction . . ."

Records provided by the Cape Law Society as evidence show that Seeff and PGP were paid R237,000 and R271,000 respectively in a period of just over a year. The payments were made by Berrange's firm under the guise of a marketing agreement. This agreement purports to be using the agents for promoting Buchanan Boyes' services through forms of advertising and in their general line of duty.

The Cape Law Society successfully argued that the amount paid was out of kilter with the so-called marketing agreement. Instead, it matched the amount of conveyancing work referred by the agents to the law firm during a particular period.

"It seems unlikely that a prudent business person, let alone a law firm, would easily part with R250,000 upon receipt of an invoice (relating to a marketing fee) with such limited detail," reads the judgment.

"The most plausible explanation . . . is that the conveyancing work referred to the respondent's firm from Seeff and Pam Golding was generated as a result of the agencies inviting their clients to refer their work to respondent's firm."

The judgment adds that the money paid must have been a strong inducement for agents to recommend their clients to Buchanan Boyes.

Seeff chairman Ian Slot says the judgment relates to a single franchise and not the entire Seeff operation, which has more than 80 licencees across SA.

"We will investigate this matter based on the principle that one is innocent until proven otherwise," he says. "The rules governing this matter are not particularly clear. "

He adds that no-one knows whether the money involved was actually used for marketing. "All I know is that Buchanan Boyes is a professional law firm which has been providing good service to our clients."

Says PGP MD Andrew Golding: "We operate within strict guidelines and we do not believe that we have acted unethically. We have many marketing and sponsorship arrangements in place which are standard across the market."

The ruling comes at a stage when the industry is seeking to shake off an image inherited from a history of unscrupulous behaviour: of estate agents disappearing with buyers' funds; of colluding with sellers to hide structural defects in properties ; and of referring work to banks and mortgage originators in return for kickbacks.

The agents may be charged with bringing the industry into disrepute and breaching regulation 7 of its code of conduct, says Ashpol. If found guilty, they may incur fines of up to R20,000 per transgression, or have their licences withdrawn. "We will, if necessary, amend the code of conduct. We have noted that this practice is widespread."

Ashpol adds that the board is investigating "a situation where attorneys are taking estate agents on overseas trips on their account".

Financial Mail

Publisher: Financial Mail
Source: Inet Bridge