Unsurprisingly, I am very fond of the Tom Wait’s lyric line that goes: “The large print giveth and the small print taketh away.”
For more than two decades I’ve been banging on about how critical it is for consumers to protect themselves from all manner of rip-offs and unsavoury business dealings by reading those off-putting Ts and Cs.
Up to now, my chief example of that has been the case of the Remax franchise on Durban’s Bluff, which had a sale agreement clause allowing the business to force a would-be purchaser to pay their commission – even when the SELLER cancelled the deal.
A would-be buyer, a recent widow, had paid the full amount – R950,000 – for a house to the conveyancing attorney, and when the seller reneged on the deal, the agency felt entitled to refund it to her minus R92,000 as their commission, usually payable by the seller.
An auctioneer may not charge or receive any fee or commission from the purchaser if the seller defaults.
— Consumer Protection Act regulation
When she protested, she was pointed to a clause in sale agreement that read: “In the event of the purchaser having paid a deposit to the conveyancers ... and provided all suspensive conditions contained in this agreement have been fulfilled, the purchaser and the seller agree that the conveyancer is authorised ... to pay Re/Max Advance their sales commission, plus VAT, from the deposit.”
After my story about that was published in the Sunday Times, almost four years ago, the widow got her money back, and that offending clause – which had only been in that franchise’s contract, apparently – vanished.
Now I have a new example and, would you believe it, the small print clause in this case also makes the would-be property buyer pay the price when the seller pulls out of the deal.
Juan Crous and his partner won an online bid – R925,500 – on a property in the Bo-Kaap in November 2020, via BidX1 SA.
They were made to pay an immediate 10% deposit (R92,500) and 5% buyer’s commission (R46,250), a total of R138,750.
In February, just before the transferring attorneys were about to lodge the papers with the deeds office, the seller pulled out of the deal and was thus in breach of the contract.
BidX1 SA took no legal action against the seller to recover its commission, instead choosing to keep Crous’s commission and, much worse, his R92,500 deposit on the property despite the failed deal.
Here’s the clause in the auctioneer’s conditions of sale that he used to justify that: “In the case of the seller being in default ... the seller shall be liable to repay the full deposit, if paid [to the auctioneer] and the auctioneer shall be entitled to keep the auctioneer’s commission.”
So despite that fact that the R92,500 was sitting in BidX1’s trust account, Crous and his partner were expected to go after the seller to retrieve that money, plus the commission they’d paid.
Bewildered, Crous consulted several attorneys, all of whom told him that thanks to that clause, his only recourse was to take legal action against the seller who had reneged on the deal.
Amazingly, not one of tho se attorneys mentioned the Consumer Protection Act’s (CPA) extensive regulations on auctions, including this:
“An auctioneer may not charge or receive any fee or commission from the purchaser if the seller defaults.
“Where such fee or commission has already been paid by the purchaser to the auctioneer, the auctioneer shall immediately refund the purchaser the amount paid, including deposit.”
So even if the sale happens and then the seller defaults, the commission has to be paid back.
When Crous put that to BidX1’s CEO MC du Toit he responded: “The sale agreement was signed by both parties, and the agreement was executed properly in respect of all parties involved and power of attorneys issued.
“The execution of the contract was done correctly and is a binding agreement.
“As per the contract, the commission by BidX1 is already earned and should be claimed back from the seller as set out in the conditions of sale.”
No word on the issue of the R92,500 deposit.
When Crous shared that with me, I approached Cape Town-based consumer attorney Trudie Broekmann for her opinion. She confirmed that Crouse and his partner were due a full refund of the auctioneer’s commission and that 10% deposit on the property, both in terms of the CPA and the SA Auctioneers Institute’s code of conduct.
Plus, she said, the CPA made it clear the auctioneer is entitled to payment from the SELLER of a maximum of 10% of the purchase price or total costs of advertising, conducting the auction and so on if the seller defaults.
When Crous went back to Du Toit with that opinion, the auctioneer responded that his contract was “fully in accordance with the CPA”.
Only it’s not.
“We, BidX1 SA, believe in full transparency at all times.
“This is also why we emphasise heavily that bidders must make themselves acquainted with the conditions of sale and rules of auction before bidding.
“The way I see it, the claim should be with the seller and not with us as we successfully did what was requested of us.”
But despite that, Du Toit said, “as a sign of good faith” he would refund the full amount of R138,750.
Recourse should be sought from the seller, by the auctioneer!
— Philip Powell, SA Institute of Auctioneers’ vice-chairperson
It took him a month, but refund he did. By then the money had been in the company’s trust account for six months.
No interest was added, despite BidX1’s contract stating the purchaser’s funds would be deposited into an interest-bearing trust account.
Du Toit told me this week that he was in dispute with his bank because it had stopped paying interest on his trust account.
SA Institute of Auctioneers vice-chairperson and head of governance compliance and discipline Philip Powell said under such circumstances, there was no justification for withholding the commission and deposit.
“(Crous) should not have waited as long as he did for that refund, and when it was paid, it should have been paid with interest,” he said.
“It’s not right for the buyer, who didn’t do anything wrong, to have to lose out.
“Recourse should be sought from the seller, by the auctioneer!”
Du Toit told Sunday Times Daily that he believed in doing things the right way and honestly thought he was doing the right thing in this matter, according to his conditions of sale.
Asked why he had held on to Crous’s R92,500 deposit on the property instead of paying it over to the transferring attorneys, he said the transferring attorneys hadn’t asked for it.
His conditions of sale contract states: “The auctioneer will hold ... the deposit unless payment is requested to be paid over to the conveyancers.”
“This was an extraordinary case,” he said. “But my intention was never to keep the money.”
Exactly what his intentions regarding the money were – given that the sale collapsed in February and he only refunded the money in May, after Crous had stood his ground and indicated that he’d sought legal help through the writer – he did not say.
Du Toit did say he’d lost out on the R20,000 to R25,000 he’d spent on marketing the property in question.
“We fulfilled our mandate; it was the seller who reneged.”
But it would be too costly to litigate against her, he said.
Buying a home on auction is a great way to buy a property, he said. If you do your homework, you can get a good deal.
Indeed.
If you feel you have been unfairly treated by an auctioneer, lodge a formal complaint with the SA Institute of Auctioneers: www.auctioneering.co.za
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