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Wasted costs question

12 October 2017

A question requiring an answer is who will be liable for the wasted conveyancing costs payable to the conveyancer where a transaction is cancelled due to the non-performance on the part of the seller, for example:

What would the position be if the purchaser cancelled the sale because of the seller’s default or a breach of warranty by the seller? Under these circumstances there should be no doubt that the costs and any deposit paid by the purchaser would have to be refunded to him in full and that the conveyancer would have to look to his client, the seller, for payment.

Reader Comments: 6
A HENDRICKS 12/10/2017:

The conveyancer is appointed by the Seller and who pays his fees is a condition of sale agreed upon by both buyer and seller. If the agreement is cancelled by whichever party, the conveyancer should not be the loser and have to run after either party for his wasted costs. Purchaser will be entitled to claim for damages and the conveyancers fees will form part of such damages. This is the standard in all industries, law shouldn't be any different.

J TROMP 13/10/2017:

I agree with A Hendricks. I have recently had just such a situation where the transaction had to be cancelled due to breach by the Sellers. The contract stipulated that the Purchasers were liable for the conveyancer's costs. I would not have been able to claim my wasted costs from the Sellers because they were not contractually liable to pay the costs in the first place. I had to debit it from the costs which the Purchasers had already paid into trust and I advised them to claim it as damages from the Sellers due to the Sellers' breach.

Charles Pearson 13/10/2017:

The client won't necessarily be the Seller, it would depend on the wording of the Sale Agreement. Nonetheless, the conveyancer appointed in terms of the agreement is usually cited as the Seller's Conveyancer. Sellers are very seldom loyal, long-term clients who are known to the conveyancer. In most instances conveyancers received their instructions through relationships with estate agents. Furthermore, the Purchaser is liable for Costs of Transfer, only if the Sale Agreement so dictates, which also is usually the case. In the absence of such arrangement the Seller would be liable for costs, by virtue of common law.

The clause in the sale agreement, appointing the conveyancer, is commonly accepted as a stipulation alteri. This does not however automatically confer rights in terms of the sale agreement on the conveyancer, i.e the right to claim damages in terms of the ‘breach clause’. Similarly, what if a bond instruction is cancelled because the transfer is not proceeded with due to the Seller’s breach? The Purchaser/Mortgagor is certainly not at fault and neither is the bank, who is in fact the client of the conveyancer attending to registration of the bond. The bank will surely not settle the conveyancer’s account for wasted costs.

An agreement exists between the bank and the Mortgagor, in terms of which the Mortgagor accepts liability for payment of the costs. In my opinion a conveyancer has no locus standi to claim damages (wasted costs) from a Seller with whom he has no agreement or relationship, far less the bond registration attorney who will also be suffering damages. The Purchaser, and possibly the estate agent in terms of a separate mandate, are (usually) the only parties who would have a contract with- and thus recourse against the Seller.

If the Sale Agreement dictates that the Purchaser is liable for costs, the wasted costs should be recovered from the Purchaser. Similarly, should the bond instruction be cancelled the bond registration attorney should recover wasted costs from the Mortgagor. It follows then that the Purchaser has suffered damages due to the Seller’s breach. The purchaser must recover such damages by way of action either under common law or in terms of the agreement’s breach clause.

R Krautkramer 13/10/2017:

When a seller nominates an attorney, a mandate is also concluded as between seller and attorney. In my view it would be implied in such an agreement that under such circumstances, the seller is liable for wasted costs.

Allen West 16/10/2017:

Still no definitive answer to this issue . Perhaps this, as well as the issue on liability to pay for clearances, should be referred to the LSSA for guidance and uniformity.

Glen van der Watt 17/10/2017:

The agreement has been cancelled, whether due to the Seller or the Buyer's default is immaterial, and there is therefore no agreement on which the conveyancer can claim wasted costs. Only if the purchaser is the conveyancer's client in the sale and transfer transaction can costs be claimed from the buyer. Additionally, from an equity point of view, the purchaser no longer receives the property, has probably expended some money preparing to move in and now has the injustice of paying a conveyancer he did not appoint wasted costs? The conveyancer must collect the costs from the Seller if at all.

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