Ogilvie Ramoshaba LSSA Your Ref:
By Email: ogilvie@lssa.org
Cc: info@lpc.org.za
Our Ref: LPC/3303711
Direct Tel: 0315368515
Email: cmcdonald@coxyeats.co.za
28th March 2025
This letter is written on behalf of the KwaZulu-Natal Legal Practitioners Association (“the KZN LPA”), of whom the writer is an elected representative and is intended to assist the LSSA in formulating its response to the Legal Practice Council of South Africa (“the LPC”). KZN LPA may supplement the response in due course.
We write with reference to the letter dated 24 October 2024 addressed from the Competition Commission South Africa (“the Commission”) to the LPC. A response was requested before 27 February 2025. However, the request was only communicated to us on 3 March 2025. As such, we request that the late submission be condoned and the response contained herein be accepted, notwithstanding that it is out of time.
The request relates to the matter currently under investigation by the Commission under Case Number 2024JUL0028, as detailed above.
It is alleged by Mr Raath that conveyancing rules and regulation are unfair to property purchasers in that:
- Purchasers are required to pay disproportionately high conveyancing fees; and
- The seller appoints the conveyancer whereas the purchaser is responsible for paying the fees.
We will address each of these allegations in turn.
Conveyancing Fees
The allegation that conveyancing rules and regulations are unfair in that purchasers are required to pay disproportionately high conveyancing fees has no basis in law.
The Deeds Registries Act, Act No. 47 of 1937 (“the Act”), governs the laws relating to the registration of deeds. In terms of section 10, the Minister may make regulations prescribing the fees payable to the deeds registry in respect of any act to be registered by that office. These fees are determined in accordance with Regulation 84 and pertain only to deeds office fees and are separate from the fees charged by conveyancers. The tariff of fees prescribed by Regulation 85, pertaining to the fee that may be charged by the conveyancer attending to registration of transfer, was repealed by Government Notice R184 of 1995. There is no tariff of fees prescribed by the Act or the Regulations.
The LPC is established in terms of section 4 of the Legal Practice Act, Act No. 28 of 2014 (“the LPA”). In terms of section 36 of the LPA, the LPC is required to publish a code of conduct to govern the conduct of the profession. The Code of Conduct for all Legal Practitioners (“the Code of Conduct”) was published under Government Gazette Notice 198 of 2019 and is available at: https://lpc.org.za/wp-content/uploads/2020/10/CODE-OF-CONDUCT.pdf. The Code of Conduct provides that legal practitioners shall be entitled to a reasonable fee for their work. In terms of Article 10 of the Code of Conduct, disputes about fees may be referred to an authorised sub-structure of the LPC. As such, a mechanism exists for the governance of the reasonableness of fees charged for legal services.
The Law Society of South Africa (LSSA), established in 1998 by voluntary association of its members and governed by its constitution, provides guidelines for recommended conveyancing fees, which are calculated based on the property’s value and other factors. These fees are not fixed and can vary. The Guideline of fees published by LSSA effective from 27 May 2024 can be found at CONVEYANCING: CONVENTIONAL DEEDS. The first line of the document states: “Conveyancing fees are negotiable. These are merely guidelines and not minimum or maximum fees.” Fees are commensurate with the complexity of the work involved and the time engaged by the attorney as well as the risks against with the conveyancer must guard.
Accordingly, there is no rule or regulation dictating the fee charged by conveyancers.
It is respectfully submitted that the Commission should perhaps be more concerned about the rampant practice of fee discounting, which is having a negative impact on the legal profession. This is not a touting practice but is a result of pressure placed on conveyancers by third parties to reduce their fees below to below that which is profitable. It is common practice for conveyancing fees to be reduced by as much as 50% of the recommended fee. The large banks frequently impose ‘campaigns’ on their panel attorneys, requiring that all bonds be registered for 50% discount of the recommended fee. Whilst this might be palatable for large transactions, it is not commercially viable for smaller transactions where the cost of running a conveyancing practice renders such discounts unprofitable.
The practice of discounting fees is dangerous to the profession as it may ultimately result in attorneys being forced to take on too much work with inadequate support structures, merely in an effort to render discounted transactions profitable.
Perhaps most concerning is the negative impact this practice is having on the efforts of the profession to encourage and promote transformation within the profession. The capital required to sustain such discounts is significant and make entry into the profession for new or emerging attorneys prohibitive, particularly for those previously disadvantaged.
The allegation that fees charged are disproportionately high is, respectfully, absurd.
Appointment of conveyancer
The allegation that the rules and regulations governing conveyancing practice are unfair because the seller appoints the conveyancer and the purchaser pays the conveyancers fee, is unfounded. There is no regulation or rule to this effect. It is a term of the contact to be negotiated by the parties, who are free to contract as they please in this regard.
In terms of our case law, if the agreement is silent on the appointment of the conveyancer, it was held in the case of James versus Liquidators of the Amsterdam Township Company 1903 TS653 that under the common law a seller was entitled to nominate the conveyancer even if the purchaser paid the costs of transfer. In the case of Kothandan versus Arbuthnot 1920 NPD 223 the court held that there was an existing custom recognised in KwaZulu-Natal that in the absence of any special stipulation, the purchaser had the right to nominate the conveyancer. Insofar as the courts may have established the existence of a custom in 1920, in the subsequent 100 years the custom has not been observed for the reason that it is unsuited to modern conditions.
As far back as 1982, in his book on Legal Ethics, Lewis noted that in KwaZulu-Natal there had in the past been an expectation that the purchaser’s conveyancer would be instructed but that this was “now changing, the choice being left to the discretion of the parties.”
The abrogation of the former colonial custom is well illustrated by the printed sale agreement forms used by estate agents. They invariably record that the conveyancing will be attended to by the seller’s conveyancer.
Sellers may insist on the right to nominate the conveyancer and with good reason. It is the seller’s duty to deliver or convey the property to the purchaser.
Some of the reasons why, a seller should nominate the conveyancer are:
- The party more likely to delay the transfer or breach the terms of the agreement is the purchaser. The purchaser is required to raise and pay the purchase price and transfer costs. The seller is required only to transfer the property. Experience shows that a conveyancer nominated by the purchaser is placed in a dilemma when his client does not perform. He is loathe to report the delay or failure to the seller. Furthermore because he acts for the Purchaser he suffers from a serious conflict of interest when it becomes necessary to place the Purchaser in mora and claim penalty interest. The conveyancer is therefore obliged to advise the seller to seek independent legal advice. This is not always done timeously.
- The most important responsibility of a conveyancer is to ensure that transfer of the property does not pass before the purchase price is secured. It is easier for the seller’s conveyancer to insist that the purchase price be properly secured. A purchaser might persuade his own conveyancer to rely upon his assurance that the money will be available on transfer. If the money were not forthcoming, that would be to the detriment of both the seller and the conveyancer.
- The property remains in the ownership of the seller until the date of transfer. It is therefore logical that the conveyance of the property should be in the hands of a conveyancer known to the seller and acting for the seller.
- The argument is sometimes advanced that as the transfer duty is payable by the purchaser, the purchaser should nominate the conveyancer. That argument falls away where the transaction is subject to value-added tax which is payable by the seller.
- Where the property sold is part of a development such as a township or sectional title scheme, the conveyancer is required to co-ordinate the sequence of various transactions necessary for registration. The seller’s conveyancer will be the best placed to know of the peculiarities attaching to the transactions such as the creation of servitudes, the imposition of conditions of title, the need to join a Homeowner’s Association and so forth. It would be unworkable for each purchaser in a township development to have his or her conveyancer attend to the transfer of that purchaser’s subdivision.
- The Arbuthnot case recognised that in auction sales the conveyancer is nominated by the seller. It would be unwise for a seller in those circumstances to place the transfer in the hands of an unknown conveyancer recommended by the purchaser. Similarly where the seller acts in a representative capacity such as a liquidator or executor, the seller’s own legal representative generally has easier access to the information required for the conveyancing process.
- There are instances where it is preferable for the purchaser’s conveyancer to act. Those instances revolve mainly around land assemblies undertaken on behalf of a purchaser. Where a number of properties situate in different Provinces are being acquired and the purchasing company is to be listed on the Securities Exchange, it makes sense for one conveyancer to co-ordinate the transfers and ensure that all the transfers are registered simultaneously or within a day of each other. The sellers’ conveyancers will generally monitor progress and liaise with the registering conveyancer nominated by the purchaser.
- Regardless of by whom the conveyancer is nominated, the conveyancer owes a duty of care to both the seller and the purchaser. If a dispute arises between the seller and the purchaser, the Law Society Rules recognise that if it was clear to the purchaser that the conveyancer was nominated by and was acting on behalf of the seller, the conveyancer may institute legal action against the purchaser to compel the purchaser to perform in terms of the contract. This accords with the logic of the conveyancer being appointed by the seller. On the other hand if the conveyancer were to be appointed by both parties acting together or if an unavoidable conflict of interest were to arise, then although the conveyancer may continue to handle the conveyancing, he or she should recommend to the parties that they consult their own attorneys to take action to resolve the dispute.
As can be seen, there are a host of reasons for a seller to insist on the appointment of their attorney to attend to registration of transfer of their property. Ultimately, however, this is a point of negotiation and there is no basis to the allegation of unfair practice within the profession.
Carol McDonald
COX YEATS
KWAZULU-NATAL LEGAL PRACTITIONERS ASSOCATION
