Dire consequences if conveyancer steals initial deposit

Buyers should be confident that a seller’s choice of conveyancer is sound, as the consequences can be dire if the initial deposit paid by the buyer is stolen.

Leza Kotzé, a partner at Shepstone & Wylie Attorneys says that, during the course of a sale of immovable property, it is an all-too-common scenario for the contract of sale to require the buyer to pay a deposit to the seller’s appointed conveyancer, to be held in trust until transfer of the property is effected.

However, she says serious consequences can result for buyers and sellers if the deposit amount is stolen by the conveyancer before the transfer is effected. Is the buyer entitled to claim transfer of the property? Where to start with legal proceedings to retrieve the money and whose responsibility is it to do so?

Kotzé highlights a recent Supreme Court judgement that concluded that any payment to the conveyancer by the buyer is not the same as payment made to the seller.

“It therefore does not remove the buyer’s obligations to pay the purchase price to the seller,” she says.

“So any performance made by the buyer in terms of the contract of sale becomes null and void, as if it never happened. For the buyer to be discharged of his obligations to pay, the contract of sale must specifically confer authority on the conveyancer to represent the seller as agent in the acceptance of the purchase price.”

There is, however, recourse for the buyer, says Kotzé. The Attorneys Fidelity Fund provides that the fund shall reimburse anyone who suffers any pecuniary loss as a result of theft committed by any practising practitioner of any money entrusted on behalf of the person who suffered. Notice of the claim should be given to the Council of the Law Society in which the practitioner practises within three months after the claimant became aware of the theft, by way of an affidavit. Any proof required by the fund, such as a copy of the claimants’ ledger accounts, paid cheques and correspondence, should also be given within six months from the date a demand is given for such proof.

However, Kotzé warns that the Attorneys Fidelity Fund is a fund of last resort and if it appears that the stolen money can be recovered from another source, the fund’s board of control will require claimants, at their own expense, to first exhaust all other available legal remedies against the conveyancer, being the person liable in law.

The fund further has discretion, in terms of the Attorneys Act, to pay only a portion of the legal costs incurred in pursuing such legal remedies. Such reimbursement will be based on again, whether the fund is of the opinion that the claimant’s claim is valid, worthwhile and whether it directed the claimant to first institute legal proceedings against the conveyancer.

The buyer will, therefore, have to instruct an attorney of his choice to act against the conveyancer and issue a formal letter of demand. If no response is received, a summons can be served on the conveyancer with normal litigation proceedings commencing to retrieve the stolen amount.

The fund will further require the buyer to proceed against the conveyancer to the point of sequestration. Pending resolution the buyer will be obliged to ensure that the legal costs incurred by his attorney is being paid and in addition the seller may elect to claim payment of the deposit amount from the buyer, since the previous payment did not discharge the buyer’s obligations to the seller in terms of the contract of sale.

“It is only at this point that the fund will do its own investigation of the matter with the evidence and proof provided by the claimant. Based on its findings, the fund can either reject the claim, pay out the claim or pay out a portion of the claim. Rejection of a claim will be due to its findings failing to support the claim of theft by the claimant. However pending this decision the buyer may very well find himself frustrated by a costly and protracted litigation process,” says Kotzé.

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