Are you the mandate?

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Are you the mandate? What does it really mean?

Anyone who is into the business of real estate brokering in Nigeria, particularly Lagos, will no doubt have heard questions such as “Are you the mandate?”, “Is your mandate talking to the owner?” or “Do you know the mandate?”. For many real estate agents, buyers and property developers, these are sacrosanct questions. The answer determines a lot of things such as the commission receivable, the extent of time and resources they put into the transaction or whether or not they even want to get involved in the transaction.

But, what exactly does the term mandate mean?

What does “mandate” really mean?

Literally, a mandate refers to a formal order or commission to carry out an exercise or a duty.

In real estate parlance, a mandate is an agreement between a principal and an agent regarding the marketing of a property for a potential sale, lease or other transactions such as a joint venture development. Such agreement essentially specifies the duties and obligations of both parties and the duration within which the agreement is binding on both parties.

Ceteris paribus, a real estate agent/agency should not be involved in the marketing/advertising of a property for any form of transaction unless he has been authorized to do so through a mandate agreement.

A mandate agreement should include such clauses/phrases as:

1.The full names and addresses of the parties to the agreement.

2.The description of the subject property

3.The duration for which the agent/agency is granted the mandate.

4.The amount of commission due to the agent/agency

5.The party responsible for the payment of agreed commission.

Types of Mandate

1.Exclusive/Sole Mandate: An exclusive mandate agreement is one in which the principal authorizes only one real estate agent/agency to market the property for sale, lease or any other transaction. The owner vests in the agent, the sole right/responsibility to find a client for his property and as such will not be able to engage the service of another agent until after an agreed duration which is specified in the agreement.

Also, by giving an agent the authority to solely market his property, the principal relinquishes the right to sell or lease out such property on his own within the stipulated duration of the agreement.

2.Non-Exclusive Mandate: This is a more popular option in Nigeria. Here the principal opts to authorize more than one agent/agency to source for a client for his property. In this case, depending on the agreed arrangement, the authorized agent may or may not be allowed to engage the services of other professionals to fast-track the process of finding a client, also the commission may either be split among the involved agents, or claimed by only the agent that successfully concludes the deal. Also, nothing stops the principal from finding a client and concluding a transaction all by himself.

However, due to the “free-for-all” nature of the non-exclusive mandate arrangement, it is usually embroiled in one form of intricacy or the other.

This really happened.....

We were recently approached by member of a family, who on behalf of the family instructed us to find a joint venture development partner for the family property which is located in an attractive location in Lagos. Although, there was no formal agreement signed to that effect, JV Pulse technically had the family’s mandate to advertise the property for a JV.

We did advertise the property on our platforms and soon found an interested developer through an agent, a proposal for the JV development was received from the developer, through the said agent who normally can be considered to have developer’s mandate.

Upon receipt of the proposal, the family referred same to their lawyers who were saddled with the dual responsibility of reviewing the proposal and negotiating terms on behalf of the family. A seemingly straight forward transaction, but not quite so!

A meeting was scheduled during which the agent through which the developer’s proposal was received introduced a third party to us as the agent who actually had the developer’s mandate.

As if things were not knotty enough, the family lawyers also demanded a fee from the developer which meant that the lawyers although having the family’s mandate, were also looking to get a fee from a client they hadn’t invested any effort in securing.

Scenarios like the one described above are some of the challenges that real estate agents/agencies get to deal with during real estate transactions.

Below are some of the factors that made this particular transaction complicated:

1.Most Clients/Principals tend to be reluctant to sign a formal agreement giving the mandate to a real estate agent/agency.

2.Agents, on their part, have different levels of understanding of how mandates should work. This often results in false claims for fees and long complicated chains of agents usually driven by the hustle of all parties to try and earn a commission.

So, what could the parties to the deal have done differently?

Obviously, the lawyers having been briefed by the family to act on their behalf should never have requested for a fee from the developer.

Also, the agent through whom the developer’s proposal was received was supposed to have opened up on his role/link to the developer?

JV Pulse should have tried to secure a written mandate from the family

Conclusion

It has become normal to hear agents in the Nigerian real estate space use terms such as “I am the mandate” or “I am talking to the semi-mandate”, it will hardly be surprising if one day I hear someone say “I am the quarter-mandate”. The truth, however is that, these all amount to misuse of the word mandate, the correct usage of the term should be “I have Mr. xyz’s mandate to market/advertise such property for sale, lease or joint venture.”

It is worthy to note also that, there are instances where a potential buyer or tenant instructs an agent to source for a property that fits their preferred specification. This may also be the case where a developer engages the service of an agent to help find suitable properties for a joint venture.

In any of these cases, the agent may be said to have the mandate of the developer, potential buyer or tenant, to help source for property.

Are you the mandate?

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