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The Consumer Protection Act and Property Transactions
Key aspects of the CPA which will apply once the Act is implemented (expected to be 31 March 2011), to the property industry specifically are:
SCOPE OF THE ACT:
The Act regulates the activities of suppliers and creates rights for consumers. Most entities supplying goods and services in SA and the transactions they enter into with consumers will fall within the Act.
A “supplier” is defined as a person or entity who markets goods or services as his or her ordinary course of business. A “consumer” includes a person to whom a particular service or goods are marketed or has entered into a transaction with the supplier in the suppliers ordinary course of business.
The Act does NOT apply to all consumers – for example transactions including the supply of goods and services to juristic persons whose asset value or annual income is over the threshold value(draft Regulation sets at R3 million currently) will not fall within the ambit of the Act.
In regard to a property transaction, where the supplier is a seller of property (who sells property as his/her ordinary course of business), and the purchaser is an individual or a juristic body whose turnover or asset value is LESS than R3 million, then the Act has application.
In regard to leases, where the landlord lets property as a living and the consumer is an individual or juristic body whose turnover or asset value is LESS than R3 million, then the Act has application.
In both cases, the Act applies and the rights attaching to such ‘consumers” as tenant or purchaser in a property transation, will have application.
[*The basic test being whether you sell property or property services “in the ordinary course of
business” means that it is unlikely that the CPA will apply to property sales in the average “one- off” private sale situation – it is aimed more at “commercial” sales- by property developers, builders
speculators, and other property dealers, and in regard to the lease of property, to landlords that rent out property for a living].
SOME OF THE REMEDIES FOR CONSUMERS PROVIDED BY THE ACT:
Right to fair and honest dealing with consumers –Sections 40-42, 44
The CPA deals with unconscionable conduct, false, misleading or deceptive representations (whether by word or conduct), fraudulent schemes or offers, and the consumers right to assume a supplier is entitled to sell goods. Consumers (purchasers) are entitled to fair and reasonable marketing. “Market” is defined in the CPA as the “promotion and supply of any goods or services”.
Estate agents will need to take cognisance of all the relevant provisions in the Act (some of which are listed below) in regard to their marketing practices, and to all mandates that they take from sellers and purchasers (even in regard to “once-off” private transactions).
All negotiations and representations made by sellers, estate agents, property developers, builders and other property dealers – to purchasers must comply with the Act, so as to ensure that purchasers are treated lawfully and fairly.
Cooling off period – Section 16
Consumers are afforded a period of five business days to rescind a transaction resulting from any direct marketing without reason or penalty, by notice to the supplier in writing.
This section may have the effect of allowing a cooling-off period when a property is purchased
due to direct marketing, even if it is sold for more than R250 000.
Right to fair value, good quality and safety – Sections 53-60
Fair value – Sale prices could be scrutinised for reasonableness. In addition, the price should always be displayed when the property is being advertised for sale.
Where the Act applies (Section 55), the purchaser has a right to return goods (to require the seller to take retransfer of the property) if the goods (property) are not suitable for the purpose which they were intended or of good quality and free of any defects.
Section 55(6) states, inter alia, that where the sale agreement EXPRESSELY lists any patent (visible) defects, latent (unknown) defects, or specifying the exact condition of the property , the seller will most likely be protected. Such clauses must be expressly accepted by the purchaser.
Right to return defective goods
Section 56(2): Within six months after the delivery of any goods to a consumer, the consumer may return the goods to the supplier, without penalty and at the supplier’s risk and expense, if the goods fail to satisfy the requirements and standards contemplated in section 55.
In effect, where the Act applies, the purchaser has the right to return the goods to the seller –without penalty and at the seller’s risk and expense-within six months of delivery (registration of transfer at the deeds office).
Effect of the CPA on the Voetstoots clause
There are conflicting views on the likely effect of the CPA on the traditional voetstoots clause. The Department of Trade and Industry has categorically stated that the voetstoots clause will no longer apply.
Certainly, where the Act applies, traditional voetstoots clauses that breach the consumer’s rights as per Section 55 of the Act will no longer be applicable. Property speculators, developers, builders and the like will be required to comply with Sections 55-56.
However it is also likely that the exception in Section 55(6) will relate to the voetstoots clause in that when the purchaser signs the deed of sale, and (s)he acknowledges that (s)he has been expressly informed that the property is sold in the specific condition that (s)he sees it, and which condition is listed in detail in the contract itself, and is acquainted with the property’s condition, nature and extent, and accepts it as is, then the exception should apply.
As set out above, the CPA will most likely not apply to once off private transactions between purchaser and seller and accordingly the traditional voetstoots clause will most likely remain in force and effect in such transactions. This question is still unclear and it remains to be seen how the voetstoots clause will be affected once the Act is implemented.
Source: Please note that the above information is not exhaustive and serves as a brief overview of the proposed legislation, which is yet to be implemented. There are still many “grey” areas and uncertainties that have yet to be resolved.
