How Consumer Protection Act Affects Property Transactions — Part 1

Consumer Protection Act will effect Real Estate transactions
Consumer Protection Act will effect Real Estate transactions

South Africa’s new Consumer Protection Act comes into effect on 1 April 2011. This law fundamentally changes the way business is done in South Africa. The law regulates the way businesses market their products and services and makes South African consumers among the most protected in the world.

Three important changes relating to Real Estate transactions are introduced with the CPA.

Firstly the Act introduces a bill of rights, granting consumers the right to cancel certain contracts within a “Cooling-off” period of five business days.

Secondly, the Act changes the way the voetstoots clause will be applied in Real Estate contracts.

The third is about how the CPA effects the Letting of property. This one will be covered in Part 2 of this post.

Cooling-off period
In terms of the Act, a Purchaser that purchases a property as a result of direct marketing has the right to cancel the sale within five business days, the “cooling-off” period. This applies only to sales that result from direct marketing. The “cooling-off” period does not apply to sales that result from any other form of marketing such as show houses and conventional print advertising. Nor does it apply to any purchase made by a client that the agent is already working with. Transactions that arise from these forms of marketing are excluded from the “cooling-off” provisions of the Consumer Protection Act.

The start of this 5-day “cooling-off” period is the date of delivery of the goods to the Purchaser. In Real Estate terms this means, not the date of signature of the contract, but the date of transfer of the property into the Buyers name. Transfer generally takes place three to six months after signature of the Offer to Purchase. Obviously cancellation after a delay of these proportions will be problematic for all the parties involved. However, this provision is as yet untested in law and it remains to be seen how it will be interpreted by the courts.

In South African Property Law, in terms of Section 29a of the Alienation of Land Act, property transactions of less than R250 000 are subject to a “cooling-off” period of five days, calculated from the date of signature of the Offer to Purchase. This provision remains in place and is not effected by the new Act.

“Voestoots” clause
Voetstoots is a term derived from Roman Dutch Law which means literally “as is”. Prior to the introduction of the Consumer Protection Act, all property was sold voetstoots. However, the new Act changes this.

From 1 April 2011, developers, speculators, and investors with property portfolios who sell property in their ordinary course of business, cannot exclude their liability for defects by way of a voetstoots clause.

However, an ordinary once-off seller, who does not sell property in the ordinary course of business, may continue to rely on the protection of the voetstoots clause for the simple reason that the sale of this property does not fall with the ambit of the Consumer Protection Act, as detailed above.

Part 2 of this post takes a look at how Lease Agreements will be effected by the CPA.

Source: Bisset Boehmke McBlain
Photo Credit: zysclassifieds

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864 thoughts on “How Consumer Protection Act Affects Property Transactions — Part 1”

  1. Hi john we signed an OTP but in between me and my girlfriend has split up..ive explained it to the agent that is busy with the deal that im still interested to buy the house but now they are afraid i wont qualify to buy the house,they are forcing my ex girlfriend to sent her documents to them and whants to sue her for breaching contract but they havent done anything yet they are still waiting for all the documents..what do you suggest i must do?

    1. Hi Gideon,

      Sorry about your split up; these things do happen. Your ex should seek the help of an attorney as soon as possible, and before doing anything else.

      Beyond that, at this point there’s little more you can do other than to let matters take their course. The agents are not likely to have much success if they try to force matters. Worst case scenario is that they may decide to try to sue your ex for half of the agents commission. It’s unlikely that this approach will meet with much success.

      My guess is that the agents will go away as soon your ex gets an attorney involved. I could be wrong.

      Good luck.

  2. Hi John,

    I sold a property in March this year. Inspections were done by one inspection company for gas, beetle, electrical and plumbing in January 15.

    The inspectors found repair items and invoiced these to the conveyancing attorneys to value of R4670. On a separate mail dated prior to the repair they sent through a inspection fee quote to value of R1800. Both myself and the conveyancing attorney were copied on both mails.

    I signed a document with the attorneys that all inspections including HOA clearance, etc, was to be deducted from proceeds of sale.

    The attorney paid all except the inspection fee of R1800. The inspection company tried to recover this from them but their response was that they paid against invoice received for repairs only (not true as they were sent inspection invoice as well).

    After a lot of back and forth between the attorney and the inspection company, the inspection company has not succeed in getting the funds out of the attorney who say that they’ve paid out what they had to and transferred the remainder of proceeds to me.

    The inspection company has now contacted me seeking the payment of the R1800 inspection fee saying that I’m liable no matter what.

    Can I be held liable and should I pay?

    1. Hi Kelvin,

      I have an idea that your attorney’s refusal to pay the “inspection fee quote” might be because it was a quote as opposed to an invoice. Could it be that the inspection company slipped up by not including this amount in their subsequent invoice?

      In any event, how you handle it from this point is up to you. If you think the amount is due, and you’re feeling forgiving and generous, then perhaps you should pay.

      Alternatively, you may decide it’s their mistake (and business is business), in which case it would probably not be worth the inspection company’s time and effort to sue; the costs would most likely exceed the amount being claimed. And if they do decide to sue, your attorney could handle it for you.

      Hope that helps with your decision. Best of luck, and thank you for your question.

  3. Hello John,

    We entered a lease for a shop that expired in May this year. Since December last year we had given notice that we had sold the business (Pty) and provided the new owners details and supporting documentation as requested by the letting agency that managed the property for the landlord. By Jan this year the lease was still on our name.

    We also hand delivered copies as they said the e-mail attachments weren’t going through. They sourced new tenants since October last year. After an ongoing 34 e-mails, the lease is still in our name and they are refusing to refund our deposit of R16 000 until they get FICA docs from the new tenants.

    They also requested an amount of R2000 for a leaking tap in Nov last year. Now they’re requesting R4000 which they say they will deduct from our deposit. Can they refuse to let us out of the lease? Are they allowed to withhold our deposit indefinitely.

    Regards,

    Asia

    1. Hi Asia,

      Your lease expired in May so it can’t still be in your name. It seems patently unreasonable that you should still be waiting for your deposit to be refunded. The new tenant’s FICA documents have nothing to do with it.

      You are being given the run around and it would best for you to consult with an attorney — the sooner the better. Often, the mere act of appointing an attorney can help to get the other party better focused on their contractual obligations.

      Good luck.

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