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

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

  1. Hi,

    I signed an offer to purchase and I want out. I have not signed anything but the home bond application form and that’s it. I signed about a week ago. Can I get out?

    1. Hi Katleho,

      I suspect that you are suffering from “buyer’s remorse” which is quite normal in property transactions. You could wake up tomorrow and feel quite differently about this.

      Nevertheless, once you’ve signed a binding agreement, cancellation is likely to have financial consequences. You may be “lucky” and have your bond application turned down, in which case you can walk away without repercussions.

      Notwithstanding the above, whenever a cancellation is envisaged it’s always best to consult with an attorney, have your contract perused, and see what the attorney thinks of your prospects.

      Best of luck.

  2. I bought a house 5 months ago of a deceased estate. All consents have been signed as per Master of the High Court request. A stepson of the occupant is still occupying the estate we are renting and feel abused. He was served with 14 days notice expiring in 5 days. If he refuse to move out a Court Order will then be applied which might even take longer. Are we still responsible for our own rent?

  3. Good Morning

    I have just taken transfer of my property. While cleaning the place to movie in, we noticed that there was a termite infestation and this is not restricted to the outside area only, but seems to be within the foundation walls as well. We are getting an inspector out there to confirm the structural infestation.

    We are first time buyers and no defect list was disclosed to us.

    Please advise if the seller/agent needs to cover the cost to have the infestation taken care of? I believe so, because even though there is a voetstoets clause, the defect was not disclosed and it is reasonable to expect that someone occupying the property would have known about it.

    Thanks,
    S

    1. Hi Sarisha,

      Most Agreements of Sale contain a “beetle” clause that specifies that the seller must obtain a “beetle-free” certificate prior to registration of transfer. For this reason, the wording of the beetle clause in your Deed of Sale is important. Sometimes this clause may only call for an inspection for “notifiable” beetles (Oxypleurus nodieri, Anobium Punctatum and Hylotrupes bajulus). However, fungi and subterranean termites can also be a problem.

      To compound the issue, the inspectors can only certify accessible areas of the property to be pest free. There will be areas where reasonable access is not possible. So there’s no real guarantee that that an inspection will find all hidden pests.

      It would be best to have your Deed of Sale perused by an attorney (not the transferring attorney who is representing the interests of the seller). You may well find that the seller is liable. If not, you will have to bit the bullet on this one, unfortunately.

      Best of luck.

  4. I bought a house in Welkom in March 2014 where I paid R582000 in cash to Lawyers in Welkom. The explanation I got is that the seller has installments arrears pertaining that house. The problem for me is that I sold my house to acquire cash to pay the house. It’s over six months I’m waiting for the registration of the house. I’m presently accommodated by my girlfriend. I need your help for the registration to be speedily done

    1. Hi Nathaniel,

      The property that you’ve purchased may be in the process of being repossessed by bank. In such cases, the bank becomes the owner of the property and, if the price offered is less than the balance owing on the sellers bond, must then approve the shortfall before your offer can be accepted. In the mean time, your payment will have been invested in the transferring attorney’s trust account, pending registration of transfer.

      Perhaps it’s best for you to consult with an attorney, not the transferring attorney in this case (who is looking after the interests of the seller) and find out who owns the property at this point. If the situation doesn’t look promising your attorney can perhaps assist by helping you to extricate yourself from this deal and make sure that your funds are properly reimbursed.

      Good luck.

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