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

  1. Hi John,

    I signed an OTP in September 2014 and the bond has been approved by the bank. Also I have signed transfer docs with the transfer and bond attorneys. However, when I went to view the property in January there was a tap leaking for 3 months which caused dampness and damaged the walls.

    The owner has now repaired the damages, however after viewing the property after the repairs I am not satisfied. I have also been misled as the repairs have taken two months and I was told that the entire house will be painted which is not the case after viewing.

    The agent only provided me with a defect list in February 2014, after several requests to the transfer attorney, and according to the list there are no defects at all to this property. I am getting a property inspector to validate this property as there are visible cracks and damage in cupboards due to dampness.

    If damages are picked up by the property inspector would I be in a position to cancel the sale? The agents has said to me that I have no legal right to cancel.

    1. Hi Reshal,

      Obtaining a home inspection report is a very good starting point. Armed with your inspection report, you may then consider approaching an attorney, not the transferring attorney who is representing the interests of the seller, to have your contract perused. Thereafter your attorney will be in a better position to give you an informed assessment as to the options that may be available to you.

      It’s possible that the seller might have concealed defects in the property or perhaps the seller may have neglected to inform you about defects that he was aware of. If that’s the case you may have a valid claim against the seller. With the help of an attorney you may be able to reach an amicable settlement with the seller, failing which you may be able to cancel. Your attorney would be the best person to advise you on this.

      Good luck.

  2. Hi,

    I signed an OTP in November, my bond was approved, I had signed all transfer and registration docs so has the seller. Everything was ready for lodgement in February but the seller is delaying paying his shortfalls and keeps on disputing the final figure.

    The transfer attorneys have now gone as far as to offer discounts on their cost to him but he still refuses to pay. I was told we can put him on terms but I don’t want to cancel the deal. What can I do? This is costing me money as I still have to pay him rent every month that could be used to pay my bond?

    1. Hi Francois,

      This sounds a lot like seller’s remorse. Fortunately this is a curable condition.

      Usually the seller appoints the transferring attorney, in which case the transferring attorney is representing the interests of the seller. For this reason, you may find it worthwhile to consult with an attorney of your own choosing. Often the mere act of appointing an attorney can help get the other party more sharply focused on their contractual responsibilities.

      Depending on the amount involved, you might also consider making the seller an offer to assist with the shortfall, particularly if one factors in the potential savings in occupational rent that a speedy resolution might yield. Preferably, have your attorney handle these negotiations to move things along.

      Good luck and thanks for the question.

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