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

  1. Hi,

    I am new to buying of properties. I and my boy friend saw this post online and we decided to buy the property.

    I was so rushed and things were not properly explained to me. We had agreed on R70,000 deposit payment for the property but thereafter the seller came up with the fact that I have to pay for attorney fees which is R30,000. This was a shock to me. I do not have this money and cannot afford R100,000 plus.

    I then told them that I am cancelling after receiving this email they sent to me:

    “Good day,

    We have encountered a problem at the municipality with the plan approvals, the municipality has informed us that they are waiting for a committee to be appointed to continue with all plan approvals, this has caused a delay with all the plans we have sent to the municipality for the last 2 months. Unfortunately the municipality does not know themselves when this issue will be resolved and have put all plan approvals on hold until further notice, this is very frustrating for both us and yourself. We would like to assure you that we are doing everything we can to try and get this resolved as soon as possible and we will update you with any information that we receive from the municipality.

    Regarding the decision about the braai are, please could you let me know what you would like done, as once this issue gets resolved we would like to submit the plan. Please email me if you have any questions.

    Thank you”

    After receiving the above message from them, I sent them an email to say that I am not interested anymore in this because it was not at all what we agreed upon from the very beginning.

    Now the lawyers have sent me an email threatening me with breach of contract and penalties. I do not know what to to expect from them or what they are going to ask me to pay. I just do not feel comfortable with these people as I have been rushed and they took advantage of me, knowing this is my first time.

    I do not know what to do. Please advise me as I am so confused and I just want an end to this already.

    Thank you.

    1. Hi Lynn,

      I can certainly understand you concern about the course of events, particularly as you are a first-time buyer. It is a very common mistake to underestimate the costs involved when purchasing your first property

      Whenever cancellation of a binding contract is envisaged it’s always best to enlist the help of an attorney. Have your contract perused and a proper assessment of the facts made, after which your attorney will be in a position to provide you with an informed opinion as to the options that are available to you at this point.

      It’s even possible that your attorney may find a way to help you cancel the contract and have your deposit refunded to you, less some minor costs.

      Good luck.

      1. One important point: it would be best to use your own attorney, and not the transferring attorney who was appointed by the seller, as this attorney is representing the interests of the seller.

        1. Thank you very much I appreciate this, I have not paid any deposits, they rushed me to secure the bond for me, nothing has been paid. The bond was approved and after that they brought me agreement to sign, nothing else has been done. I have not started paying back the bank. The municipality also have not approved the plan for the house. But now the lawyer keeps pushing me to come and pay or face legal charges. I will discuss with a good attorney and thank you, I have been well stressed. So stressed. You eased my minds now. Any further advise would be appreciated. Lynn

          1. The fact that you haven’t paid a deposit yet is very good news. It means that the transferring attorney cannot simply deduct “costs” and hand you the difference.

            See an attorney without delay, and before you do anything else. Try to avoid responding to any communications from the other party, at least until your attorney has advised you.

            Best of luck.

  2. I lost my job for three months and could not pay my bond. In the 4th month I got a job and started paying. A year later the bank repossessed my house and sold it to property developers.

    I have since won the house back in the High Court but now the Deeds Office can not find my title deed to change the house back to my name.

    Please help me on advice on how to get the missing title deed.

    1. Hi Pamela,

      The process for applying for the replacement of a lost Title Deed is quite straightforward.

      An application must be made to the Deeds Office for a duplicate of the original, at a prescribed fee. I believe it’s in the region of R300.00. The application must be accompanied by an affidavit stating that the Title Deed is actually lost or destroyed and that a diligent search has been made.

      Once the Registrar of Deeds is satisfied, a certified copy of the Title Deed will be issued. The new document will, for all intents and purposes, be treated as if it were the original document.

      The transferring attorney should be able to help you get this sorted out.

      Best of luck.

  3. We’ve put our house on the market immediately after we signed an OTP on the property we wanted. So, the sales were going concurrently until there was a delay on our property because it is an estate.

    To cut the long story short, our current property went for lodging first which we withdrew as our new property has not yet been finalised.

    The purchaser of the house therefore requested us to go ahead with the lodgement as their bond administrator might pull out and it was agreed that we will stay in this property until our property is registered.

    What agreement should we have in place?

    1. Hi Neo,

      This problem seldom comes up if there’s an estate agent involved as it’s standard practice to include a clause in your Offer to Purchase (OTP) that would make your offer subject to the sale of your existing property. This is known as a “suspensive condition” and it ensures that the the two properties can be lodged and transferred simultaneously, even if there’s an unexpected delay of some kind.

      Unless you are paying for your new property in cash, you will need protection from liability for payment on the new property before the funds from the proceeds of the sale of your existing property become available.

      You didn’t say why your existing property’s transaction was delayed but, whatever the reason may be, you should ask the transferring attorney who is attending to the transfer of your existing property to draw up an addendum to your agreement of sale. This should provide clarification on the aspect of occupational interest as well as the passing of risks and benefits of occupation.

      Hope that helps and thanks for your question.

  4. 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.

  5. 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.

  6. 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.



    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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