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

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

  1. John,

    I have signed a contract on 2 June 2014 and transferred money same day with my husband. Ever since, no communication has been made, I mean with the agent and attorneys. I always have to phone for an update.

    The property belonged to the deceased. The beneficiary sold the house and apparently there are consent documents that must be signed and submitted to the master of the court. We feel neglected. Also, someone is still living at that house whilst we paid the purchase amount.

    Today I get an sms from the attorneys, “still awaiting one consent to be signed.” I mean, all this time? We are paying rent and we took a personal loan to buy the property — so many expenses and responsibilities to take care of.

    Please advise us we need assistance. The contract states that occupation of the property shall be given to and taken by the purchaser on registration. Should the date of transfer not coincide with the date of occupation (the party enjoying such occupation shall pay the other party)?

    We are heading towards the 4th month waiting to move in a house we purchased.

    1. Hi Thembi,

      When a property that’s part of a deceased estate is sold, an executor is appointed by the Master of the High Court to wind up the deceased’s estate. Depending on the complexity of the issues that must be dealt with by the executor, the process of winding up an estate can sometimes take a while. In some circumstances this could take up to a year or longer.

      Even a “normal” transaction (no suspensive conditions) takes two to three months. Your wait of less than three months is not really out of the ball park, yet. Hopefully the final consent will be obtained shortly and your transaction can proceed to lodgement in the Deeds Office. Once it gets there, transfer should take place within about two to three weeks.

      Congrats on your new home, and best of luck.

      1. My husband and I are now ready to cancel please assist us,tomorrow we are going to the conveyancer office to cancel are there going to be cancellation fees and so?we desperately need a home

  2. Hi John,

    The buyer of my property is wanting to cancel the offer to purchase although a clause (in the offer to purchase) states that the offer is irrevocable until expiration date (including a time). I signed the document on the same day that they claim they requested that their attorney cancel the offer to purchase. Their request to cancel was before the time stated in the expiration clause (5pm). Legally can they do that? What are my rights (as the seller) as I signed the document before the offer to purchase expired?

    Can I insist that they have to continue with the purchase? If not, can I claim the 10% deposit (as per the offer to purchase)? It is a cash sale with no special clauses (eg. buyer needing to sell their house, etc).

    1. Hi Jen,

      Provided you signed your acceptance of the Offer to Purchase (OTP) before your buyer cancelled, or before the buyer actually communicated the cancellation to you, you can probably hold the buyer to the contract. Even if the deposit has not been physically paid over at this point, your OTP has no suspensive conditions. You are in a strong position.

      As the seller of the property, it is your prerogative to choose the conveyancing attorney. You should do this right away and have the attorney put your buyer to terms.

      Good luck and thanks for your contribution.

  3. Hi,

    My Mom recently sold her house (titles are held by my Fathers Estate), but the sale is being stalled as he built a little store room that is over the boundary line. The are adamant that they want this torn down and rebuilt as it was part of the sale.

    My questions are;
    1. Is she protected under the Consumer Act for selling the property “Voetstoots”?
    2. She is happy to have it torn down but just does not have the money to have it rebuilt.
    3. She is happy to withdraw from the sale as she just cannot afford this, but they are threatening to keep her legally to it?

    What are her options?

    Regards,
    Lian

    1. Hi Lian,

      “1. Is she protected under the Consumer Act for selling the property Voetstoots?”

      Generally the use of the voetstoots clause in any Agreement of Sale should indicate that the CPA does not apply to the transaction.

      In order to resolve this delay to the transfer process it may be necessary to seek the professional services of an attorney. In most transactions, the seller appoints the conveyancing attorney. If that’s the case here, your mother can ask this attorney to help facilitate and negotiate an amicable settlement.

      Ultimately, it may be as simple as adjusting the selling price or it may eventually lead to cancellation of the sale, if the parties cannot reach agreement.

      Good luck.

  4. We wanted to buy a property where we can run our small business of manufacturing from. The agent was well notified of building a factory on the property. We signed a contract between us and the agent, but we kept on asking the agent to check with Municipality if we can run this type of business on the property. She told us that there won’t be any problem as her husband also confirmed that you can do anything on a small holding.

    As we were a bit worried about the whole process; we contacted Municipality ourselves – we were told that we cannot build a factory on that property as the primary rights only allows a dwelling house and agricultural building.

    We sent the agent an email that we contacted the Municipality and unfortunately we were told we would not be allowed to proceed with our factory on the land and as a result we are unable to proceed with the transaction of buying a property without correct rights. We asked for written confirmation from the banking institutions from which they have secured a bank offer of the loan of their knowledge of the purpose of the land.

    After sending the email to them, we never received any response from the agent. After a week we received a letter by email from their attorney stating that we breached a contract and therefore we have to pay the agent her commission fee plus interest and the summons will be issued against us within 7 days.

    1. Hi Lizzy,

      It’s unlikely that the agent can successfully hold you liable after misrepresenting the property to you. However, if you do nothing to defend yourself, you could possibly have a default judgement taken against you. For this reason, it may be best for you to consult with with an attorney at the first available opportunity.

  5. Hi John

    I put in an offer to purchase on a flat in 2011 which was a new development and I have not moved in yet. Last year I got married. My husband and I decided to wait but it still took so long we decided to buy a house.

    When we phoned the seller of the flat and his attorneys to say we are cancelling because we have a house now they tell us we can’t; the seller might sue.

    I read the Consumer Protection Act and I was wondering if he has a case against us or, because of the 3 year delay, does he not have a case against us (I’m married in COP)?

    1. Hi Lebo,

      Your question goes to whether you are still bound by this contract after a delay of three years, or not.

      Unfortunately it’s not possible to answer this without seeing your Deed of Sale. You’d be well advise to consult with an experienced attorney who can peruse your documentation and give you an informed opinion.

  6. Hi John
    i am selling my home and the buyer did not want my oven, which is quite valuable.
    So in the offer, it was stated that i am willing to replace with a suitable oven and installation.
    Now my oven is not brand new anymore but the buyer demands i replace with a “new” oven at current replacement value. What is my right here? I have offered a considerable amount to the buyer but still not happy. I feel like buying any decent used stove and fitting to kitchen. I am in gauteng. Thanks

    1. Hi Jack,

      “What is my right here?”

      Without seeing your contract, it’s difficult to comment. You really need someone, preferably an attorney, to examine the meaning of the term “suitable” in the context of your offer.

      In most transactions, it is the seller who gets to appoint the transferring attorney. This means that you may then consult this attorney as his or her client on this particular issue, and on any other similar problem that may crop up during the transfer process.

      If your transaction hasn’t quite reached that stage yet, you could select a suitable conveyancing attorney now and ask for advice. In return for this advice you are offering him or her an appointment as the transferring attorney, should an Agreement of Sale be successfully concluded.

      In either case you’ll get ‘free’ expert advice and assistance with this problem.

      Hope that helps, and many thanks for your question.

  7. My husband and I signed an offer to purchase a house to the value of around R1250000. After five days we expressed to our agent how worried we were that we could not meet the monthly installments. She explained that we had to apply any way for a bond.

    It just so happened two banks denied us a bond and one bank accepted our application at an interest rate we can definitely not afford. My husband and I had to cancel the bond application due to an affordability issue.

    We are now being forced by our agent to sign the bank papers but we know we just cannot afford it. What do we do. Agent wants to sue us.

    Please advise

    1. Hi Natasha,

      Since the introduction of the National Credit Act 34 of 2005, credit providers must to do a thorough assessment of affordability before extending credit of any kind. If the lending institution gets this wrong they may be accused of “reckless lending” if the consumer is unable to service the debt.

      Before you sign, check your contract for the clause which dealt with bond finance, making the granting of a mortgage loan a suspensive condition of the sale. Preferably have someone, an attorney if possible, peruse the wording of this clause to see what options may be available to you.

      Getting an attorney involved may help to bring some clarity to your problem. If common sense prevails, the agent may simply call it a day and move on.

      Good luck.

  8. Hi John

    My wife and I are first-time buyers and found what we thought was the perfect rural home. It is out of town (Simonstown). We were told all the usual stuff by the estate agent that there were others who wanted the property (buyers with “cash” etc.) and we quickly made an offer to purchase which the seller accepted. So documents have been signed.

    Subsequently, we have discovered that there is a massive low-cost housing development planned with in excess of 400 low-cost houses which will completely envelope the house (and its fifteen-odd neighbours) we have agreed to buy. We discovered this by accident while looking to see what the price of houses in the immediate neighbourhood were going for.

    I found an acticle in which the seller himself was quoted commenting on the development, yet neither he nor the estate agent ever mentioned this development to us. Were we to have known about this development, we would not have made the offer.

    Are we stuck or can we pull out of the agreement? We feel that the estate agent nor the seller disclosed to us all material facts relating to the property that they were aware of. We signed the offer on Tuesday and it is now Sunday. Bank approval is being handled by a licenser who we were referred to by the estate agent.

    We’d be very grateful for your comment.

    Kindest regards

    Simon

    1. The issue of non-disclosure of material facts relating to the sale of property is often the source of disputes between the parties involved. A material fact is any fact which would influence a reasonable buyer’s decision to purchase a property or that would have an impact on the purchase price of a property.

      Unfortunately, there’s no simple answer to the question of whether a specific material fact should have been disclosed or not. It’s often said that if you put two lawyers in a room you will get three legal opinions. Is this true? I’m not sure. However, as is usually the case with legal issues, each case must be judged on its own merits. For this reason it’s probably best to consult with an experienced attorney on this and take it from there.

      Good luck.

      1. Hello John

        Many thanks for the advice which we will take. The bottom line is that we would not have made an offer had we know about the development so I hope that there is something theat can be done.

        Kind regards
        Simon

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