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

  1. Hi John,

    I purchased a unit in a development in 2012 November,I have now got a problem where in each room on one corner there is a crack showing straight from the floor all the way to the ceiling. Also, the people from the flat bellow now complain that my shower pipe is leaking into their flat and I am responsible for the repairs.

    My question: is the HOA not responsible for all the repairs for the first 5 years of the development and given the issues on the unit is there a way that I can now sell the unit without having to share any profit with the developer for selling before the five years?

    Regards,
    Mokone

    1. Before you can think about selling, you may first need to take steps to find out what these cracks mean.

      Surface cracks could be symptoms pointing to a structural failure of some kind or they could just as easily be less serious “settlement” cracks. The latter is relatively inexpensive to fix.

      It’s not a good sign that you have fractured piping in the walls.

      Repairing a structural problem has the potential to cost a small fortune. If that’s the case, you may not find a willing buyer that will meet your asking price. Don’t try to hide the problem; you could end up being liable in terms of the ‘voetstoots’ clause.

      As the owner of a sectional title unit, and as member of the Body Corporate, you could start by getting the BC involved. It will be useful to your cause to establish if there are other units with similar issues.

      Best of luck.

  2. Good Day

    I signed an offer to purchase and want out of it because I feel the agent concluded the contract in bad faith: there is this part on the contract that says:
    “OFFER AND ACCEPTANCE
    The Purchaser’s offer shall constitute an irrevocable offer, which may not be withdrawn prior to presentation to the Seller, and which
    offer shall remain available for acceptance until 22h00 on 7th December 2014 whereafter it shall lapse and be of no further force and effect” .

    But now after the signing of the contract the date has been changed to the 10th which I didn’t write, but it was cancelled and amended by the agent in my absence.

    Can you please explain what is the meaning of changing the date and what effect does it have since i didn’t change it. The copy that was sent to me had the 7th of December date.

    1. Hi Lee,

      By altering a clause of the contract after you signed it, the agent has effectively invalidated your offer. Should you wish to withdraw, you can do so.

      If you decide to go this route it may be wise to first seek the assistance of an attorney who can peruse your Offer to Purchase and ensure that you walk away unscathed.

      Best of luck.

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