The new Consumer Protection Act which will come into effect at the end of March 2011 will significantly impact on the way business is done in South Africa and has some rather serious implications for the property industry.
The Consumer Protection Act has some serious implications for agents selling property - for one, a disgruntled purchaser can get out of a sale agreement within 5 days of signing it.
It creates rights for the consumer buying property while regulating closely how suppliers or estate agents operate. Estate agencies and property professionals need to be aware of the implications and prepare for changes in the way they will interact with property buyers and sellers in the future.
Section 16 of the Consumer Protection Act states as follows:
“A consumer may rescind a transaction resulting from any direct marketing without reason or penalty, by notice to the supplier in writing …, within five business days after the later of the date on which
a) The transaction or agreement was concluded; or
b) The goods that were the subject of the transactionwere delivered to the consumer.
The section further provides that the supplier has 15 days within which to return any payment or property after receiving the cooling off notice.
Insofar as the following definitions are applicable to the property industry we may just have a problem:
- A Supplier includes an Estate Agent;
- A Consumer includes a Purchaser;
- A Transaction refers to the supply of goods in return for payment;
- Goods refers to a legal interest in land or immovable property;
- and of course direct marketing includes approaching a person, either in person or by e-mail for the direct or indirect purpose of promoting or offering to supply of any goods...
On a literal interpretation of this section a disgruntled purchaser can get out of a sale agreement within 5 days of signing it, or even worse, 5 days after taking transfer of the property in the event that this agreement was concluded as a result of an estate agent simply doing what she does in the ordinary course of business - namely looking for a purchaser to buy a client’s property.
Add to that the fact that the supplier has 15 days to return any payment or the property after receiving the cooling off notice, and I don’t think estate agents will be cooling off anytime soon. - Marlon Shevelew, Marlon Shevelew and Associates
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Interesting Hypothesis, however there are still many aspects to be considered such as the definition of “Direct Marketing” and Contractual Law, not to mention the fact that once the Property has been transferred there are still other agreements that have been signed for Bonds and previous to that for Guarantees which were necessary for the transaction to go through in the first place. I do hate people who stir up comment like this in order to effectively get free advertising for themselves. Do these guys have any idea how many problems this article alone is going to cause for people in the property industry when this article is quoted at them, as it is actually a part information comment and to a large degree ill informed. - Tony
This seems improper and almost an impossible issue to resolve, in the context of a Purchaser purchasing buying or a Seller selling a property. There is sufficient time for the purchaser to view the property as many times as required before the transfer goes through, however once transfer has taken place, who would be held accountable for refunding the purchaser any of the legal costs and does the Receiver of Revenue also have to refund the transfer fees, etc. This could be a very long and complicated affair, it makes no sense. Please advise what the consequences of such a transaction would be, as we are in the process of selling our home. - Liz
What idiots? who is gonna cover the costs of deregistering? who is gonna cover the costs of interest lost on huge purchases? (R30 million rands gain some interest in 5-15 days) whose gonna cover the loss of rent should the purchaser move in to the property and then he gets his money back after 15 days but the law protects his abode for 3 months. I suspect I know the type of person that made these changes. Now we have to add another 2 pages of suspensive conditions that effect after the sale. what lunacy drove them to this. Maybe they should rather go and have a longer lunch each day! - Marius
I think the Dodo was more protected! And look what happened to them......!What is the future in Estate Agency? A rather bleak one I'm afraid. Do the attorneys and SARS also have to return transfer costs and duties that were paid because the purchaser takes advantage of this UNBELIEVABLE new law? Why would a purchaser do such a thing? Perhaps because he has found a bargain elsewhere and decides he shouldn't have been so hasty in putting pen to paper. Isn't the market poor enough as it is? Aren't the genuine sellers and honest agents struggling enough already just to see a sale through from listing to transferring? I would gladly accept this law if it was used in cases where the Agent or Seller were hiding latent and patent defects on a property just to ensure that the poor blindsided purchaser takes the bait and falls into a vicious trap set by either, out of their greed and dishonesty.I am truly SHOCKED and APPAULED by this madness.- Nadene
Thank you for a very informative and educational website. It is my favorite one. I cannot imagine such a law can be passed and enforced. This is another means of removing responsibility and accountability from the person and forcing onto another. Buy and selling is a huge important process which should not be taken lightly. How can one be given such liberties in such an important case. Just does not make sense. If after registration of the property and bond the person is able to change their mind with no accountability this is disaster, and sounds like it has been purposely brought about so that every institution, business and family must become poverty stricken…. Going the same direction as the continent up north. - Val
This not a big deal. It simply means that the process of signing a purchase contract effectively takes 5 days, or is delayed by 5 days, depending on how you view it. This time delay is insignificant in comparison with the delays in getting mortgage approval – a common condition to most purchases. - Roy
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