21 Jul 2010
The Consumer Protection Act (CPA), due to take effect on 25 October this year, will mainly force agents to ensure property sellers and buyers understand the wording and legal effect of all contracts they enter into.
If this is not complied with, the Act gives wide latitude to the consumer to seek legal recourse and compensation.
Simon Raab, Southern Suburbs manager for Greeff Properties, says property marketers will find themselves “in a new ballpark” when this Act is implemented.
Raab warned that agents will have to take it upon themselves to ensure that sellers and, more particularly, buyers, have fully understood the meaning of the wording and legal effect of such wording contained within all mandate agreements and contracts into which they have entered. “The aim of the new Act is to promote a fairer, more accessible and more sustainable marketplace in which the less well-informed and less educated clients are better protected.”
Furthermore, said Raab, if in any way the quality of the product or the service rendered falls short of generally accepted high standards, the customer will from November onwards, be entitled to claims, replacements or even to a total cancellation of the agreement. “Consumers will also have an opportunity to approach the National Consumer Commission instead of the Magistrate's or High Courts, which in itself will encourage more action being taken when damages can be proven.
“The wording of the Act makes it clear that all in the ‘supply chain’ can be held responsible. This, as I read it, implicates the agent as well as the manufacturer or, in the property world, the seller and/or valuer.”
Steven Kay, MD of Home Inspection Services, says Section 55 of this Act places a responsibility on estate agents to ensure that potential buyers are fully informed regarding the condition of the property.
“The ‘As Is’ or ‘voetstoots’ clause in an Offer to Purchase will no longer protect estate agents from the perils of non-disclosure. This means that the challenge for estate agents is to provide full disclosure up-front to potential buyers.”
Dr Andrew Golding, CE of Pam Golding Properties (PGP), says he believes the primary benefit of the Act will be enhanced protection for consumers against exploitation and unfair marketing and business practices. “Property buyers will also benefit from improved standards of consumer information and the setting of standards and national norms relating to consumer protection.
“I do believe that the Act is a good thing that will offer improved protection to the most vulnerable of consumers, who most often find themselves in unequal bargaining positions. Consumer issues will also be dealt with in a less fragmented way and the Act has sought to consolidate various pieces of legislation in relation to consumer protection. The regulations to be promulgated under the Act will provide greater clarity with respect to the implementation of certain of the Act’s provisions.”
He says PGP has already commissioned a review of their standard documentation and business and marketing practices to ensure that changes are made where necessary and new processes implemented as required. “We believe that this review will be an ongoing process in light of the interpretation by our courts of the new Act’s provisions.”
The CPA is set to have a massive impact on virtually every business in the country, including the real estate industry, says Peter Gilmour, chairman of RE/MAX of Southern Africa.
He says that, for example, the CPA states that a supplier cannot make any false, misleading or perceptive representations that any land or immovable property has characteristics, facilities and amenities that it does not have, or that it may lawfully be used for purposes that are unlawful or impracticable. “As per this particular clause, any false representation or inaccurate concepts, whether delivered knowingly or not, could, under the CPA, make it possible for the buyer, on appeal of the courts, to get the contract cancelled.”
Furthermore, it deals with restrictions pertaining to unfair, unjust or unreasonable terms, and stipulates that the price and terms must be fair. “This is a relatively controversial provision, as it could be used as a price control mechanism. In reality, with markets and demand in a constant state of flux, it is very difficult to determine what a fair price is. A fair price is what the market at any particular given time is willing to pay for a property,” he explains.
Gilmour notes that in terms of Section 55 of the CPA, every consumer has a right to receive goods that are suitable for the purpose for which they are bought and free of defects. He explains that the exception to the aforesaid is if a consumer has been expressly informed that the goods were offered in a specific condition and has accepted goods in that condition. “However, this particular section does not apply to auctions.”
The CPA is limited to transactions that are concluded as part of the regular business of sellers, suppliers, distributors and manufacturers. “As long as it is not their usual business, the Act does not apply to once-off transactions undertaken by private individuals who sell their property. However, pertaining to the real estate industry, if the supplier of the home is a developer or builder, and defects become evident after the sale, they will be held responsible.
Gilmour says the seller will need to sign a declaration that they have listed everything that they are aware of, and likewise, the buyer will also need to sign a declaration noting that they have read and fully understood the list.
“If enforced successfully, the CPA will no doubt instill great confidence in local and international investors alike, as well as weed out unscrupulous operators, which will be to our benefit in the long run.”
Raab says ultimately, this legislation will work to the benefit of all concerned because it will result in more transparent, open dealings coupled to strong deterrents against any form of misrepresentation.
Raab added that the Act does not in any way do away with the basic stipulation that all property deals have to be in writing, “but it will make it necessary to ensure that the wording of these deals is clearer and simpler than in the past”. Greeff Properties, he said, would be consulting with their lawyers on this matter. – Eugene Brink