The cooling-off period is useful in certain circumstances, but is not a solution for simply changing your mind.
An Offer to Purchase becomes a legal and binding Sale Agreement between a buyer and seller, the very instant that the seller signs the contract (generally the buyer would have already signed it before the offer was presented to the seller). Therefore it is imperative that you are 100% sure that the offer you make on a property is one that you are not going to regret.
Make sure NOT to do the following when submitting an offer:
Do not sign several offers to purchase, on various properties, hoping that one of the sellers accept.
Do not lie about not being able to secure finance (getting a mortgage loan) - a seller has every right to ask the bank for proof that they are not willing to finance the property;
Do not think that you can change your mind shortly after entering into this contract, and then simply breach the contract by not even applying for finance as, again, a seller has every right to ask the bank for proof that they are not willing to finance the property;
Do not rely on the “Cooling-off Period” – know that it can only be used in certain instances.
It is far better to just be honest and tell the seller upfront that you have regrets and will no longer be able to purchase the property. In a property boom market, when there are many able and willing buyers, you may be lucky that the seller might agree to let you off the hook and look for another buyer. But, as the market currently stands, while there are few buyers and the banks are stringent with their lending, most sellers will be relieved to have the offer in-hand and will force the matter legally, and you will be left with a seriously expensive “impulse buy”.
The CPAs Cooling-Off Period will NOT help you in this instance (when you change your mind)! People are under the misconception that the Consumer Protection Act (CPA) protects them, by providing the “cooling-off period”.
In terms of The Alienation of Land Act, residential property transactions of R 250 000.00 or less are subject to a “cooling-off" period of five working days, calculated from the date of signature of the Offer to Purchase. It does not apply to residential properties sold for more than R 250 000.00. This provision remains in place and is not affected by the Consumer Protection Act.
In terms of the Consumer Protection Act, a Purchaser who 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. Direct marketing in terms of the Act includes to “approach” a person (i) in person, (ii) by mail or (iii) by electronic communication (this includes email and sms) for the purpose of promoting or offering to supply goods or services to the person. The “cooling-off” period does not apply to sales that result from any other form of marketing such as any purchase made by a client that the agent is already working with or conventional print advertising or show houses!
Furthermore, the Act protects consumers in terms of transactions entered into with a supplier “in the ordinary course of the supplier's business”, which also excludes ‘regular’ property sellers who do not generally buy and sell property as a vocation in order to derive an income from it.
The start of the CPAs 5-day cooling-off period is the date of delivery of the goods to the purchaser.
With a property transaction this means, not the date of signature of the contract, but the date of transfer of ownership of the property into the buyer’s name. Transfer can take anything from three to six months after signature of the Offer to Purchase, so cancellation at this stage may prove to be problematic for all the parties involved. This provision is, as yet, untested in law and it remains to be seen how it will be interpreted by the courts.
This article originally appeared in Property Power 11th Edition Magazine. To order your copy at the discounted price of R120 click here.