With the new Consumer Protection Act (CPA) now in effect, property professionals will be forced to look at the way they do business and how certain procedures affect both them and their clients.
The act has been a work in progress for many years but now that it has been implemented it will change the way businesses operate in South Africa completely. In certain cases, risks that were previously assumed by consumers will now be placed on the supplier. This means that South African’s are now among the most protected consumers across the globe.So what impact will this have on the real estate industry? Adrian Goslett, CEO of RE/MAX of Southern Africa, highlights important aspects of the act pertaining to property. “With regard to the sale of property, the CPA will definitely have an impact on how property professionals draw up contracts. All standard contracts will need to be reviewed and must be brought in line with the requirements of the act. Certain terms may have been ambiguous in the past but now the act calls for clear and understandable terms that are partial to both parties.” Goslett notes that as the main objective of the CPA is to promote a fair, accessible and sustainable marketplace, all terms within the property sale agreement must be fair and reasonable for both parties. Until now parties could agree to any term in the contract, even if it severely prejudiced one party, which in most cases was the buyer. Parties had the freedom to negotiate contract terms at will, but now the CPA will set out to restrict contractual rights and make sure that parties prescribe to specific, just practices in the negotiating and selling of property.
“The voetstoots clause for example, was a one-sided term designed to safeguard the seller from liability for any damages that arouse from any hidden defects in the property. Voestoots can be simply translated to “as is”, which is how property was sold before the Consumer Protection Act was introduced. When a property was sold “as is” it meant that it was sold in whatever condition it was in - this is no longer the case. This has now been changed and any defects that the seller is aware of must be made known,” adds Goslett.The Voetstoots clause cannot be inserted into agreements for any property sold to an individual or small corporation in the ordinary course of business and a list of defects must be included. The purchaser must be made fully aware that the property is offered in its condition with the defects listed and agree in writing to accept the property in that condition. “Essentially what this will do is get the seller to make sure all necessary aspects of the property are in suitable working order and indirectly this will give the buyer an implied warranty of quality on their purchase,” explains Goslett.
It must be noted that the Consumer Protection Act does not apply to any private once-off transaction where the seller’s ordinary course of business is not that of selling property and these sellers will still be protected by the voetstoots clause. However, if an estate agent is involved in the transaction by means of marketing or negotiating the sale of the property, this service will be covered under the ambit of the act. When property professionals are involved in the marketing of any property or services that pertain to their ordinary course of business, they will need to make sure they adhere to the restrictions laid out in the CPA regarding direct marketing. This is defined in the act as approaches in person, by mail or electronic communication, which is further defined as telephone calls, fax, sms, wireless computer access, email or any similar technology. Consumers may request that suppliers do not contact them at all.“Estate agents will need to have permission from prospective buyers before they engage in any form of direct marketing and the buyer will have the right to withdraw from any transaction that may occur as a result of this marketing,” says Goslett.Transactions that result from non-direct marketing such as regular print adverting or show houses that are open to the general public will be exempt from the cooling off period.“Although some aspects of the Consumer Protection Act may seem severe and will require certain suppliers to adjust their business practice, it is important to remember that this act will have a positive effect on the sentiment of consumers in the current market,” concludes Goslett.