The power of partnership
May 22, 2024
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When does the Consumer Protection Act cover property transactions?

While the introduction of the Consumer Protection Act (hereinafter referred to as “CPA”) was widely praised by many South Africans, some consumers believe that they are afforded a blanket protection under the Act. However, in fact, certain commercial transactions enjoy limited protection under the CPA.

Protection offered to consumers by the CPA does not apply to all transactions, but more specifically to transactions where home sellers do not sell their homes “in the normal course of business.” One such transaction is the sale of a residential property by its owner by means of a private treaty.[1] In these instances, the agreement is not covered under the Act because legally the seller is not classified as a “supplier.”

Most “second hand” houses in South Africa are sold by private “once-off” sellers. This means that most South African home sales are specifically excluded from the reach of the Act as the agreements are not concluded in the ordinary course of the supplier’s business. In considering the core concepts defined in the CPA, it is clear that transactions in the ordinary course of the supplier’s business, which includes dealing in immovable property, are however covered by the CPA.

By way of example:

  1. A developer (as supplier) offers units in a development for sale to a member of the public (as consumer); and
  2. A speculator sells his house to a consumer.

However, if an estate agent engages in marketing the property and negotiating the sale between the seller and purchaser, this marketing service provided by the agent is covered by the provisions of the CPA.

It is important to look critically at the consequences that flow from this limitation and find an effective way to protect buyers where the transactions fall outside the Act. This clause commonly inserted is the “voetstoots” clause which means that the property is sold as is regardless of its condition and without guarantees. Buyers are encouraged to agree to accept this clause only if the seller agrees to making the sale subject to a satisfactory home inspection. This gives the buyer the option to withdraw and re-negotiate.

Notably, where a buyer later wishes to report the defect, he or she may have no other recourse but to approach the court. The effect of the CPA may seem harsh to certain members of the business community; however, it is important to keep in mind that the purpose of the CPA is to protect the rights of consumers and to empower them to bring these rights to fruition.

Moreover, if it can be shown that he or she deliberately withheld information or misled the buyer in any way, they can be held liable – and be made to pay penalties. Their misconduct will be recorded in perpetuity by the Estate Agency Affairs Board (EAAB) because it has contravened their Code of Conduct.

Prepared by:

Raymond Scott |Conveyancer | Real Estate

Lauren Barnard |Candidate Attorney

[1] The agreement for the sale of a property at a price negotiated directly between the vendor and purchaser or their agents.

While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein.  Our material is for informational purposes.

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