WHEN DOES THE CONSUMER PROTECTION ACT COVER PROPERTY TRANSACTIONS?

The introduction of the Consumer Protection Act 68 of 2008 (hereinafter referred to as “CPA”) was widely praised by many South Africans for providing greater protection for consumer who are often in a weaker bargaining position vis-à-vis the supplier of goods and services. However, some individuals and juristic persons erroneously believe that they are afforded a blanket protection under the Act for every transaction they enter into. In actuality, the application of the CPA is limited to only certain commercial transactions which are in turn limited  to consumers, as defined in the act.

The protection offered by the CPA does not apply to all consumers, for example the typical once-off sale of a residential property by it 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” since the seller does not regularly sell their home “in the normal course and scope of business”.

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 ambit of the Act as the agreements are not concluded in the ordinary course of the supplier’s business.

However, in considering the core concepts defined in the CPA, it is clear that if a seller regularly as part of their ordinary course of their business, enters into transactions dealing in immovable property, sucha transaction would be 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 is involved 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 for those transactions that fall outside the ambit of the CPA.  A common area of disputes centres around  the “voetsstoots” clause which provides that the property is sold “as is” regardless of its condition and without guarantees. In the absence of the CPA, buyers would be constrained to rely on the Common Law and approach the Courts for relief, as oppose to the Consumer Tribunal.

Buyers are encouraged to agree to accept this clause provided  the seller agrees to making the sale subject to a satisfactory home inspection, thusproviding the buyer with an option to withdraw and re-negotiate.

Moreover, if it can be shown that a supplier (including that of an Estate Agent) deliberately withheld information or misled the buyer in any way, the supplier 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.

While 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.

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

Prepared by: Raymond Scott | Conveyancer | Real Estate

Lauren Barnard | Candidate Attorney

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)