I’m buying or Renting Property – Can Consumer Law offer me Protection?
Yes, the Consumer Protection Act offers radical assistance to consumers buying or renting property, provided the Act applies to the situation.
The Consumer Protection Act will only apply to a property sale when:
- the seller is acting in the ordinary course of business (such as a developer or someone who renovates and sells houses for a living, or where you receive a RDP house from the State).
- If you are buying in a legal entity like a company or CC, the Act will apply if the buyer is an entity with an annual turnover and asset value of under R2 million (“small business”).
- If you are buying in terms of an instalment sale, the Act will apply if you are an individual or buying in a small business, whether or now the seller is a developer or renovator etc.
If you are renting, the Consumer Protection Act will apply if:
- you are an individual or a couple.
- If you are renting in the name of a legal entity, the Act will apply if the entity’s turnover and asset value are each below R2 million.
However, if there’s an estate agent involved, even where the seller is not a professional seller or developer, the CPA is likely to apply. It will also apply to the services provided by a conveyancer where the consumer is an individual or a small business.
So, as you can see it’s quite complicated- if you’re uncertain whether the CPA can come to your assistance, feel free to contact us to enquire.
Here are a few examples of clients whose property problems have been resolved by the CPA:
1. Misleading marketing
A couple bought a plot in a new development from a developer. They felt they could afford it because the estate agent had told them it would cost about R2 million to build a house on the plot. After they had signed an Offer to Purchase but before transfer had taken place, they spoke to a builder who explained that a house would cost at least double- so R4m to build. They cancelled the contract, but the conveyancers refused to refund their deposit. We wrote to the conveyancers relying on the CPA and after a few rounds of correspondence, the full deposit was refunded.
Another couple bought a house in a quiet neighbourhood. They asked the sellers, a couple who had lived in the area for a long time, whether the area had much crime and they said it was very safe. After moving in, a hijacking took place in their street and they heard that the house had been burgled several times and that this was also not the first hijacking in the neighbourhood. We wrote to the sellers and claimed the cost of dramatically improved security at the house.
2. Defects in the Property
A couple bought a house but on taking occupation, discovered that the geyser was not earthed, so one got a literal shock when washing your hands. The foundation was not compacted, so when they lifted the fitted carpets, they discovered the floor was cracked and had sagged away from the walls. We are suing the seller and estate agent for their repair costs.
Another couple bought a retirement home with a wooden second floor balcony. They were assured that the house was in such a good condition that no repairs or renovations were needed. After moving in, the second floor balcony collapsed and it was discovered that it was not indicated on the plans, nor was it safely built. We are claiming the replacement costs from the estate agent and seller.
3. Getting your deposit back
Our client initially rented a house and then decided to buy it from the owner. They agreed that the purchase price would be paid in instalments and that a large deposit would be paid upfront. Our client paid the deposit and the first few instalments, but then the rainy season started and she discovered that the roof leaked and would cost an enormous amount to repair or replace. She cancelled the purchase contract, but the seller refused to pay back her deposit since the contract said it was non-refundable. She came to see us. We examined the contract and discovered that it didn’t comply with the requirements of the CPA and so was invalid, so the deposit had to be paid back.
Another client paid a deposit on a flat after selling her house with all of its furniture and equipment. Just as she was about to move in, the hard lockdown started and she was unable to buy a fridge or bed to furnish the flat. She was forced to cancel the lease as she didn’t know how long the lockdown was going to last. We helped her to recover her deposit from the landlord.
4. Rental Rebate for embattled restaurants
We’ve assisted several restaurants in reducing their rental for the periods during which they weren’t able to trade fully due to pandemic regulations such as limitations on trading hours, number of patrons and ability to sell alcohol.
5. Getting out of vacation investments
We regularly assist clients in getting rid of unwanted vacation shareblock and joint ownership rights.
The remedies for consumers differ. When there is a defect in the property / building, the remedies include getting a full refund of any consideration paid for the goods, whereas if a service is defective the remedy is a refund of a portion of the fees paid for the service.
When the act applies and the buyer has bought a property as a result of direct marketing, the buyer has a cooling-off period of five business days. Direct marketing is defined as “to approach a person, either in person or by mail or electronic communication, for the direct or indirect purpose of promoting or offering to supply, in the ordinary course of business, any goods or services to the person; or requesting the person to make a donation of any kind for any reason. This means the buyer may without penalty, and without giving a reason, cancel the agreement by sending a written notice to the seller within five business days from registration of transfer
of the property at the deeds office. This cooling-off right is in addition to the cooling-off period in terms of section 29A of the Alienation of Land Act, which applies where the value of the property is R250 000 or less and the buyer is an individual. This result is particularly concerning for a seller who may not be acting in the ordinary course of business, but due to direct marketing by his estate agent, finds that the purchaser has a right to cancel the sale.
When the act applies, a property may not be displayed for sale without displaying the price. It will not be sufficient for a seller to invite offers – an asking price will have to be indicated, either on the property, or on an estate agent’s catalogue (which must be dated) or advertisement, or placed or published in a way that creates an association between the price and the property.
Developers who sell properties ‘off plan’ must ensure that properties delivered to buyers comply in all material aspects to any description, artist’s impression or plan that was provided to buyers. Likewise, if the buyer was persuaded to make the purchase on the basis of a show-house, the developer must deliver a house which complies in all material respects with the show-house. If the consumer saw a description and a show-house, the house must correspond to the description and the show-house. If a buyer buys a property ‘off plan’ and the buyer is a consumer to whom the act applies, the buyer may at any time cancel the transaction. This does not apply if the property is ‘special order goods’, for instance where the buyer has persuaded the developer to provide a residence that deviates from the standard plans or fittings provided by the developer.
The developer is entitled to charge a reasonable deposit and, if the buyer cancels, charge a reasonable cancellation fee.
Unfair, unreasonable and unjust contract terms are prohibited in deeds of sale to which the act applies. That will mean, for example, that estate agents will no longer be able to insert a clause that has the effect that the buyer forfeits his deposit if the sale is cancelled for any reason, or a variety of causes that are outside the control of the buyer. Such a clause will be void, and may lead to the entire agreement being void.
The CPA provides protection for buyers regarding the time, place and cost of delivery and how risk is allocated, which is the default position that will apply unless the contract between the seller and buyer provide differently. Where the act applies, we recommend that the deed of sale specify that the buyer is liable for the costs of transfer, and that transfer takes place at the buyer’s risk. If that is not done, the transfer takes place at the seller’s cost and risk. The buyer has the right to cancel the agreement without penalty if the seller’s conveyancers tender transfer at a different time (either earlier or later) than specified in the deed of sale.
Where the act applies, a buyer has a right to require a seller to take re-transfer of a property if the property is not of good quality, in good working order, free of any substantial defects, or not fit for its purpose. The buyer has this right for six months from transfer and may return the property to the seller without penalty and at the seller’s expense and risk. The buyer has the choice as to whether the seller must refund the buyer or provide the buyer with a replacement property. Alternatively the buyer can decide to keep the property and require the seller to repair the defect. Practically, this can be very difficult for sellers who may not have the necessary funds
or a replacement property available.
Traditional voetstoots clauses which breach the consumer’s rights to a property that is of good quality, in good working order, free of any substantial defects, and fit for its purpose are prohibited by the CPA. Consequently these voetstoots clauses will not be allowed in agreements to which the act applies, but if you sell your home outside of your ordinary business, a voetstoots clause is still in order and valid. Instead, sellers acting in the ordinary course of their business (such as developers) must insert a detailed clause in which they specify the condition of the property, dealing with both patent (visible) defects and latent (unknown) defects. If this clause has been
expressly accepted by the buyer, or the buyer has knowingly acted in a way that is consistent with accepting the property in that condition, the seller will not be liable to the buyer for these disclosed defects. We recommend that sellers and their estate agents obtain detailed reports on all patent defects from home inspectors and attach these to deeds of sale.
Where the act applies, and the buyer has a claim against the seller due to defects or any of his other rights under the act, the buyer does not need to approach a court, but can refer the issue to the National Consumer Tribunal, a relevant ombud, consumer court (tribunals which fall under the provincial governments), alternative dispute resolution agent or the National Consumer Commission.
Where the act applies, estate agents may not market properties, or administer property
transactions in an unfair, unreasonable or unjust way. Marketing may not mislead or deceive consumers, nor use exaggeration, innuendo or ambiguity about material facts. Sellers and estate agents will need to reconsider advertising properties with expressions such as ‘you will be dazzled by this house’, ‘immaculate’, ‘secure’, ‘great investment property’.
Banks and other financial institutions that provide finance to developers usually look at the developer’s ‘bankable sales’ when evaluating their risk. These financial institutions need to be cautious in relying on these amounts, since buyers who are individuals or juristic persons under the threshold have the right to cancel the sale agreement or return the property to the seller, as set out above.
By Trudie Broekmann