Purchasers of second hand houses have been surprised to learn that the Consumer Protection Act does not offer them any protection, as originally expected, against estate agents and sellers of these houses.
South Africa’s consumer landscape changed forever when the Consumer Protection Act (CPA) came into force on 24 October 2008. Its far-reaching provisions affect every facet of consumer activity as its very comprehensive legislation is essentially a consumer’s Bill of Rights.
However, despite its depth and breadth, its primary focus is on bilateral relationships between service provider and service receiver, leaving transactions where multiple parties are involved, in doubt.
A typical property transaction is founded on a multiplicity of relationships such as firstly, a selling mandate between the estate agent and seller, a relationship between seller and purchaser, a relationship between seller and conveyancer, and a relationship between the agent and the purchaser. The result is that there has been much uncertainty and debate as to how and whether the CPA actually applies to the sale of second-hand residential property.
With regard to the sale of residential property, the Estate Agent’s role is essentially that of an “intermediary” who is defined as someone who in the ordinary course of business, represents another (the seller) for remuneration in respect of the potential supply of goods and services. However the CPA’s definition of an “intermediary” clearly provides that it “does not include the person whose activities as an intermediary are regulated by other national legislation.” And of course the affairs and conduct of estate agents are governed by national legislation in the form of The Estate Agency Affairs Act together with its Estate Agents Code of Conduct.
Who does the CPA apply to?
The key governing requirement of the CPA is that the legislation will only apply to a transaction between a supplier and consumer involving a “supply of goods and/or services in the ordinary course of business”.
Although the legislation does enable an industry to apply to exempt itself from the CPA due to the fact that it has its own governing legislation, such as the Estate Agency Affairs Act together with its Code Of Conduct, this has not been done.
The single sale of a “second-hand” property is not governed by the CPA
The greater majority of second-hand house sales are transactions where the owner does not sell multiple properties in the ordinary course of his daily business. His ordinary course of business would be other activities such as being an accountant and businessman, artisan and so forth. Most owners would not run any business as they would be employees. So therefore the provisions of the CPA, as far as the purchaser and seller relationship is concerned, do not apply to most
second-hand house sales, even when an estate agent is involved. As the agent is an intermediary, he is exempted. This also means that it is business as usual when it comes to this sale of second-hand residential properties. The voetstoots clause remains (where the purchaser buys the property with any hidden defects and accepts liability therefore) and the purchaser has no special protection under the CPA.
The wide-ranging publicity of the CPA has certainly caused much confusion and misunderstanding in the minds of purchasers. The moment there is a hint of rising damp or any defects in the property, the first cry of the purchaser is the Consumer Protection Act; which in these particular circumstances, have no application whatsoever.
The selling mandate and relationship between Estate Agent and Seller is governed by the CPA
The mandate to sell a property is a service between the agent and the owner/seller, in the ordinary course of the agent’s business. Thus, the mandate and service of selling a property is, against the estate agent governed by the CPA. So a seller can benefit from the wide-ranging provisions of the CPA if he wants to take action against the estate agent. These protections include the following; there must be responsible marketing, honest dealings, equality and privacy, full disclosure of information, plain and understandable language, fair, reasonable and just terms, express notice of any risk or liability and details of a cooling off right in certain limited circumstances.
Multiple sales by a Property Developer is governed by the CPA
A property developer whose ordinary course of business is the sale of multiple properties on a continuing basis would be covered by the CPA.
The purchaser has no rights under the CPA against the estate agent.
As referred to above, the relationship between the purchaser and the estate agent is an “intermediary” relationship which by definition in the CPA legislation excludes anyone whose activities are regulated by national legislation : because of this exclusion, any complaints that the purchaser may have against the estate agent cannot be made under the CPA. The purchaser would have to take action against the estate agent under the Estate Agents Code under The Estate Agency Affairs Act
The Purchaser has no rights under the CPA against the seller of a second hand house
Because the seller does not sell the property in the ordinary course of his business, the CPA does not apply. Despite the fact that an estate agent may be involved in the sale, the purchaser has no
CPA rights, against the agent nor the seller.
Similarly, the typical private sale, where no estate agent is involved, is also excluded from the CPA.
The purchaser has general legal remedies directly against the seller under the law of contract, the law of sale and The Alienation of Land Act.
Reproduced from the Denoon Sampson Ndlovu Inc. website by permission of Denoon Sampson Ndlovu Inc.