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Consumer protection act – does it affect property sale in South Africa?

Cape Town property sale - Hout Bay real estateThe long awaited Consumer Protection Act (CPA) came into effect in South Africa on 1 April 2011. Fundamentally changing the way business is conducted in South Africa, the law regulates the way products and services are marketed and makes South Africa among the most consumer-protected countries in the world.

We have explored the most important changes relating to Real Estate property transactions below:

Most importantly the Consumer Protection Act grants consumers the right to cancel certain contracts within a “Cooling-off” period of five business days.

Secondly, the Act modifies the way the voetstoots clause is applied in Real Estate contracts.

The third is about changes with regard to the letting of property.

1) Cooling-off period
If it comes to a property purchase because of direct marketing efforts, the real estate buyer has the right to cancel the sale within 5 business days. This law is commonly known as the cooling off period.

Keep in mind this only applies to property sales due to direct marketing and not purchases due to marketing through show houses or traditional print ads. Nor does it apply to any property purchase made by a client that the estate agent is already working with. Such deals generated by mentioned forms of marketing do not fall within the scope of the Consumer Protection Act.

There is some good news with regard to whats considered the start of the “cooling-off” period. The date of delivery of the goods is the official start of the “cooling-off period”. In property terms this means the date of transfer of the House or flat into the buyers name, not the date of signature of the contract. In actual fact the buyer has 3 to 6 months to develop second thoughts. Of course a cancellation after several months can be complicated for all the parties involved. Also keep in mind that this is a yet untested law. It remains to be seen how it will be interpreted by the courts.

The “cooling-off” period only kicks in when the property purchase price is less than R250 000. This clause is covered in South African Property Law, in terms of Section 29a of the Alienation of Land Act. This provision is not effected by the new Act and will stay in place.

2) “Voestoots” clause
“Voetstoots” is an Afrikaans term derived from Roman Dutch Law. It literally means “as is”. Prior to the introduction of the Consumer Protection Act, all property was sold “as is”. Luckily for the buyer, the Consumer Protection Act modifies this.

Since 1 April 2011, developers, speculators, and investors owning real estate portfolios who sell real estate in their ordinary course of business, can now be held liable for defects.

An ordinary once-off sale does not fall within the scope of the Consumer Protection Act. Once-off sellers may continue to rely on the protection of the “voetstoots” clause.

For more information how the Consumer Protection Act affects lease agreements click the link provided.