Know your rights when buying or selling property
Craig Hutchison, CEO of Engel & Völkers Southern Africa, talks to HomeFront about the legal ins and outs of property transactions
QAt a time when several severe cases of alleged wrongdoing in the realestate industry are being investigated, Minister of Trade and Industry Rob Davies has promised harsh consequences for estate agents who betray the trust placed in them by home sellers and buyers. This, after several allegations of misconduct in the local industry relating to possible fraudulent and unprofessional behaviour. In an environment where many sellers and buyers choose their estate agents based on how well their brand is established, how should South Africans now choose their real-estate professionals? Several items of a new legislation are in process or have been promulgated, all governing how real-estate professionals conduct their businesses. Not least of these is a National Qualification Framework certification and upto-date Estate Agency Affairs Board recognition. These new levels of professional
Athat will protect clients is the Consumer Protection Act (CPA). Although many elements of the act have been in place for a while now, the National Consumer Commission only opened its doors for business on April 1, and the provisions of the act have yet to be tested by any claims to the commission or in any court. According to the Igqwetha Training Academy, the act has the following aims:
To promote a fair, accessible and sustainable marketplace for consumer products and services by setting national norms and standards relating to consumer protection; To provide for improved standards of consumer information; To prohibit certain unfair marketing and business practices;
To promote responsible consumer behaviour;
To harmonise laws relating to consumer protection;
To provide a consistent enforcement framework; and
To establish a National Consumer Commission.
What has become clearer on closer examination of the act and specifically with regard to property transactions is the following:
The act does not cover the relationship between the average seller and buyer of residential property or the contract between them. This is because the sale and purchase of the property is not considered to be in the ordinary course of either of their businesses as it is a once-off transaction, therefore, as examples, the voetstoots clause could remain in the contract and the buyer would not be able cancel the transaction five days after registration, for which the current CPA allows.
A property developer or a property speculator would be governed by the act even if an independent estate agency was not involved in the sale of a property because the sale of properties is in the ordinary course of business of those individuals, as are their marketing efforts and contractual relationships relating to the sale of the properties. Therefore the contract in this regard would be subject to the CPA. It is important that developers receive legal advice on their current contracts.
In the case of a developer or a property speculator, a buyer can cancel a transaction at the seller’s cost up to five business days after registration has taken place as these transactions are seen to be in the normal course of their business. Also note that in terms of the act the seller can claim damages for the cancellation of the contract, so it is not as cut and dried as just cancelling the transaction.
A landlord leasing a property would arguably be seen as providing the unit for residential rent in the normal course of his business due to the nature of a lease, therefore the CPA would apply to the lease agreement signed between the parties. If the rental agreement is seen to be in the normal course of business the CPA would apply and the contract could be cancelled at any time by the lessee. As is the case with a developer, the landlord would have a possible damages claim for the cancellation of the lease.
A property professional’s mandate signed with the seller, buyer, landlord or lessee, and their actions with these parties, would fall into the act. A mandate can be cancelled at any time as the mandate falls within the CPA. Any costs carried up to the date of the cancellation can be claimed back from the seller or buyer, depending with whom the mandate was signed. This would include any advertising costs incurred. It is now more important than ever for property professionals to nurture the relationships with their buyers and sellers and ensure that only the best service is offered so that the mandates are not cancelled. Even with all these safety measures, the question still remains, how do you choose which real estate professional to entrust? When engaging with a realestate professional it is vital that sellers and buyers ask to see proof of the candidate’s qualifications and certification, as well as proof of the integrity of their trust account. This financial element of the transaction should remain with the transferring attorneys, leaving the real estate professionals to focus on marketing the property, but while the status quo remains this is a vital element to consider. If you’re putting your property on the market, interview possible real-estate professionals and establish the depth of their knowledge and understanding of your area. This will enable you to choose one professional that you are happy with to market your property on a sole-mandate basis. An expert will be able to offer a realistic value that meets the conditions of the current market and a true professional will be able to present a customised marketing plan for your particular property. This should include a combination of carefully focused advertising, show days and an understanding of the points on which you are prepared to negotiate.
If you are considering purchasing a property through an agent in a new area, ask for references from some of their recent clients, both sellers and buyers, and ask for a brief overview of the activity that they have seen in their area in recent months. A successful and trusted agent will enjoy good references and a significant number of sales and they will be able to display their qualifications and certification readily.
Engel & Völkers Southern Africa supports all the measures set in place to regulate the industry. The sale of a property is often the biggest financial transaction that someone will enter into and they have every right to expect a fully transparent, honest and professional experience. Engel & Völkers partners with qualified real-estate professionals who are passionate about property and committed to relationships of integrity in their business and ours. We embrace the high standards imposed by our internationally recognised brand, secure in the knowledge that our sophisticated systems not only boost our effectiveness but also maintain a tight control on the professionalism of our representatives.