Property developers and real estate agents take note
ESTATE AGENTS and developers have a little over two months to get used to dramatic changes South Africa’s new Consumer Protection Act will bring to the property industry. Starting at end-March, developers will be bound to watertight contracts, and real estate agencies can face hefty fines for using ambiguous terms such as “cosy” and “immaculate” in their advertising. The maximum penalties for transgressions prescribed by the Act should serve as a huge deterrent to sellers marketing or selling property of shoddy quality, says Webber Wentzel’s Trudie Broekmann, who says although it serves to protect property buyers, its requirements will be a tough transition for unscrupulous developers and estate agents.
The Act will protect house buyers in a similar way to other consumers and at first glance looks very much like a wish list from any homeowner who has ever had to deal with builders. One of the biggest changes the Act brings to the property sales sector is the stipulation that voetstoot clauses that breach a consumer’s right to property which is fit for its purpose and in good working order are prohibited by the Act.
If the transaction results from direct marketing, the consumer is also entitled to a cooling-off period of five days after the property has been registered at the Deeds Office. Property buyers will be able to cancel such a contract without penalty – and without giving a reason.
Another possible blow to especially the smaller real estate agencies is the stipulation that if a property is of inferior quality or there are major defects, such as broken plumbing, the buyer has the right for six months after transfer to return the property to the seller without penalty and at the seller’s expense and risk. Banks will also need to be more critical of what developers deem will be their “bankable sales” when they look at their risk, as buyers have the right to cancel a sale agreement and return the property to the seller.
It’s important to note the Act only applies to sellers who act in the ordinary course of their business, such as developers or real estate agents, says Broekmann.
Adrian Goslett, CEO of real estate agency RE/MAX, says the group hired consultants to make sure its workings are in line with the Act’s specifications – an expense a smaller, private real estate agency may not be able to afford. “We’ve prepared ourselves and don’t expect it to be a major issue. There are many positives for consumers but we’ll have to wait and see how it’s interpreted by the courts,” says Goslett.
What gives the Act teeth is the stipulation that a disgruntled buyer doesn’t need to approach a court but can refer the issue to the National Consumer Tribunal, a relevant ombudsman or a consumer court – making it an accessible and cheap remedy. Other Act stipulations: 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 outside his control.
If the deed of sale doesn’t specify the buyer is liable for the costs, the risk of 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 conveyancer tenders transfer at a different time (either earlier or later) than specified in the deed of sale.
An individual who buys a property “off plan” may at any time cancel the transaction. The developer may charge a reasonable cancellation fee.
“Off plan” properties and designs need to conform exactly to their show houses or specifications as presented to buyers.
A property may not be displayed without a buying price, whether on the “For sale” sign or in the estate agency’s brochure.
THE ACT A homeowner’s wish list