Tough tran­si­tion

Prop­erty de­vel­op­ers and real es­tate agents take note

Finweek English Edition - - MONEY CLINIC - LEANI WES­SELS leani.wes­sels@fin­

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

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