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Are property transactions protected by the CPA?

Are property transactions protected by the CPA

Introduction

The introduction of the Consumer Protection Act 68 of 2008 (“CPA”) was welcomed by many when it came into full effect on 1 April 2011, but it has, in some instances lead to confusion with regards to its applicability to certain transactions.

Some may believe that the CPA provides a manner of “blanket protection” in all commercial transactions and scenarios. But there are some instances where the CPA will not afford protection and consumers need to be aware of when and where this might be to ensure they do not rely on a law that is not applicable and of effect.

One of these instances is property buy and sell transactions. Despite the fact that the CPA does affect the rights of property buyers and sellers, it has in some scenarios led property buyers to believe that they are entitled to the aforementioned blanket protection, which would cover any transaction they are involved in. This is however a common misconception.

Property transactions in which the CPA does not apply
In property dealings, most transactions do not fall under the application of the CPA. One such transaction is the sale of a residential property by its owner by means of a private treaty, i.e. with a standard Deed of Sale or Offer to Purchase. In these cases, the sale agreement is not covered by the CPA because, legally, the seller cannot be classified as a “supplier”.

The CPA defines “supplier” as “a person who markets any goods or services” and “supply” as:
a) in relation to goods, includes sell, rent, exchange and hire in the ordinary course of business for consideration; or
b) in relation to services, means to sell the services, or to perform or cause them to be performed or provided, or to grant access to any premises, event, activity or facility in the ordinary course of business for consideration.

It is clear from these definitions that a normal seller, who sells his or her home, is not a supplier in terms of the CPA. This, naturally, leads to considerable frustration for a buyer who has neglected to thoroughly inspect the property he or she is about to purchase, with the belief that he or she is fully protected by the CPA.

When moving into the property after registration thereof in the buyer’s name, it becomes clear that there are serious defects that were never disclosed by the seller, but they can no longer hold the seller responsible.

However, most residential property sale agreements will have a “voetstoots” clause that reads along the lines of:

“The property is sold ‘voetstoots’, as is at the date of signature hereof, together with all fixtures and fittings and subject to the conditions and servitudes contained in the title deeds of the property as it stands on the date this agreement is concluded, with all visible and invisible defects applicable to such a property.”

The seller is, by law, obliged to disclose any defects in the property of which he or she is aware at the time of the sale. ‘Voetstoots’ is always applicable where the seller is not selling the property in the course of his normal business as a supplier in terms of the CPA.

Thus, even though the CPA does not apply in these instances, the ‘voetstoots’ clause will provide the buyer with protection. However, the seller cannot be held liable for defects he or she was unaware of.

Property transactions in which the CPA applies
Properties which are sold by investors, speculators, traders, builders and developers “in the ordinary course of business” are fully protected by the CPA. In these cases, the seller will fall within the definition of a supplier as described above.

The effect of this, is that a ‘voetstoots’ clause cannot be applied by the seller, even if it is written into the sales agreement. Defects will be deemed to be the seller’s responsibility and he or she will be liable to either fix same or pay compensation to the buyer.

Estate Agents
In most property transactions, including those by private treaty, an estate agent is involved.

An estate agent’s actions are always subject to the CPA, as they provide a professional service. Thus, if it can be shown that an estate agent deliberately withheld information or misled a client in any way, they can be held liable in law and forced to pay penalties.

Conclusion
As is clear from the above, a buyer in a normal property transaction should not be misled into believing that a seller can be held liable in terms of the CPA. The agreement of sale entered into should be drafted by a professional to ensure protection is built in. Further, a buyer should take the time to thoroughly inspect every aspect of the property before entering into the transaction.

© Arinda Truter - Schoemanlaw Inc. - 2017

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