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Peter Gilmour, Chairman of RE/MAX of Southern Africa, discusses how the Consumer Protection Act will affect the real estate industry
Gazetted in April 2009, with published regulation as of April 2010, the Consumer Protection Act (CPA) is a virtual "Bill of Rights", designed to create a strong culture of consumer rights and responsible trading in South Africa. The Act makes South African consumers some of the most protected in the world.
The intention of the legislature is to define and enforce a set of fundamental consumer rights, as well as to regulate business names and industry codes of conduct. The CPA is set to have a massive impact on virtually every business in the country, including the real estate industry, says Peter Gilmour, Chairman of RE/MAX of Southern Africa.
He notes that the consumers' rights, as laid out in the CPA, include the right of market equality; the right to privacy; the right to choose; the right to disclosure and information; the right to fair and reasonable marketing; the right to fair and honest dealing; the right to fair, just and reasonable terms and conditions and the right to fair value, good quality and safety. "Many of the provisions in the Act will certainly change the way estate agents have traditionally marketed properties, and it may also do away with parameter pricing and marketing," says Gilmour.
For example, the CPA states that a supplier cannot make any false, misleading or perceptive representations that any land or immovable property has characteristics, facilities and amenities that it does not have, or that it may lawfully be used for purposes that are unlawful or impracticable. Says Gimour: "As per this particular clause, any false representation or inaccurate concepts, whether delivered knowingly or not, could, under the CPA, make it possible for the buyer, on appeal of the courts, to get the contract canceled."
Furthermore, it deals with restrictions pertaining to unfair, unjust or unreasonable terms, and stipulates that the price and terms must be fair. "This is a relatively controversial provision, as it could be used as a price control mechanism. In reality, with markets and demand in a constant state of flux, it is very difficult to determine what a fair price is - a fair price is what the market at any particular given time is willing to pay for a property," he explains.
Gilmour notes that in terms of Section 55 of the CPA, every consumer has a right to receive goods that are suitable for the purpose for which they are bought and free of defects. He explains that the exception to the aforesaid is if a consumer has been expressly informed that the goods were offered in a specific condition and has accepted goods in that condition. This particular section does not apply to auctions however.
The CPA is limited to transactions that are concluded as part of the regular business of sellers, suppliers, distributors and manufacturers. "As long as it is not their usual business, the Act does not apply to one-off transactions undertaken by private individuals who sell their property. However, pertaining to the real estate industry, if the supplier of the home is a developer or builder, and defects become evident after the sale, they will be held responsible.
Gilmour recommends that agents ensure that, before the sale, any clients (sellers) compile a list of all the defects with their property that they are aware of, and that they make sure that prospective buyers are aware of these. The seller will need to sign a declaration that they have listed everything that they are aware of, and likewise, the buyer will also need to sign a declaration noting that they have read and fully understood the list.
Gilmour believes that the Act is still very new, and expects that, as with the implementation of anything new, it will take some getting used to and some adjustments will need to occur to iron out any issues as they rise.
However, he believes that ultimately it will benefit the real estate industry and business at large in South Africa: "If enforced successfully, the CPA will no doubt instill great confidence in local and international investors alike, as well as weed out unscrupulous operators, which ultimately, will be to our benefit in the long run."