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The impact of the CPA on real estate

The real estate market is where most people make one of the biggest financial commitments of their lives - where they buy and sell their homes. Not only does one need to worry about applying for a bond or making sure that the house is ready for showing on Sunday - it doesn’t matter which end you’re at, the process is costly and the legalese can be overwhelming with all its clauses and sub-clauses to attend to. Many people have misunderstood the contracts or, been misinformed and have had disastrous experiences.
 
Established in 2008 the Consumer Protection Act aims to simplify the transaction for both buyer and seller stating that the mandate needs:
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.
The question is, how does the act impact on the real estate market? Trudie Broekmann, commercial director of the legal firm Gunston Attorneys indicates that the only thing that is clear at present is that no final answers as to how various aspects of the act will be interpreted, have been established. Many of these issues were discussed during a recent breakfast session addressed by Buyile Nopote, Consumer Protection Deputy Director: Tribunal Support.
 
One of the questions currently debated is whether the act affects an estate agent’s relationship with the buyer – with whom he / she will have plenty of contact, also supplying “goods” – when the agent’s commission is paid by the seller, not the buyer.
 
“I believe that the Act does apply to an agent’s relationship with both the seller (the client) and the buyer (who is in effect also a client). In fact, an estate agent should always communicate within the terms stipulated by the Act as a matter of professional conduct”, says Bruce Swain, MD of Leapfrog Property Group. He goes on to indicate that the Act, in essence, outlines proper conduct which should already be part of any estate agency’s business practice.
 
According to Broekmann, Consumer Protection Deputy Director: Tribunal Support - Buyile Nopote – agrees with this view having recently stated that “it makes no difference that there is no monetary agreement between the buyer and the agent: all business activities, including all marketing activities, are regarded as being "for consideration", and are thus governed by the Act.”
 
Agents would do well to note that Mr Nopote considers the insertion of direct advertisements into free community newspapers to be direct marketing which should not be delivered to addresses that exhibit a 'No adverts/junk mail' sign. Agents who follow this practice could be held liable along with the newspaper publisher if these papers are delivered to such an address. One could reasonably conclude that the practice of mail dropping so common with many agents would also be viewed in a like manner.
 
Possibly one of the biggest changes the Act seeks to bring about relates to the voetstoots clause which has traditionally protected the seller from legal action due to any defects in the property he was not aware of. In terms of once off transactions this clause will still apply. It seems that the CPA will apply in the case of a supply by developers and speculators.  In all cases the need for full disclosure by all parties, particularly the seller, when it comes to disclosing problems and defects that they are aware of, but are not readily apparent, is imperative.
 
Cleary the Consumer Protection Act has a significant impact on the real estate market in term of its practices and marketing – should it be implemented. “While the Consumer Protection Act sets out very clear guidelines for the treatment of both buyers and sellers by estate agents, the question remains as to how infractions will be dealt with. The CPA is a good idea but, who on earth is going to enforce it?” wonders Bruce Swain, MD of Leapfrog Property Group.



Jan le Roux, CEO of Leapfrog Property Group

 


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