The Property Practitioners Bill set to improve consumer protection
The new Property Practitioner’s Bill (PPB) will go a long way to “levelling the playing fields” for South African home buyers, sellers and their estate agents, says John Graham of HouseCheck, South Africa’s leading home inspection company.
Graham says the proposed new law will ensure much better consumer protection for home buyers – who are at present massively exposed to financial risk when buying existing homes voetstoots. The PPB encourages:
- Improves transparent disclosure to potential buyers of all known defects in a property
- Exposes agents and sellers who are not transparent to real financial risk
- Compels agents to treat both sellers and buyers with equal care
- Regulates the training and registration of estate agents and home inspectors
- Creates an ombud office to simplify the process of arbitration
Graham believes that the PPB puts a much more effective responsibility on agents and sellers to protect the interests of home buyers. He says there are indications that many estate agents are already becoming much more positive in recommending impartial and independent home inspections to buyers and to sellers.
Graham explains that presently, if the buyer only discovers after concluding the sale agreement, that the property has problems, then the buyer usually just has to “suck it up”. This is because high legal costs, combined with the difficulty of actually proving that a seller or an agent deliberately concealed known defects, generally makes redress impractical and unaffordable.
Graham says the PPB strikes a welcome blow for consumer protection and transparency by making mandatory the existing seller’s property defects disclosure form. When the PPB comes into effect, agents will no longer be allowed to accept any mandate from a seller without also obtaining a written disclosure of all known defects; explaining these defects to the buyer and also ensuring that the disclosure forms part of the signed sale contract.
Graham says that this is a massive improvement in protection for property consumers: This is because the Consumer Protection Act of 2008 (CPA) gives the buyer of an existing South African home very little practical consumer protection. Sellers of most existing homes are not selling in the normal course of their business and are therefore permitted by the CPA to sell their homes voetstoots (as is).
He says voetstoots is a necessary legal protection measure for sellers of existing homes and their agents. Sellers cannot reasonably be expected to know about every potential problem of the home. However, a voetstoots transaction leaves the buyer horribly exposed.
As consumer awareness grows under the new PPB regime, Graham says astute and cautious buyers will increasingly protect themselves by also making the offer to purchase contingent on a satisfactory, impartial, condition assessment by a knowledgeable home inspector, or other professional. This is common practice in many countries worldwide. In the US up to 80 percent of existing homes are independently inspected when they are sold.
Independent home inspection is obviously necessary because the thrust of a seller’s disclosure of defects hinges entirely around the seller’s personal knowledge of defects or potential defects. “Disclosures are all well and good – except that most sellers don’t have a clue as to the true condition of their roof or their hot water geyser – for instance”.
By exposing the property practitioner (agent) to financial liability if disclosure is not properly made, the PBB goes a long way towards levelling the playing fields Sellers and their agents could in future, much more easily and cheaply, be found financially liable by the ombud, if the seller knowingly failed to disclose defects of which the seller was aware.
The PPB also provides for a Property Practitioners Ombud office which will simplify and reduce costs for arbitration between aggrieved parties
The PPB recognises the important role of home inspectors by allowing that a consumer, for his or her own account, can undertake a private property inspection to confirm the state of the property before finalising the transaction.
In another important move to better consumer protection the PPB compels agents to treat both sellers and buyers with equal care. In South Africa, most estate agents are mandated and paid by the seller. In practical terms and despite agents’ protestations to the contrary, this means that where the agent has been mandated by the seller then the agent’s principle duty is to the seller, not to the buyer. The PPB seeks to address this imbalance by stating that the property practitioner owes (both) a buyer and a seller a duty of care.
The PPB also compels the new Property Practitioners Regulatory Authority (PPRA) to conduct campaigns to educate and inform the public of their consumer rights in respect of property transactions and property practitioners of their functions, duties and obligations.