Top attorney warns estate agents and sellers about the CPA
There is an interesting article in Cape Town’s Weekend Argus Property Section of 26 May 2012.
I believe that this debate will continue until there is a test case and the courts rule on sellers’ and agents’ liability under the Consumer Protection Act. Meanwhile hardly a week goes by that an aggrieved buyer does not contact HouseCheck after moving into a new house and discovering that the condition of the property was not what he was led to believe when he signed the offer to purchase.
HouseCheck is assisting a Pretoria home buyer at present with a case study which will land up with the Consumer Tribunal.
John Graham, HouseCheck
Estate agents warned on ramifications of Consumer Protection Ac ( Weekend Argus)
If one thing in the ongoing discussion as to how the Consumer Protection Act when applied in South Africa’s property marketing sector is now clear it is that at this stage, says Trudie Broekmann, commercial director of the legal firm Gunston Attorneys, no one yet has the final answer as to how the act will be interpreted on many different aspects.
Broekmann recently attended a breakfast session addressed by Buyile Nopote, Consumer Protection Deputy Director: Tribunal Support (based in the Western Cape), during the course of which he spoke about the impact of the Consumer Protection Act on property professionals.
One of the questions raised, said Broekmann, was whether the act affects an estate agent’s relationship with the buyer.
“As we all know,” she said, “the agent’s mandate is signed with the seller and it is he who pays the agent’s commission. Nevertheless the agent will during the course of the transaction probably spend considerable time with the buyer and render many services to him, possibly also supplying him with “goods” which, as defined in the Act, includes information or plans. The question is, are these dealings with the buyer subject to the Act even though the two parties have no contract and the agent is not paid by the buyer?”
In Nopote’s view, said Broekmann, it makes no difference at all that there is no monetary agreement between the buyer and the agent: all business activities, including all marketing activities, are regarded by Nopote as being “for consideration”, i.e. are governed by the Consumer Protection Act. This means that an estate agent has to comply with all the provisions of the Act not only in his dealings with sellers, but also as a supplier of goods and services to buyers. According to Nopote, the agent can be reported or sued by the buyer for misrepresentation or any other prohibited practice.
“My own view is that this is the correct way to see the act,” said Broekmann. “I believe the Consumer Protection Tribunal will also take this view of the agent’s role and consequently agents will have to review carefully all steps they customarily take in dealing with buyers.”
Another part of the Act that has not been clear, said Broekmann, relates to the insertion of advertisements in free community newspapers delivered to consumers’ homes. Nopote, said Broekmann, holds the view that this is unsolicited direct marketing and any publications with such supplements or advertisements should not be delivered to an address displaying a ‘No adverts/junk mail’ sign. Ominously, Mr. Nopote said that the advertiser is jointly and severally liable with the publisher of the community newspaper if it is delivered despite such a sign, or outside of the permitted hours for direct marketing.
“We expect such signs,” she added, “to become increasingly evident in Cape Town’s suburbs.”
“I believe that holding advertisers in community newspapers liable for the delivery practices of the publishers is taking too hard a line,” said Broekmann, “but those placing advertisements need to concern themselves with this since in Mr Nopote’s opinion it could result in their being reported along with the publishers and/or the distributors.”
Also discussed at the breakfast was the validity of the voetstoots clause in relation to the Consumer Protection Act. The Act states that it applies only to transactions where the supplier is acting in the ordinary course of his business. Consequently most commentators, says Broekmann, have held the view that the Act will only apply where the seller is acting in the ordinary course of his business, e.g. as a property developer, and that otherwise, a voetstoots clause is still permissible in a property sale.
“Opinions in the legal fraternity here are still very diverse,” said Broekmann. “Nopote’s opinion is that as the agent is acting in the ordinary course of his business, once he becomes involved in a property transaction, the voetstoots clause is prohibited. A voetstoots clause traditionally protects the seller from liability for any defects in the property of which he was not aware. In terms of the Consumer Protection Act, sellers are liable for material defects and hazards relating to a property, whether or not they were aware of these defects or hazards. This is a big change. In terms of section 61 of the Act, any supplier of goods, including a person who provides access to the goods, such as the estate agent, is liable for any harm caused by these defective or unsafe goods. Nopote quoted the example of a recent case in the United States where an estate agents was ordered to pay $700 000 in damages after “fraudulently” failing to disclose to the buyer that the property was painted with a type of lead paint which can cause health problems to inhabitants.”
Estate agents, said Broekmann, will now have to review all sale documents, promotional and advertising literature, even where their principal is not acting in the ordinary course of his business. A contravention of the Act can lead to a fine of up to R1 million or 10% of the estate agency’s turnover, whichever is the greater amount.