Attorney warns: CPA doesn’t apply to single property transaction
A Cape Town attorney, specialising in property transactions has warned prospective buyers to thoroughly inspect properties before buying. The attorney Denver Vraagom of Gunston Attorneys recommends that prospective buyers should consider using inspection professionals if required for peace of mind.
Buyers need to be careful, says Vraagom, because the Consumer Protection Act (CPA) does not apply where sellers are involved in one-off selling. That is, (when) property dealing is not their regular occupation. ‘This applies even if an estate agent (for whom property dealing is a daily business) helps to achieve the sale.’
‘Although sellers are legally obliged never to fraudulently conceal any defects of which they are aware, they cannot be held responsible for latent defects or defects of which they apparently had no knowledge,’ Vraagom says.
For property transactions that are not subject to the CPA, the voetstoots clause is still valid and enforceable – in other words, the property is sold as it stands. ‘A buyer in this instance won’t have any remedy against a seller for any defects discovered in the property unless the buyer can prove that the seller had intentionally defrauded him at the time of the sale,’ he says.
‘With the introduction of the CPA, it has become common practice for sellers and buyers to draw up defects lists, which confirm known defects and further confirm that the seller is unaware of any latent defects. The defects list offers buyers limited additional protection,’ Vraagom says. Weekend Argus 15/09/13
“Grateful to have a good report for Agent to offer prospective buyer”
- Nell Browne
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I am an attorney specialising in consumer law. I am concerned that this article is misleading. The Consumer Protection Act applies to all property transactions where the seller is acting in the ordinary course of business, e.g. a developer. This can include a one-off transaction, e.g. where you buy a house to renovate it and sell it for a profit. It may also include someone who has been letting out an investment property and now sells it. The CPA does not require property sales to be your only or your main business- it can also just be a sideline.
The CPA is also not clear whether the entire sale is subject to the provisions of the CPA if the sale is arranged by an estate agent, and there is a risk that even if the seller is not acting in the course of his business, the sale is subject to the CPA because the estate agent is acting in the ordinary course of his business. It is worthwhile taking this risk into account if you are a seller. Certainly the services supplied by the estate agent both to the seller and to the purchaser are fully subject to the CPA.
I agree that a defects list is not foolproof, but if the CPA applies to the sale, and an incomplete defects list, or no defects list is supplied, the seller will be liable to replace the property or refund the purchaser, or repair the defect, if a material defect is found which is not on the list (section 56). If the defect causes harm to the purchaser or his family/guests, then the seller will be liable whether or not he knew of the defect (section 61).
Thanks for your comments Trudie.
I think we can agree that the CPA has been poorly drafted insofar as the consumer protection it provides consumer home buyers – who are making the biggest purchase of their lives.
By far the majority of sellers of pre-owned homes in South Africa are one-off sellers who escape accountability under the CPA. Surely it wasn’t the intention of our consumer-orientated legislature that most home buyers are effectively stripped of their consumer rights and most home sellers can continue to sell voetstoots – which is clearly against the spirit and intent of the CPA?
I agree that the services supplied by the estate agent both to the seller and to the buyer are fully subject to the CPA but, because many estate agents regard this as a grey area when acting for one-off property sellers, it is high time that the Consumer Commissioner found the legal skills and resolve for a high profile test case in order to bring estate agents into line and make them fully accountable for supplying all South African home buyers with relevant and comprehensive information regarding the condition of the home being purchased.
The most practical way for estate agents to achieve this is to add a default clause in the OTP – whereby buyers make their offer subject to a satisfactory home inspection report. That way at least the buyer obtains an impartial view of the condition of the house which they are being asked to buy voetstoots. John Graham CEO HouseCheck and principal of SAHITA (www.sahita.co.za)