The Consumer Protection Act real estate South Africa

We trust this serves as a useful resource on the Consumer protection act real estate South Africa.

Used with permission from Sloan Willson Attorneys

 

The Consumer Protection Act (CPA / the Act) is one of the most important pieces of legislation to be introduced in South Africa for some time. As its name implies the main purpose of the Act is to protect consumers (particularly against exploitation and unfair marketing practices) and to empower them in making informed purchasing decisions. The Act was supposed to have come into effect on 24 October 2010 but the effective date was deferred until 31 March 2011. It also seems apparent that the Act will limp into full effect over a period because the promulgation of the regulations required to give the Act full effectiveness is taking place at rather a slow pace.

 

Nevertheless the Act is a reality and almost all businesses will feel its impact and it will impact on most business transactions to some extent. There are however some “transactions” that will fall outside the scope of the Act. The question has been posed whether transactions relating to the sale of immovable property will fall under the provisions of the Act. The short answer to this is “no” in respect of the sale of residential homes entered into between “private” sellers and buyers. However the sale of residential properties by developers will, as a general rule, fall under the provisions of the Act.

 

In essence the CPA regulates the following:

  1. Every transaction between a supplier and a consumer involving the supply of goods and/or services in the ordinary course of business and;
  1. The promotion of such goods and services that could lead to the transaction being entered into (i.e. the advertising / marketing of goods and services).

To determine whether the sale of residential homes falls within the scope of the Act one needs to consider the scope of the key words referred to above including (a) transaction, (b) supplier, (c) consumer, (d) goods and/or services and (e) in the ordinary course of business. “Supplier” is defined as “a person who markets any goods or services”. So potentially a seller of immovable property could be a supplier.

Included in the definition of “goods” is “a legal interest in land or any other immovable property….”. So potentially the sale of immovable property could be the supply of goods under the Act.

A “consumer” is defined (amongst other things) as:

  1. a person to whom goods or services are marketed in the ordinary course of the suppliers business
  1. a person who has entered into a transaction with a supplier in the ordinary course of the supplier’s business

A transaction is defined in the Act to mean:

(a) in respect of a person acting in the ordinary course of business

  1. an agreement between or among that person and one or more other persons for the supply of any goods or services in exchange for consideration.

It is clear from the definitions of consumer and transaction that the legislature did not intend the Act to apply to the sale of immovable property by a private seller to a purchaser. When a private seller (as the supplier) sells his or her home such person is not acting in the ordinary course of business. Furthermore the purchase of the home by a private person is not the supply of goods to a person in the ordinary course of the supplier’s (seller’s) business. The purchaser of a residential property from a private seller would accordingly not be regarded as a consumer in terms of the Act.

The situation is however different when a developer sells a residential property to a buyer. In such transactions the supplier (developer) would be supplying goods (immovable property) to a consumer (the buyer) in the ordinary course of the supplier’s (developer’s) business. In such transactions the agreement (Deed of Sale) and the actual supply of the goods (transfer of the property into the name of the purchaser) would fall under the provisions of the CPA and the buyer (as consumer) would enjoy all the protection provided by the Act.

Our professional team at Engel & Völkers Port Elizabeth are all familiar with all new acts effecting property transactions and will guide you ensuring unsurpassed levels of service.

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