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How the Consumer Protection Act could affect estate agents

The Consumer Protection Act and the selling of property & services

Estate agents are suppliers of goods and services to sellers and buyers of immovable property and so they fall into the defined criteria of a supplier as highlighted in the Consumer Protection Act.

Consumer Protection Act Estate Agents

Different scenarios affect who the CPA applies to, but when does it apply to estate agents? Unfortunately there is still so much uncertainty with regards to how to apply the CPA in a practical way, especially with regards to the way in which the sale of immovable property is affected.

How does the CPA apply?

The CPA applies to agents in the case of a mandate agreement or in a deed of sale where the estate agents act in behalf of a principal party who is a property developer or speculator. 

It also applies to them with regards to the commission clause or with regards to the marketing of the immovable property. 

In a mandate agreement where the estate agent is given the task marketing and selling an immovable property, the estate agent is the supplier and the owner of the property is the consumer. 

The provisions of such an agreement need to comply with the CPA and so have to be understandable and need to be free from unfair contractual terms. 

Mandate agreements are fixed term agreements and so may be cancelled by the consumer as long as 20 business days notice has been given. 

The owner can thus cancel the mandate agreement but would have to pay recompense to the estate agent for the expenses that went into the marketing of the property. 

When this agreement expires then it is no longer a fixed term agreement and so will operate on a month to month period of time until the agreement is either terminated or extended for another fixed period of time. 

When the estate agent acts in behalf of a principal who is either a property developer or property speculator there are a few factors that could cause problems to arise. 

Generally, in such situations the Developer or speculator usually go about business as usual with the CPA applying to the sale transaction and a usual supplier-consumer relationship is formed in the agreement. 

This agreement should be clear and informative and needs to be fair and reasonable with regards to the contractual terms. 

The consumer who purchases the property is afforded numerous rights due to the CPA and should the supplier infringe on the rights, then they could face severe consequences.

The most important of these rights include the right to choose and examine the goods or service being provided; the rights regarding the delivery of the goods and service and the right to return said goods or services after delivery. 

These could present huge problems for the developers as there is no actual way of knowing how the case would be dealt with. 

Should the consumer purchase an immovable property for a specific purpose as stipulated at the start of a purchase agreement, then he or she has the right to expect that the purchased goods can fulfill that specified purpose. 

This right is forfeited in the event of a consumer following through with a purchase knowing that the goods do not meet their required condition.

It is necessary for the developer or spectator to ensure that the goods being provided are in compliance with the requirements and standards set out by the CPA. 

If the goods are not able to meet said requirements or standards then the supplier will be responsible for rectifying or repairing the goods to meet them or otherwise the consumer will have to be refunded for the full amount paid. 

This creates a problem as all decisions are generally left to the estate agent to make and should any error be on the part of the agent, then he or she could also be liable for certain consequences. 

The commission clause

The commission clause in a contractual agreement lays out the amount of commission that will be made by the estate agent on the sale of a property and as the supplier of the service, the estate agent needs to make sure that this agreement is fair, and that the terms are not unreasonable and that all aspects of the agreement can be understood by the consumer who is selling their property. 

The last aspect that we will consider is with regards to the marketing of an immovable property. 

Marketing of an immovable property

Obviously suppliers are not allowed to market any goods or services by making false representations or misleading buyers through other fraudulent and deceptive means. 

The language used within any brochures or marketing materials needs to be plain, easy to understand, reasonable and just. 

Any misunderstandings that come into fruition as a result of the marketing of the property need to be corrected by the agent. 

These could relate to the property not having some of the predefined characteristics as stipulated in the marketing of it, the amenities and natural features that can or can’t be accessed, and if the property will be used for a specific purpose which may not be allowed legally. 

Different marketing strategies can be applied, however with regards to direct marketing certain rules and regulations need to be adhered to. 

While an agent is allowed to directly market a service to households, they have to do so at certain times of the day and aren’t allowed to do so on Sundays and Public Holidays.  

Of course issues will arise with regards to the understanding of how to practically apply the CPA and these all can cause serious implications for the parties involved. 

The need for a clearly defined procedure is necessary for this obstacle to be overcome. In the meantime, the best solution is to wait on a decision made by the courts.

Van Deventers & Van Deventers Incorporated - Attorneys Cape Town

Please contact us to peruse your marketing material, we can offer expert legal advice on all aspects of the Consumer Protection Act. 

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