The Consumer Protection Act (CPA), due to take effect on 25 October this year, will mainly force agents to ensure property sellers and buyers understand the wording and legal effect of all contracts they enter into.

If this is not complied with, the Act gives wide latitude to the consumer to seek legal recourse and compensation.

Simon Raab, Southern Suburbs manager for Greeff Properties, says property marketers will find themselves “in a new ballpark” when this Act is implemented.

Raab warned that agents will have to take it upon themselves to ensure that sellers and, more particularly, buyers, have fully understood the meaning of the wording and legal effect of such wording contained within all mandate agreements and contracts into which they have entered. “The aim of the new Act is to promote a fairer, more accessible and more sustainable marketplace in which the less well-informed and less educated clients are better protected.”

Furthermore, said Raab, if in any way the quality of the product or the service rendered falls short of generally accepted high standards, the customer will from November onwards, be entitled to claims, replacements or even to a total cancellation of the agreement. “Consumers will also have an opportunity to approach the National Consumer Commission instead of the Magistrate’s or High Courts, which in itself will encourage more action being taken when damages can be proven.

“The wording of the Act makes it clear that all in the ‘supply chain’ can be held responsible. This, as I read it, implicates the agent as well as the manufacturer or, in the property world, the seller and/or valuer.”

Steven Kay, MD of Home Inspection Services, says Section 55 of this Act places a responsibility on estate agents to ensure that potential buyers are fully informed regarding the condition of the property.

“The ‘As Is’ or ‘voetstoots’ clause in an Offer to Purchase will no longer protect estate agents from the perils of non-disclosure. This means that the challenge for estate agents is to provide full disclosure up-front to potential buyers.”

Dr Andrew Golding, CE of Pam Golding Properties (PGP), says he believes the primary benefit of the Act will be enhanced protection for consumers against exploitation and unfair marketing and business practices. “Property buyers will also benefit from improved standards of consumer information and the setting of standards and national norms relating to consumer protection.

“I do believe that the Act is a good thing that will offer improved protection to the most vulnerable of consumers, who most often find themselves in unequal bargaining positions. Consumer issues will also be dealt with in a less fragmented way and the Act has sought to consolidate various pieces of legislation in relation to consumer protection. The regulations to be promulgated under the Act will provide greater clarity with respect to the implementation of certain of the Act’s provisions.”

He says PGP has already commissioned a review of their standard documentation and business and marketing practices to ensure that changes are made where necessary and new processes implemented as required. “We believe that this review will be an ongoing process in light of the interpretation by our courts of the new Act’s provisions.”

The CPA is set to have a massive impact on virtually every business in the country, including the real estate industry, says Peter Gilmour, chairman of RE/MAX of Southern Africa.

He says that, for example, the CPA states that a supplier cannot make any false, misleading or perceptive representations that any land or immovable property has characteristics, facilities and amenities that it does not have, or that it may lawfully be used for purposes that are unlawful or impracticable. “As per this particular clause, any false representation or inaccurate concepts, whether delivered knowingly or not, could, under the CPA, make it possible for the buyer, on appeal of the courts, to get the contract cancelled.”

Furthermore, it deals with restrictions pertaining to unfair, unjust or unreasonable terms, and stipulates that the price and terms must be fair. “This is a relatively controversial provision, as it could be used as a price control mechanism. In reality, with markets and demand in a constant state of flux, it is very difficult to determine what a fair price is. A fair price is what the market at any particular given time is willing to pay for a property,” he explains.

Gilmour notes that in terms of Section 55 of the CPA, every consumer has a right to receive goods that are suitable for the purpose for which they are bought and free of defects. He explains that the exception to the aforesaid is if a consumer has been expressly informed that the goods were offered in a specific condition and has accepted goods in that condition. “However, this particular section does not apply to auctions.”

The CPA is limited to transactions that are concluded as part of the regular business of sellers, suppliers, distributors and manufacturers. “As long as it is not their usual business, the Act does not apply to once-off transactions undertaken by private individuals who sell their property. However, pertaining to the real estate industry, if the supplier of the home is a developer or builder, and defects become evident after the sale, they will be held responsible.

Gilmour says the seller will need to sign a declaration that they have listed everything that they are aware of, and likewise, the buyer will also need to sign a declaration noting that they have read and fully understood the list.

“If enforced successfully, the CPA will no doubt instil great confidence in local and international investors alike, as well as weed out unscrupulous operators, which will be to our benefit in the long run.”

Raab says ultimately, this legislation will work to the benefit of all concerned because it will result in more transparent, open dealings coupled to strong deterrents against any form of misrepresentation.

Raab added that the Act does not in any way do away with the basic stipulation that all property deals have to be in writing, “but it will make it necessary to ensure that the wording of these deals is clearer and simpler than in the past”. Greeff Properties, he said, would be consulting with their lawyers on this matter. Source: Property24

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Quick fixes for desperate property sellers – banks

South Africa’s big banks, smacked hard by defaulting home loan clients, have come up with a quick fix for desperate property sellers. With an offer of 10% commissions to estate agents in some cases and up to 100% mortgage finance for bargain-hunters, there’s a catch – sellers can expect to walk away still owing their bank manager money after they no longer own the home.

Auctioneers have been reporting a roaring trade in distressed property sales as the recession takes its toll on over-indebted consumers. Estate agents, meanwhile, have struggled to make ends meet as buyers have failed en masse to secure mortgage finance for properties. Some estate agents have opened their own auctioneering divisions with a view to capturing some of the distressed sales business while others have persuaded banks to give them a share of the pie in a “quick sell” programme.

The carrot for sellers in these new “quick sell” type deals is they can offload their cumbersome real estate liabilities quickly and avoid being “blacklisted”, though they can expect to continue paying off a shortfall between what they initially owed the bank for buying the property in the first place and the discount at which it sells in this market. Some sellers are heavily indebted thanks to remortgaging their homes above their market value and then spending the excess funds elsewhere – like on cars, businesses or general consumption expenditure. 

We spoke to banks to find out how their quick sell programmes work and what benefits they offer the seller. Some banks offer 100% bonds to buyers of these properties, making this initiative very attractive for buyers.

FNB Quick Sell Plan (QSP), introduced in April, is a private sale option for individuals that are unable to service their debt burden and assists with voluntarily selling their properties through bank-approved estate agents and auctioneers, says Sean O’Sullivan, head of sales and marketing for FNB Home Loans.

O’Sullivan says a minimum reserve price is agreed upon upfront and any shortfall is repayable over a period of up to 20 years at the prime lending rate.

Ryno Mey, national quick sell manager at FNB Home Loans, says the banks offer buyers up 100% bonds on all Quick Sell properties and enjoy discounts on both transfer costs and registration fees.

The bank assists with the payment of the agent’s commission. Asked whether there are discounts on the normal selling prices of the properties, he says the properties are marketed at realistic market values determined by market conditions and comparative sales in which the properties are located.

Mey says in many cases sellers break even with but for others there is a shortfall. When the latter happens, the bank may be prepared to offer the borrower some relief regarding their residual debts.

FNB Home Loans works with estate agents including Chas Everitt and describes the initiative as “positive”, allowing the bank and its customers already in financial distress to work together to sell a property.

According to Chas Everitt, the estate agency has sold more than 62 properties around the country on the QSP, to the value of about R41m.

A minimum reserve price is established on each property and buyers introduced by FNB partner agents are offered up to 100%. Such buyers also receive a 50% discount on transfer costs and bond registration while the agent’s commission is paid by FNB, says Chas Everitt.

Annette du Plessis, estate agent from Smart Sell and also working with FNB on QSP, says the advantage to the seller is that the property is sold quickly and the approach saves financially-distressed home owners from being blacklisted for defaulting on bond repayments.

Du Plessis says estate agents get a 10% commission from the sale of the property. Property sellers are seemingly interested in this method of selling because the property gets “enormous marketing exposure”.

Absa has a “quick sell” programme for customers who can no longer meet their monthly bond repayments and are currently in default.

Absa does not work with estate agents, and the process operates on the basis of selling the property on a public auction, says Luthando Vutula, managing executive for Absa Home Loans.

The customer is given the option if it is determined that they do not have the means to continue meeting the monthly repayments on their home loan and they would then provide consent allowing the bank to sell the property on auction.

Absa says its approach is always to try and keep its customers in their properties and ascertain whether there is a repayment plan available which will facilitate this. Where it is evident that the customer cannot afford the property even under a repayment plan, auction is an optimal method for the customer to exit the property in a relatively short time.

Nedbank has two programmes: auctions in association with the Alliance Group and a private treaty programme to assist home owners in financial distress.

Pramod Mohanlal, general manager for customer management for Nedbank Home Loans, says there are a few benefits to the seller including: Avoiding the legal process and adverse judgements for non-payment of home loan accounts and the seller will also avoid the “sale in execution” stigma and its consequences once they speak to their bank about their financial situation in order to exit the property.

Meanwhile, Rawson Properties has also got in on FNB’s QSP act. With juicy commissions – which are quite a bit higher than the average 5.5% to 7.5% asked for by South Africa’s estate agents – it is hardly surprising that Rawson Properties MD Tony Clarke is urging struggling home owners to join the quick sell action. 

He said, as he announced Rawson Properties’ inclusion in the programme: “I do seriously advise those in financial difficulty (which these days very often come about through no fault of their own) to consider QSP and to take quick action rather than to hang on in the hope that things will change. 

“In our experience, this very seldom happens and the distressed mortgage payer gets himself deeper and deeper into debt. The time to take action is, almost without exception, now! 

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