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CPA could favour unhappy buyers

07 Apr 2014

When the Consumer Protection Act was first promulgated some three years ago, many people in the real estate sector were worried that it would lead to regular cancellations of sale contracts and/or post sale disputes in which the agent and the seller would be held responsible for any number of problems, including defects they had simply not been aware.

A buyer who is buying without seeing the product, e.g. in a plot-and-plan development, could quite easily claim that any one of several standard phrases used in the promotional literature had misled him and could use this as an excuse for cancelling his contract.

This is according to Bill Rawson, Chairman of the Rawson Property Group, who says however, thus far this has not yet happened.

Nevertheless, says Rawson, it is by no means certain that at some stage in the future one or two of the ‘trickier’ clauses in the Consumer Protection Act will be invoked by dissatisfied buyers and as the act stands at the moment it seems likely that the courts would have to rule in favour of the plaintiff.

Asked to give examples of what he considers clauses that could prove to be disadvantageous to a seller and his agent, Rawson mentioned:

1. The right to information in plain and understandable language

This section of the act stipulates that all documents and ‘visual representations’ should be in plain language or a form which can be understood by ‘an ordinary customer of the class of persons for whom the notice document or visual representation is introduced’, says Rawson. The act adds that the customers in this case can be assumed to have ‘average literary skills and minimal experience as a consumer of the relevant goods or services’.

“While all the major estate agencies have been at pains to comply with this ruling and reword their documents so that they are easy to understand, the simple truth,” says Rawson, “is that most of us still have just one set of documents for all sellers and buyers and it is possible that those at the lower end of the literary scale can still find these difficult to comprehend. 

“It is also possible, therefore, that even though the document may have been run through with the buyer and explained to him, this clause could be invoked if the client later comes to believe that certain aspects of the home were not fully explained to him.”

The act also stipulates that the description of the product must in no way be misleading or exaggerated. Here again, he says, a buyer who is buying without seeing the product, e.g. in a plot-and-plan development, could quite easily claim that any one of several standard phrases used in the promotional literature had misled him and could use this as an excuse for cancelling his contract.

2. The right to return unsafe or defective goods and/or to cancel a sales contract; alternatively to be compensated for the defects

“This clause is quite clearly in an altogether different ballpark from the previous universally applied Voetstoots clause. So far as I know, this clause, too, has not yet had any serious repercussions, possibly because it has resulted in agents being a great deal more diligent about listing the defects in a home they are selling to the buyer prior to his signing for it. Nevertheless, I suspect a time will come when it will be used to cancel an entire sale, even possibly if the purchase has already been transferred and the documentation lodged with the Deeds Office,” says Rawson.

Asked what lessons can be learned from what he has said, Rawson says the inherent dangers here make it all the more important for the agent to be thoroughly involved with the client and the buyer and to iron out with them any misunderstandings.

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