Section 2 Part H of the CPA deals with the consumer’s fundamental right to fair value, good quality and safety. The CPA has a fundamental influence on the common law warranty against latent defects. It is however extremely important to keep in mind that the CPA is not applicable to all property transactions. The CPA will not be applicable where a transaction is a once-off transaction and the goods and services are not supplied in the ordinary course of business.
Where a home owner for example wants to sell his residential property or even vacation property and sells it once-off or not in the ordinary course of his business, the common law position discussed above will be applicable. Typical examples where the CPA will apply to the sale of immovable property would be where the seller is a property developer and investors who buy, renovate and sell houses as a business.
- Legal Position where the CPA is not Applicable (Common Law Position)
The common law position has been amended by the CPA but because of the scope of its application, many sale agreements will fall outside the ambit of the CPA. In such instances the common law position prior the commencement of the CPA will remain applicable.
2.1 Where the CPA does not apply and “voetstoots “ clause is excluded from the terms of the agreement Common law position is that seller will not be liable for clearly noticeable (patent) defects .The rationale behind this is that the said patent defect would (or should) have been spotted through a reasonable careful inspection of the property by the purchaser. However the position with regards to hidden (latent) defects is the liability of the seller as same would (or should) not be noticeable upon careful inspection.
2.2 Where the CPA does not apply and “voetstoots” clause is included in the terms of the agreement Seller provides no warranty in respect to the property. The voetstoots seller is not liable for latent or patent defects. However if the seller had knowledge of such defects or should the seller have known of these defects and had not communicated same to the purchaser the seller would not be at rights to call on the “voetstoots” clause for protection. The burden of proof would lie with the purchaser to prove such knowledge.
- Legal position of the estate agent under the CPA
Estate agents are regarded as intermediaries in terms of the CPA. An intermediary is defined as “a person who in the ordinary course of business and for remuneration or gain, engages in the business of representing another person with respect to the actual or potential supply of any goods or services; accepting possession of any goods or other property from a person for the purpose of offering the property for sale; or offering to sell to a consumer any goods or property that belongs to a third person”.
Section 1 of the CPA further provides that a person whose activities as an intermediary are regulated in terms of any national legislation is not included in the definition of an intermediary. Though it can be argued that estate agents are already regulated by the Estate Agency Affairs Act and the Estate Agents Board, estate agents are deemed to be included under the definition of intermediaries in terms of the CPA. It is clear from the definition of “intermediary” that the CPA will apply to the Mandate Agreement between the seller and the estate agent. The CPA will also apply to the marketing practices of the estate agent and should amount to responsible marketing. The agent should be honest in his/her dealings and have regard to the consumer’s fundamental rights of equality and privacy in terms of the CPA.
Finally section 27 of the CPA and regulation 9 of the regulations made under the CPA require full disclosure of certain prescribed information. The question that arises is whether the involvement of an estate agent in the sale of property where the sale is not in the seller’s ordinary course of business, will make any difference to the transaction and the inclusion of a “voetstoots” clause?
The involvement of an estate agent in the sale of immovable property gives rise to two transactions, namely the mandate agreement and the resultant sale agreement. The service the agent provides to its client (the seller) is the marketing and advertising of the property in the hope of procuring a willing and able purchaser for the property for which the estate agent will then receive consideration. The estate agent receives no consideration for his services in advertising and marketing the property unless those services are successful and result in the production of a purchaser for the property. The agreement that results from the estate agents marketing efforts does not fall under the scope of the CPA. The contractual relationship that is the result of the agent’s marketing efforts is a once-off transaction between the seller and the purchaser.
In mitigating the agent’s risks it is important to give careful consideration to the fact that the agent also provides a service to the purchaser in the process of conclusion of the sale agreement, which qualifies under the CPA as a transaction between a supplier and a customer involving the supply of services. This is so whether in a given case the purchaser or the seller provides consideration for such services. Whether or not an agent can be held liable in a given instance will depend on the facts of the matter at hand. In order to avoid any arguments between the seller and the estate agent after conclusion of a sale with regards to what was and was not disclosed by the seller to the estate agent, it is suggested that it be recorded in the Mandate Agreement that the seller accepts and acknowledges that it is his (the seller’s) duty and responsibility to disclose any latent defects that he is aware of as well as any issue regarding the property which may be of relevance to the purchaser. It is further suggested that the purchaser should initial (and thereby acknowledge) the “voetstoots” clause in the agreement of sale.
Having thus clearly advised the seller of his obligations and the purchaser of his acknowledgements with regards to the condition of the property, the estate agent will have taken adequate care of both parties ensuring that they know exactly what their rights and obligations are. Notwithstanding the above is may be prudent for the agent to have the seller complete and sign a comprehensive “Property Condition Report” in the listing phase of the property which can be presented to the prospective purchaser prior to signing the agreement of sale. However the greatest risk for the agent lies in assurances that an agent may give to a prospective purchaser with regards to the value of a given property, the development potential thereof, or the zoning or condition thereof, that may move the purchaser to in fact proceed to purchase a given property at a certain price and that can later be found not to be accurate.