The Good, the Bad, and the plain Ugly consequences of the Consumer Protection Act in relation to buying and selling of property through Estate Agencies.
Posted by Samantha van Blerk
Even though the Consumer Protection Act no 68 of 2008 (hereafter referred to as “the CPA”) has been in effect since April 2011, it is still causing much confusion in the legal spectrum and remains a topic of debate and speculation regarding its effect on the different business spheres. One such a sphere, is the buying and selling of property through use of the services of Estate Agencies.
This article is aimed at providing a constructive, yet opinionated exploration (as there have not been any precedents established by a court or any tribunals as yet) into the question whether Estate Agencies can be deemed to be Intermediaries in terms of the CPA. To establish this, one need to first have regard to the parties to the buying and selling process, which are the purchaser, the seller and the estate agency, as well as the roles that are assigned to them as per the definitions in section 1 of the CPA:
THE ROLES OF SELLER AND PURCHASER
Consumer: in respect of any particular goods or services, means—
· a person to whom those particular goods or services are marketed in the ordinary course of the supplier’s business;
· a person who has entered into a transaction with a supplier in the ordinary course of the supplier’s business, unless the transaction is exempt from the application of this Act by section 5(2) or in terms of section 5(3);
· if the context so requires or permits, a user of those particular goods or a recipient or beneficiary of those particular services, irrespective of whether that user, recipient or beneficiary was a party to a transaction concerning the supply of those particular goods or services; and
· a franchisee in terms of a franchise agreement.
Person: This definition includes-
· Natural persons
· Juristic persons, such as a company or a close corporation, However, the definition of Juristic person in the CPA is extended to also include a trust, partnership AND a body corporate.
Transaction:means—
· in respect of a person acting in the ordinary course of business—
§ an agreement between or among that person and one or more other persons for the supply or potential supply of any goods or services in exchange for consideration; or
§ the supply by that person of any goods to or at the direction of a consumer for consideration; or
§ the performance by, or at the direction of, that person of any services for or at the direction of a consumer for consideration
From the above definition of a “consumer”, it is clear that a purchaser will only be deemed to be a consumer, if goods or services are marketed to the purchaser “in the ordinary course of the supplier’s business, or if the purchaser has entered into a transaction, that is not exempt from the CPA’s application, with the supplier in the ordinary course of the supplier’s business. This is confirmed by the definition of a “Transaction” depicting that one of the parties to a transaction must be a person acting in the ordinary course of business.
Supplier: means a person who markets any goods or services.
Market: when used as a verb, means to promote or supply any goods or services
The seller in a Purchase and Sale agreement can be deemed to be the supplier according to the definition of “supplier” and “market”, however, it can be argued that the CPA will only be applicable to a Purchase and Sale agreement if the seller sells any goods, which includes immovable property (such as houses, buildings and land), in the ordinary course of the seller’s business. Thus one could have two scenarios when it comes to a Purchase and Sale agreement with regards to the CPA:
Scenario 1) If the seller sells property in the ordinary course of his or her business to a purchaser, the purchaser will be deemed to be a consumer, and the CPA will apply to this transaction. Subsequently, the parties as well as any agreement concluded between the them, will have to conform to and abide by the rules and regulations as stipulated in the CPA.
§ An example of a seller, who supplies goods (property) in the ordinary course of his or her business, would be a developer who develops a piece of land into small sectional title units and sells these units to purchasers.
Scenario 2) If the seller does not sell property in the ordinary course of his or her business to a purchaser, the purchaser will not be deemed to be a consumer, nor will the Purchase and Sale agreement be seen as a transaction in terms of the CPA and the act will possibly not apply to such an agreement.
§ An example of such a situation is where a seller sells his residential house to a purchaser, and this is a once off occurrence and not a continuous business.
THE ROLE OF AN ESTATE AGENCY IN THE PURCHASE AND SALE AGREEMENT
Estate agencies are normally used by a seller who wishes to find a purchaser for his or her property. The estate agency appoints an agent who will market the property on behalf of the seller and bring potential purchasers to view the property. If the property is sold, the seller is liable to pay the estate agency a fee knows as a commission or brokerage fee.
The key definition to determine the roll assigned to the estate agency is the definition of an intermediary:
Intermediary: means –
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, soliciting offers for or selling to a consumer any
goods or property that belongs to a third person, or service to be supplied by
a third person.
BUT does not include a person whose activities as an intermediary are regulated in
terms of any other national legislation;
If one has regard to the definition of an Intermediary as per the CPA as well as the function of an estate agency, it is clear that an estate agency, used by a seller to market and sell his or her property in the ordinary course of his or her business, as per scenario 1 above, will be deemed to be an intermediary, which means that the estate agency will also have to conform to and comply with the rules and regulations as imposed by the CPA (The role of an estate agency in scenario 2 need not be discussed as the CPA is not applicable in such a position and will thus not affect the position of the estate agency).
This would be a simple and clear role, but for the last section of the definition of intermediary that exclude any person who’s activities as an intermediary is regulated in terms of any other national legislation.
Estate agencies are regulated by theEstate Agency Affairs Act of 1976, which means that they may be excluded from the role of intermediaries in a Purchase and Sale agreement where the CPA is applicable to such an agreement. This seems to be the current position as argued by practitioners in the legal sector.
However, before one hides behind the safety net of such an argument, one should have cognizance to the purpose of the CPA as per section 3, as well as the interpretation of the CPA as stated in section2(9).
Section 3 of the CPA contains and explains the purpose of the Act, which purpose is to promote and advance the social and economic welfare of consumers in South Africa by—
§ establishing a legal framework for the achievement and maintenance of a consumer market that is fair, accessible, efficient, sustainable and responsible for the benefit of consumers generally;
§ reducing and ameliorating any disadvantages experienced in accessing any
supply of goods or services by consumers—
§ who are low-income persons or persons comprising low-income communities;
§ who live in remote, isolated or low-density population areas or communities;
§ who are minors, seniors or other similarly vulnerable consumers; or
§ whose ability to read and comprehend any advertisement, agreement, mark, instruction, label, warning, notice or other visual representation is limited by reason of low literacy, vision impairment or limited fluency in the language in which the representation is produced, published or presented;
§ promoting fair business practices;
§ protecting consumers from—
§ unconscionable, unfair, unreasonable, unjust or otherwise improper trade practices; and
§ deceptive, misleading, unfair or fraudulent conduct;
§ improving consumer awareness and information and encouraging responsible and informed consumer choice and behaviour;
§ promoting consumer confidence, empowerment, and the development of a culture of consumer responsibility, through individual and group education, vigilance, advocacy and activism;
§ providing for a consistent, accessible and efficient system of consensual resolution of disputes arising from consumer transactions; and
§ providing for an accessible, consistent, harmonised, effective and efficient system of redress for consumers.
Section 2(9) states that when interpreting the act the following must be applied:
§ If there is an inconsistency between any provision of this Act and a provision of any Act—
o (a) the provisions of both Acts apply concurrently, to the extent that it is possible to apply and comply with one of the inconsistent provisions without contravening the second; and
o (b) to the extent that paragraph (a) cannot apply, the provision that extends the greater protection to a consumer prevails over the alternative provision.
Thus, if one reads Section 3 and Section 2(9) together with the definition of an Intermediary, it could be argued that if the provisions contained in the Estate Agency Affairs Act of 1976 is found by a court or tribunal not to extend the greater protection to a consumer in its implementation in the estate agency sphere, a court or tribunal may still rule that the CPA and its regulations pertaining to Intermediaries may well be applicable to Estate Agents.
To this point, the position remains uncertain. We can only hope that a judgment will be delivered in the near future to provide clarity in this regard.
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