Consumer Protection Act and your property rights (Seraj Haroun 07 March 2011)

9 Mar 2011

The purchasers of property that was marketed to them via direct marketing, such as e-mail, will be able to cancel the sale after the property has been registered, and months after the sale agreement was signed, according to the new Consumer Protection Act (CPA).

In terms of the new Consumer Protection Act (CPA), consumers are entitled to rescind transactions that arise from direct marketing, without penalty or charge, on written notice to the supplier, within a period of five business days after the date on which the transaction was concluded or the goods that were the subject of the transaction were delivered to the consumer.
This so-called 'right to cool-off" is but one of the consequences that flow from the CPA for transactions concluded as a result of direct marketing. The cooling-off right is significant in the context of the real estate market because, in terms of the South African law of property, delivery (in the sense of transfer of ownership) of immovable property is constituted by registration of the immovable property into the name of the purchaser in the deeds office.
Registration, by necessity, takes place some months after a sale agreement is concluded. Thus, a consumer might be able to rescind an agreement in terms of which immovable property is sold long after the sale agreement was signed.
This stands in contrast to a purchaser's right to cool-off under the Alienation of Land Act. Under this legislation, a purchaser of immovable property has, in certain defined circumstances, the right, within five business days after signature of an offer to purchase, to revoke the offer by giving written notice to the seller.
It is conceivable that where the consumer is not given possession of the unit before registration of title in the deeds office, the consumer could take delivery of the unit on registration and, thereafter within five business days, notify the developer in writing that he wishes to rescind the sale. If the consumer does so, he has ten business days from when the property was delivered to return it to the developer and the developer must repay the consumer within 15 business days after receiving the unit back from the consumer.
This will give rise to a number of legal, practical and procedural difficulties. For example, the fact that a mortgage bond may also have to be cancelled and the issue of who will pay the attendant costs.
*Seraj Haroun is a senior associate in the corporate and commercial practice at Cliffe Dekker Hofmeyr business law