UPDATE ON THE CPA... AND MORE

"Keeping up with the trends so that you can make the smart choice."

From MF Legal:

In 2011 we dealt with many topics.  Two of these topics have since had further developments or have been clarified.

The first of these is the infamous voetstoots clause in the Consumer Protection Act 68 of 2008 (CPA) and the other is with regards to the transfer of immovable property from a company, close corporation or trust to an individual.  Here’s an update for our valued clients and agents on those issues that have since changed.

CPA and Long Term Leases

THE CONSUMER PROTECTION ACT AND LONG TERM LEASES

from MF ATTORNEYS INC

As we get closer to the end of the year we hear estate agents say increasingly that rentals are becoming the preferred choice. Thus, we decided to have a look at what the Consumer Protection Act 68 of 2008, says in this regard.

The Act provides that fixed-term consumer agreements must not exceed a certain maximum period. The current set of draft regulations prescribe this maximum period as a period of 24 months.

Section 14, which deals with expiry and renewal of fixed term agreements, confirms that it applies only to individuals and not juristic persons, i.e. companies or entities. There is currently some uncertainty as to whether an individual landlord who, lets premises to another, in addition to his main business, that is not in the course and scope of business,  falls within the definition of ‘service provider’ or 'supplier’  in order for the Act to apply.  It appears that such transactions do fall under the provisions of the CPA if the activity occurs on a continuous basis, and is not once-off as not to constitute a constant activity.

Keep your eyes open...

Earlier this week we published an article aimed at equipping you to make sound and wise decisions when signing an Offer to Purchase.  With such an important contract in hand, you need to ensure that your signature binds you to an agreement that is reasonable and protects both you and the other party.

There are many things to take into account and we encourage you to take your time to read the contract in its entirety before signing it.

To help you know what to look out for – here are some more prudent points:

1. Faults, renovations and defects:  the days of buying ‘voetstoets’ – what you see is what you get – are now in the past (Since the effect of the Consumer Protection Act, April 2011).  If you are buying through an agent or developer, the seller needs to state all and any faults, renovations and defects of the property.  If they agree to fix these, then that needs to be stated in the Offer to Purchase as well as the date by which the jobs should be completed.  Without a deadline, if they are showing intent to fix the problems, you will have a hard time tying them down to a completion date.  If you are able to, taking photographs of the areas in question will help you ascertain if they have been sorted out properly.

The seller is the seller...

...not the agent.

At Rivigan Property Group, we believe that communicating openly and honestly with our clients is the only way to conduct our business and build long-term relationships.

It is equally important for our clients who are selling property to communicate with us, as effectively and extensively as possible, throughout the sale process so that we can deliver the best service when securing a mutually beneficial deal for both the seller and the buyer.

Although we act as an agent to help and facilitate sales, we are not the actual seller.  The new Consumer Protection Act (CPA) that came into effect in April 2011 has tighter restrictions on real estate sales and calls the seller to higher levels of accountability when engaging in the sale process.

One of our biggest concerns has been in the disclosure of defects.  As an agent, it is impossible for us to know all the defects of a property since we do not live in it and are not privy to all of the plumbing, structural and aesthetic features.  We have seen more than one sale fall through because of defects that were not listed on the defect sheet and encourage our clients to disclose every defect that they are aware of.

We are the experts in selling and want our clients to have the best experience when selling and buying property, and, build into a relationship that will have long-term benefits.

For more information on the revised CPA and how it will affect you, contact us today and we’ll make sure that your questions are answered.  Choose the Rivigan Property Group, it’s the smart choice.

The effect of debt

Debt can be used most efficiently in order to grow an investment portfolio and purchase items that we need before we have acquired the full purchase amount.  This is only possible, however, if debt is managed properly and wisely.  Debt can have positive effects, but it can also have severely negative effects.

There are two types of debt: good and bad.  Good debt, quite simply put, is manageable and sustainable.  When you have what you need and are staying on top of your monthly repayments, you are in a good credit position, i.e.  you manage your debt well.  This is a common situation for many people who buy houses, cars or perhaps a few other expensive items, for which they can afford the repayments.  Affordability of debt refers to monthly repayments that are due in order to pay back the amount that you borrowed.

Bad debt is the opposite: you over-extend yourself and are unable to maintain repayments to your creditors.  This means that the debt that you have incurred is unaffordable.  This is typically caused by bad spending habits when people buy too much too soon, but it can also happen in the case of a hike in the interest rate or the tragic and often unavoidable loss of employment.  In order to manage your debt situation you need to manage your lifestyle.  There is an old idiom “cut your coat according to your cloth” - a basic budgeting principle to ensure that your costs do not exceed your income.

Does the new CPA affect me?

You’ve heard all the hype around the new Consumer Protection Act (CPA), but how will it affect you when it comes to buying or selling a property?

Patrick Bracher, financial services lawyer and senior director in the commercial department at Norton Rose South Africa (formerly DeneysReitz Attorneys), outlines just who is protected:

“The ‘consumer’ as defined by the Act includes all companies with a turnover or asset base of R2 million at the time of the transaction, as well as all individuals.” (From thinksales)

What this means is that the act protects the end-user from being duped by purchasing defective property – even if bought through an agent or reseller.  This means that much of the responsibility lies in the hands of the seller and is not the sole responsibility of the agent.

As Real Estate agents, we value our clients’ needs to sell or to buy and want to make sure that all transactions are smooth, efficient and beneficial to the parties concerned.  Here are two main points in the new CPA legislation to be aware of:

Cooling-off period
A five-day cooling-off period is now available to the buyer, from the date of transfer.  This only applies to property that is bought through direct marketing and is not applicable to show houses and conventional print advertising (this does not included fliers that are delivered to mailboxes).  It is important to note that the cooling-off period is from the date of transfer, and not from the date of signature.  This process can take between three to six months; a delay of this length can be seriously problematic for all parties concerned if cancellation does occur during the cooling off period.

“Voetstoots” is no longer valid
If the sale is in the ordinary course of business: ie. sold by someone who regularly sells property, the CPA will prevent the voetstoots sale of property.  Developers, speculators and investors with property portfolios can no longer rely on this Roman Dutch Law clause to exclude their liability from defects. 

It is crucial that the seller do all that they can to eliminate any potential issues that might arise from failure to disclose defects of their sold property.  At Rivigan Property Group, we want to try and protect all of our clients – both sellers and buyers.  Contact us today and let us help you make the best purchase or sale.