• September 5, 2019

Does the CPA afford any remedies to the purchaser of immovable property?

Does the CPA afford any remedies to the purchaser of immovable property?

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“I recently purchased a house through an estate agency. Prior to purchasing the house, I did a few viewings with one of their agents, and he assured me that there were no major defects. Transfer has taken place and I have been living in the house for 1 month now and my bathrooms walls are cracking. A plumber has advised that there is a leakage which seems to have been there for a long time. Can I rely specifically on the Consumer Protection Act in any way considering that registration has already taken place? “

The Consumer Protection Act No. 68 of 2008 (CPA) was mainly enacted to promote a fair, accessible and sustainable marketplace for consumer products and services.[1] It applies to every transaction which happens within the Republic of South Africa.[2] If your property transaction happened in South Africa, which it probably did, then the CPA definitely protects you.

An estate agency carries out work related to immovable property in the ordinary course of their business. In most instances they provide a service for the seller. The CPA defines a service as “any work or undertaking performed by one person for the direct or indirect benefit of another.”[3] A supplier is defined as a person who markets goods or services. The agent – who markets the house (thereby rendering a service and marketing goods) then becomes the supplier, and the seller (who is receiving the service) becomes the consumer. Likewise you, as the purchaser, are also a consumer as the goods (in this case the immovable property) were marketed to you. It is clear therefore that the Consumer Protection Act applies in this instance, but only with regards to the relationship between either the agent and the seller, or the agent and yourself. You will not be able to rely on the CPA in any action against the seller, as he most likely would be found not to sell properties in the ordinary course of his business, and would therefore not fall under the CPA definition of a supplier.

The estate agent however also represents the seller and acts as the seller’s agent, creating a fiduciary relationship.  A person is in a fiduciary relationship with another when he or she has rights and powers which he is bound to exercise for the benefit of that other person.[4] [5] This then means that an estate agent will have some liability for a defect such as the one you have in your house because they are the ones supplying you with the service (marketing of the property) on behalf of the seller.

Liability of Sellers in circumstances such as yours, is a question that legal practitioners have interpreted differently. Our view is that a seller is fully responsible and liable for their property, as they are the party who best knows the condition of their property. You have an option, according to the law of contracts, to go back to the contract signed between yourself and the seller, and make sure that there was no mention of defects in the house. If the contract stipulated that any leaking pipes will be repaired by the Seller, he will then be liable to repair the leak(s) and resultant damage, or to compensate you for any costs that you incurred for such repairs. If the Seller knew that there was a leaking pipe, or could reasonably have been expected to know about the leak, and wilfully withheld this information from you or tried to hide it, the leak will be considered a latent defect and the Seller will also be liable. Your claim will however not be in terms of the Consumer Protection Act, for reasons stated earlier, ie the seller is not a supplier.

 The estate agent has a responsibility, under the CPA, to sell goods or to promote the sale of goods and to honestly present the goods that are being sold. If an estate agent neglects to inform you that there is a defect in the house that they sold and marketed to you, then the agency has failed to discharge their duty and have in fact falsely represented the house to you. You can hold the estate agent liable under the CPA as they are the suppliers of the service and goods that they have marketed to you.

Of course an estate agency will not be liable for the repair of the house because the previous owner is liable for such defects, especially if they were aware of them. However, estate agents must be careful of negligent conduct and filling out property condition reports on behalf of sellers without making 100% sure of the actual condition of the property, as they can incur liability.  False representation of goods goes against the purpose which the CPA was enacted for. Apart from having to forfeit their commission income, estate agents may face long-term consequences like losing credibility and having their licence revoked because of bad conduct.

Another remedy for the purchaser would be to hold the seller vicariously liable for the misrepresentation. This means that the seller would be liable for the agent’s negligence in assessing the property and carrying out their duty.

The best option, though, is to hold the seller liable for the defects that he should have reasonably known about and communicated to the agent. It would also be reasonable for the agent to lose some – or all – of their commission for not carrying out their work and providing the service as they should have.

Source: Tonkin Clacey Inc.

Head Office : 011-274-1700