Who are ‘suppliers’ under the CPA?
When the Consumer Protection Act became law in April 2011, there was considerable confusion in the real estate industry as to who was actually affected by it. Some conveyancers, industry-related bodies and others said that all property transactions would be affected by the Act and that all property sellers had to comply with its requirements. Today it has become widely accepted that only certain persons are affected and it is important to know who they are. John Gilchrist, director of Property Law Publications, explains.
The definition of a supplier
In the definitions at the beginning of the Act a supplier is defined as anyone who markets goods or services. This means it is not only manufacturers, wholesalers and retailers who are affected by the Act (they all supply goods), all conveyancers and estate agents qualify as suppliers as they market their services to the general public. They are bound by the provisions of the Act in respect of these services.
This does not mean, however, that estate agents are responsible for the condition of any property they are selling because the property does not belong to them. Some roleplayers have claimed that the moment a seller engages an agent to sell his property, he becomes bound by the Act because his agent is bound by it, but this is not true. Agents only qualify as suppliers in respect of their services and this does not bind their sellers in respect their homes or other properties.
The definition of a consumer
The Act defines a consumer as someone who deals with a supplier ‘in the ordinary course of the supplier’s business.’ This means that all sellers are excluded from the definition of a supplier unless they are dealing with their buyers in the normal course of their businesses. Note that it does not say ‘ín the normal course of business’. It is expressly says that a consumer must be dealing with his supplier in the normal course of the supplier’s business. This means the seller must be dealing with the sale or letting of properties as a normal business enterprise that he actually operates as such.
If a property owner runs his panel-beating business on a business property and sells the property, he does not qualify as a supplier in this instance because selling properties is not done in the normal course of his business. Only panel-beating qualifies as his ‘normal’ business. The only people in the real estate industry who qualify as suppliers are developers who are developing cluster, sectional title, or other property schemes as well as any other natural or juristic persons who are selling and buying properties or letting them in the normal course of their business.
Important exceptions to be noted
Even people who invest in a few properties as a long-term investment designed purely to create asset-based wealth for their retirements do not qualify as suppliers. Just because they own a few properties does not mean that they have suddenly become suppliers in terms of the Act. The expression ‘normal course of business’ must be interpreted to mean that the property owner must be operating an income-based enterprise (not something created purely for capital growth in the long-term) and such an enterprise must have an ongoing basis to be ‘normal’ in a business sense. The VAT Act talks about going concerns and this is a good definition of anything being operated in the normal course of business.
Any single sale of a property will invariably be excluded from the provisions of the CPA. Estate agents only need to ascertain whether their sellers are engaged in regular buying and selling of properties as a form of income-creation to determine whether they are bound by the Act or not. This applies equally to sellers who derive their monthly income from letting such properties to respective tenants.
This is the first in a series of four articles that John Gilchrist did for Property Professional on the Consumer Protection Act.