CPA: Direct marketing and allied issues
There are many provisions in the Consumer Protection Act that affect direct marketing and other marketing issues and it is important for estate agents to know them. John Gilchrist, director of Property Law Publications, explains further in this third article in his series on the Act.
Advertising properties with catchy titles
Section 44 of the Act provides that suppliers of services, which includes all estate agents and conveyancers, must avoid being accused of failing to disclose any material facts known to them íf that failure amounts to a deception. The ‘voetstoots’ clause will cover property defects but, if an agent is asked whether he is aware of any specific defects, or requests the agent to get this information from the seller, the agent must do so and disclose any defects disclosed to him. The section only deals with actual representations made to the agent and does not oblige the agent to uncover all defects or make disclosures as to the condition of the property upfront if the buyer has not raised these issues.
Agents must, however, be very careful when using catchy titles to promote their properties. They should refrain from using expressions like tudor special, your dream home or will sell quickly. They should especially avoid clichés like in excellent condition. They will be in trouble if these prove to be misrepresentations afterwards. Photographs are the best way of promoting properties and it is best not say anything about the quality of anything on the property. Advertising should be confined to descriptions, such as ‘4 bedrooms, 2 en-suite bathrooms, fitted kitchen, swimming pool,’etc.
What is direct marketing as defined by the Act?
This is defined as approaching someone in person, or by any form of mailing, or by any form of electronic communication to directly promote any goods or services in the normal course of business. Many agents use direct marketing techniques very professionally but care needs to be exercised in view of the provisions of the Act. Direct marketing basically includes any way by which an agent takes the initiative to approach individual members of the public other than by public means such as newspapers or local home-finder’s guides.
If a sale agreement results from direct marketing the buyer must be informed of his rights to cancel the sale (Section 32). He is entitled to do so ‘without reason or penalty’ (Section 16) provided he does so within five days of the conclusion of the sale or delivery of the ‘goods’ to him. This must be taken to include transfer of the property and, if the buyer does cancel in these circumstances, he is entitled to be repaid within 15 days of cancellation. This can create serious consequences for the banks cancelling their existing bonds or registering new ones.
Do buyers have any general rights to cancel sales?
Rumours have been making the rounds in the industry, occasionally supported by misleading media articles, that all property buyers have a general right (independent of direct marketing) to cancel their sales within five days of purchasing their properties or, worse still, within five days of receiving transfer of their properties. There is no provision in the Act or any other law to this effect save for Section 29A of the Alienation of Land Act which only gives buyers a five-day cooling-off period for properties sold for R250 000 or less.
Estate agents need to be very careful when using direct methods of marketing. The rights which the practice gives to buyers make the eventual outcome uncertain until the time periods have passed during which buyers must exercise their rights. Targeting individual members of the public without having first been approached by them is a risky venture and this includes marketing properties directly to former clients who might have originally sold their properties through the agency. Any new direct communication will still give them the rights conferred by the Act.
This is the third article by John Gilchrist in a series of four on the Consumer Protection Act. In case you missed it, the first one is ‘Who are suppliers under the CPA?’ and the second ‘Disclosure certificates and voetstoots clauses’.
If you have any questions for John Gilchrist, you are welcome to email firstname.lastname@example.org.