Does the CPA apply to the Private Sale of a house?

For those of you who watched the property story on Carte Blanche last night, you will have been left even more unsure about the implication of the CPA on the sale of residential property. As the presenters in Carte Blanche stated, the issue of property sales is not a simple one and the legal debate over whether the CPA will apply to private sales between individuals is not one that can be easily answered.

Let the buyer beware

Who does the CPA apply to?

When looking at the sale of property we usually have three parties:

• the buyer,
• the seller, and
• the estate agent.

At face value, it seems totally logical that the transaction between the seller and the buyer should fall within the CPA, but this is not the case.

Seller

A seller is usually a private person who sells property as a secondary form of income to what they do on a day-to-day basis. Unless the seller sells property in their “ordinary course of business”, they would not be a “supplier” in terms of the CPA.

Buyer

Can a buyer be a consumer, even though they do not buy from a defined supplier under the CPA? The answer is, no. The buyer also would not be a  consumer under the CPA, because they are not entering into a transaction with a defined supplier.

A consumer under the CPA is someone:

• to whom those particular goods or services are marketed in the ordinary course of the supplier’s business;
• a person who has entered into a transaction with a supplier in the ordinary course of the supplier’s business, unless the transaction is exempt from the application of the CPA;
• if the context so requires or permits, a user of those particular goods or a recipient or beneficiary of those particular services, irrespective of whether that user, recipient or beneficiary was a party to a transaction concerning the supply of those particular goods or services; and
• a franchisee in terms of a franchise agreement.

This means that if the seller is not a supplier, then the buyer also cannot be a consumer.

The role of estate agents

You cannot argue that the contract must be regulated by the CPA, when none of the parties or the property sold fall within the ambit of the CPA.

The next question would then be whether the estate agent would be an intermediary in terms of the CPA, since they are in the business of “representing another person for “the actual or potential supply of any goods or services” and “offers to sell the property that belongs to a third person”.

But the definition of an intermediary goes further than that, because it excludes “a person whose activities as an intermediary are regulated in terms of any other national legislation”. Since estate agents are regulated by the Estate Agency Affairs Act of 1976 it could easily be argued that they are not intermediaries as defined in the Act.

If we have three parties who do not fall within the ambit of the CPA, it would be hard to argue that the sale of a private property would fall within the ambit of the Act.  This includes the so-called “voetstoots” clause that has been eradicated by the CPA, because you cannot argue that the contract must be regulated by the CPA, when none of the parties or the property sold fall within the ambit of the CPA.

This, however, might be the only ray of light for buyers. If it is found that the estate agents are “intermediaries” under the Act, then it could be argued that the seller might now have to be jointly and severally liable with the estate agent if they contravened the CPA. This means that sellers will rather sell the properties themselves so as to evade the effects of the Act, unless they will be included by an amendment to the CPA as it stands.

The bottom line

For the time being, there is a lot of uncertainty. Unless the Act changes or there is a definitive decision about the application of the Act on the sale of residential property, the Act will not apply.

Possible solutions

Instead of trying to make the parties fit the definitions within the CPA, it would be a much better solution to adopt an Act of Parliament that deals with all the unique problems that the sale of property entails. The other option would be to especially include the sale of property into the provisions of the CPA as an exception to the general rules that apply to transactions and agreements in the Act.