15 May COOLING OFF PERIOD FOR BUYING A PROPERTY IN SOUTH AFRICA
An important factor that a Purchaser should always bear in mind is that a Sale Agreement is a legally binding contract. Should a Purchaser attempt to cancel a Sale Agreement before its conclusion, they might have to face the consequences of their decision.
It is a common misconception that Consumer Protection Act No 68 of 2008 (hereinafter referred to as “Consumer Act”), provides a Purchaser a means to can cancel a sale based on the ‘cooling off’ period. When referring to a cooling-off period, a simplistic definition would mean the ability of the Purchaser to cancel an agreement. It goes without saying that the Consumer Act does provide a certain level of protection to a consumer, however, this protection is not boundless or unlimited.
Section 29A of the Alienation of Land Act 68 of 1981 states that, property transactions of less than R250 000-00 are subject to a “cooling-off” period of five days. This five days period is calculated from the date of signature of the Agreement of Sale. It is important to note that Section 29A this does not apply to property priced above R250 000-00.
The Consumer Act, also provides guidance, on the granting consumers the right to cancel certain contracts within a “Cooling-off” period of five business days. Section 16 of the Consumer Act reads as follows:
“Consumer’s right to cooling-off period after direct marketing
(3) A consumer may rescind a transaction resulting from any direct marketing without reason or penalty, by notice to the supplier in writing, or another recorded manner and form, within five business days after the later of the date on which—
(a) the transaction or agreement was concluded; or
(b) the goods that were the subject of the transaction were delivered to the consumer.
Interpretation of Clause 16(3) reflects that a Purchaser, who purchases a property, because of direct marketing, has the right to cancel the sale within five business days. This applies only to sales that result from direct marketing. The “cooling-off” period does not apply to sales that result from any other form of marketing such as show houses and conventional print advertising. Nor does it apply to any purchase made by a client that the agent is already working with.
A problem also facing a consumer is also the interpretation the start of this five-day cooling-off period. Section 16(3) of the Consumer Act refers to five business days after agreement was concluded, or the goods that were the subject of the transaction were delivered to the consumer. This could mean not the date of signature of the Agreement of Sale, but the date of transfer of the property into the Purchaser’s name. However, Section 16(3)(a) and (b) remain untested in law we will need to see how our court interpret the Consumer Protection Act.