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Direct marketing laws affecting real estate are laid out by The Consumer Protection Act (CPA) and specify many aspects of direct marketing and the marketing related activities of estate agents.
Estate agents are advised to know and understand these provisions as set out in the Act because if they are not applied while engaging with consumers or general public, it could have a direct impact on their livelihood and may even cost them their licence to operate as an accredited estate agent.
Section 44 of the CPA deals with misrepresentation or misleading marketing or advertising and it provides that suppliers of services, which includes all estate agents and conveyancers, must avoid being accused of misleading or catchy phrases to advertise a product, service or property.
This section also covers the intentional non-disclosure of latent defects and classifies it as deceptive conduct.
The seller and agent are covered under the voetstoots clause for any defects found on the property as long as the agent was transparent and disclosed such defects that they are aware of to the purchaser.
Should the agents not be aware of any defects, they are required to find out from the seller before signing any sale agreement upon the buyer’s request.
In such cases, the agent is under no obligation to personally conduct an in-depth inspection on the property, but is only required to convey to the purchaser the details provided by the seller.
Agents must avoid using catchy phrases to promote a property as many of these phrases can be considered misleading.
The safest and also most effective means of advertising a property is the use of several good quality images as well as a straight forward description of the property’s features.
An example would be: 4-bedroom home with 2 bathrooms plus an en-suite in the main bedroom. Built in cupboard in all rooms, large kitchen with built in oven and plumbing for two appliances. Single garage with secure off-street parking for 2 additional cars. Swimming pool and undercover patio in back garden.
Direct marketing is defined as directly approaching an individual in person within the prescribed conditions of Act, communicating with any individual through any means of written or electronic form of communication and to directly market any product or service for sale in the course of daily business.
Estate agents use direct marketing methods astutely, but should proceed with caution to avoid the pitfalls they could encounter should the CPA not be taken into account.
Direct marketing includes all methods the agent uses to engage with a consumer or the general public, except through public and local newspapers and Home-finders inserts.
The cooling off period and the consumers right to cancel the purchase, as prescribed under Section 32, should be clearly explained to the willing buyer before finalising the sales agreement.
In cases where the sales agreement resulted from direct marketing to this buyer, the buyer is entitled to do so within 5 days of the successful transfer of property into their name without prejudice or penalty (Section 16).
If the transaction is cancelled within the 5-day cancellation period, the buyer will be refunded in full within 15 days of cancellation.
The consequences of the cancellation at this stage will cause a ripple effect of problems for banks who are required to cancel their bonds and register new ones which come at a fair legal cost.
It needs to be understood, the cooling off period applies only to buyers who were directly marketed to. This cancellation period does not apply to other instances where a property sale is made without the use of an agent or direct marketing methods.
Only Section 29A of the Alienation of Land Act provides buyers a five-day cooling-off period for properties sold for R250 000 or less, regardless of whether direct marketing methods.
This clause may not benefit the many people who may purchase properties at a higher value or who have been misled by articles in property magazines using independent marketing. In these cases, the buyer is left unprotected.
Estate agents are advised to adhere to the guidelines stipulated in the CPA and use an ethical approach to direct marketing and dealing with the general public.
This will prevent cases of the last-minute cancellation of transactions. The property sales process can be uncertain until the 5-day cancellation period has passed and the buyer has taken transfer of his property.
This is the only time in a direct marketing transaction where the sale is finally secure. The Consumer Protection Act provides ample time for the consumer or buyer to exercise their rights to cancel a transaction resulting from a direct marketing campaign.
Estate agents are well aware of the complexities of approaching individual clients in the general public or former clients they may have sold homes to at prior agencies.
In addition, they may also face financial or legal issues should the buyer be misled or misinformed because consumers right are well protected by the Consumer Protection Act.
For professional legal assistance regarding property related transactions, laws affecting real estate or other legal matters, please feel free to contact us.
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