Consider The CPA When Buying, Selling

With the new Consumer Protection Act (CPA) now in effect, property professionals will be forced to look at the way they do business and how certain procedures affect both them and their clients.

The act has been a work in progess for many years but now it has been implemented it will change the way businesses operate in South Africa completely.

In certain cases, risks that were previously assumed by consumers will now be placed on the supplier.  This means South African's are now among the most protected consumers across the globe.

So what impact will this have on the real estate industry?  Adrian Goslett, CEO of RE/MAX of Southern Africa, highlights important aspects of the act pertaining to property.

"With regard to the sale of property, the CPA will definitely have an impact on how property professionals draw up contracts.  "All standard contracts will need to be reviewed and must be brought in line with the requirements of the act.

"Certain terms may have been ambiguous in the past but now the act calls for clear and understandable terms that are partial to both parties."  Goslett notes as the main objective of the CPA is to promote a fair, accessible and sustainable marketplace, all terms within the property sale agreement must be fair and reasonable for both parties.

Until now parties could agree to any term in the contract terms at will, but now the CPA will set out to restrict contractual rights and makes sure parties prescribe to specific, just practices in the negotiating and selling of property.  "The voetstoots clause for example, was a one-sided term designed to safeguard the seller from liability for any damages that arose from any hidden defects in the property.  "Voetstoots can be simply translated to 'as is', which is how property was sold before the Consumer Protection Act was introduced.  "When a property was sold 'as is' it meant it was sold in whatever condition it was in - this is no longer the case.  "This has now been changed and any defects the seller is aware of must be made known," adds Goslett.

The Voetstoots clause cannot be inserted into agreements for any property sold to an individual or small corporation in the ordinary course of busines and a list of all defects must be included.  The purchaser must be made fully aware the property is offered in its condition with the defects listed and agree in writing to accept the property in that condition.

"Essentially what this will do is get the seller to make sure all necessary aspecdts of the property are in suitable working order and indirectly this will give the buyer an implied warranty of quality on their purchase," explains Goslett.

It must be noted that the Consumer Protection Act does not apply to any private once-off transaction where the seller's ordinary course of business is not that of selling property and these sellers will still be protected by the voetstoots clause.

However, if an estate agent is involved in the transaction by menas of marketing or negotiating the sale of the property, this service will be covered under the ambit of the act.

When property professionals are involved in the marketing of any property or services that pertain to their ordinary course of business, they will need to make sure they adhere to the restrictions laid out in the CPA regarding direct marketing.

This is defined in the act as approaches in person, by mail or electronic communication, which is further defined as telephone calls, faxes, sms, wirelss computer access, e-mail or any similar technology.  Consumers may request that suppliers do not contact them at all.  "Estate Agents will need to have permission from prospective buyers before they engage in any form of direct marketing and the buyer will have the right to withdraw from any transaction that may occur as a result of this marketing," says Goslett.

Transactions that result from non-direct marketing such as regular print advertising or show houses that are open to the general public will be exempt from the cooling off period.  "Although some aspects of the Consumer Protection Act may seem severe and will require certain suppliers to adjust their business practice, it is important to remember this act will have a positive effect on the sentiment of consumers in the current market," concludes Goslett.

Occupational Rent: Don't Skip The Fine Print

When it comes to buying and selling property, one of the most important aspects to consider is the fine print in the contract, says Adrian Goslett, CEO of RE/MAX of Southern Africa.

Reducing the contractual agreement to writing when wanting to purchase or sell a property is required by the law governing property transactions in South Africa, and, with the introduction of the Consumer Protection Act last year, contractual agreements have become far easier to understand.  "However," says Goslett, "it is vital that both parties involved in the transaction ensure that all aspects of the agreement have been stipulated correctly and agreed upon before either party signs.  This is particularly important for areas of the contract that deal with issues such as occupational rent.  Although most sale contracts will have a section that addresses this aspect of the transaction, often it is not given the required attention that it deserves."

The clause in the contract regarding occupational rent is of particular significance as it is intended to protectd both parties involved in the transaction.  According to Goslett, the section in the contract referring to occupational rent essentially covers the seller when the purchaser moves into the residence before the transfer of ownership has transpired.  The clause offers equal protection to the buyer, should the seller still reside at the premises after the property has been transferred into the buyer's name.

In the occurrence of either of the above situations, the clause must clearly state the amount of occupational rent that will be paid to the other party each month.  This way both parties have a clear idea as to what to expect.  An occupational rent amount must be included in the agreement of sale, even if the occupation date is stated as the date of registration of transfer, this will avoid any conflict at a later stage with regards to the amount to be charged should the parties subsequently agree to bring the occupation date forward for whatever reason.

Goslett says that while buyers generally have little intention of moving into the property until it has been registered in their name, in some instances this has proved necessary.  Delays in the transfer process such as the rates clearance from the local Council or the Deeds Office taking longer than expected, and the fact that many buyers have to give notice on their current home and move out by a set date could force the buyer to take occupation earlier than they intended.

Alternatively, the seller might have purchased another property and may have to stay in the sold residence for longer than intended if that transaction is delayed for whatever reason.  Although either situation could be an annoying aspect to deal with, parties who have read the occupational rent clause and understand what is required of them will be in a far better situation than those caught out by surprise.

"As the issue of occupational rent affects both parties, it is important that both the seller and buyer agree upfront to the amount charged and agree that it is fair.  The clause is designed to avoid conflict at a later stage, not create it.  Although the buyer will have very little say as to what amount the occupational will be, the seller should be reasonable and set a figure that is in line with market-related rentals in that area," says Goslett.

In some cases, agents have used an amount that is equal to 1% of the purchase price.  However, if the seller has a high bond on the property this could result in them losing money.  "It is for this reason," says Goslett, "the general practice is for the occupational rent amount inserted into the contract to be enough to cover the bond repayment on the property."

He concludes by saying that if buyers and sellers have all their bases covered and understand what is contractually required of them, they can avoid conflict and can make the process of buying a home much easier and more enjoyable for all parties involved.

Stable Repo Rate Good News For Property, Say Agents

THE RESERVE Bank's decision to hold the repo rate at 5.5 percent - where it has been for 18 months - is good news, says Bill Rawson, chairman of Rawson Properties.  "This has been the longest-running low rate scenario in South Africa since the 1930s and it has done a great deal to foster confidence in residential property," he says.

"What is more, with Europe in financial turmoil and the UK now facing a double-dip recession, the repo rate will probably stay at low levels for the foreseeable future.

"The inflation rate is driven by high oil and food prices, and some predicted it would reach 6.8 percent this quarter, but to everyone's surprise inflation is currently at 6.1 percent, and it seems unlikely to go much higher.  This bodes will for a continuing low interest rate."

He says prospects for buyers have improved steadily.  "Property sales are still 50 percent below the levels of 2006 but we are seeing a steady improvement in sales data and a slow but discernible increase in average prices."

Rawson says house prices are at the bottom of the cycle and that this is the right time to buy.  "FNB reports that a 6 percent year-on-year rise in house prices is taking place and the long-awaited bottoming out has probably come about.  Those who don't buy before the end of this year could find they are hit by rising prices.

"However, the get-rich-quick days in property experienced in the 2003 to 2008 era will not be seen again."

Adrian Goslett, Chief executive of RE/MAX of Southern Africa, believes the decision to keep the interest rate steady will continue to boost the property market.

"So far, the low and steady interest rate has brought many more buyers back into the property sector during the first quarter of 2012," he says.

Low Effort Energy Saving

Homeowners that want to make a difference to their environment can do so with just a few low-effort energy saving tips, that will put money back into their pockets, says Adrian Goslett, CEO of RE/MAX of Southern Africa.  "Often homeowners want to do their part in conserving energy, but don't know the steps to take in turning their residence from an energy sapping home to an energy efficient one.  The good news is that homeowners can do this with relatively no effort or cost.  While the steps won't make much difference individually, even small steps an add up to large strides if added together," says Goslett.  He gives homeowners 8 effortless energy tips that save both energy and money.

Turn down the geyser
During the hot summer months there seems little sense in having the geyser work unnecessarily, especially when it accounts for nearly half the cost of a household's electricity.  By simply lowering the thermostat, costs can be reduced greatly.

Latch windows securely
If a home has an air conditioning or heating system, more energy will be spent if windows aren't closed properly.  Close the windows and lock them, this will ensure that no space remains between the frame and window which will prevent air leaks.

Pull the plug
Even if electrical appliances or electronics are turned off, many of them still draw power in their stand-by modes.  Eliminate this by unplugging them from the wall completely.  This may seem like a lot of effort, but homeowners can plug more than one item into a multi plug or plug strip and simply unplug that and cut the power to all items at once.

Avoid the energy sapping appliances
Whenever possible, avoid using appliances such as the stove or oven and rather opt for items such as the microwave or perhaps an electric slow cooker instead.  Generally, the larger the appliance, the more energy it will take to heat up.  If the oven needs to be used, make it work for its money by cooking numerous dishes at once.  When using the stove, make sure the pot matches the plate - avoid using a large plate to cook a small pot of food.  When using the kettle, only boil as much water as is necessary.

Cold water washing
Switching the washing machine to cold water will save 40% of the energy used on the heating of the water, and as a bonus, will save the clothing.  Washing clothing in cold water reduces the wear and tear, which means they will also last longer.  Homeowners will save money on electricity and on replacing worn out clothing.  Certain items such as towels and bed linen should still be washed in hot water washes, but can be rinsed in cold water.  To save more energy with washing, hang clothes outside to dry instead of using the electric dryer.

Lighting sets the mood
Having a dimmer installed on the lights will save money over the long term because it relduces the electricity flowing to the light fixture or lamp.  Often there is no need for bright lighting and dimmed lights can enhance the relaxed ambience of a home.  Compact fluorescent light bulbs will also reduce energy usage, although not all CFL light bulbs can be used in conjunction with a dimmer but those that can, will state so on the packaging.  Lights should also be turned off in areas of the home where they are not needed.

Turn the computer off
If the home computer needs to be on during the day, then activate the system standby or hibernating feature, or alternatively shut it down.  A computer left on standby will use as much as 20% of the usual power it would in full use.  Turning it off and unplugging it will also protect it from possible power surges.

Use the sun
The sun is a most powerful heating resource available, and not just during the summer months.  The installation of solar panelling will cost in the initial outlay but the saving will far outweigh the cost in the long term. 

"With the rising cost of living as well as the worldwide exhaustion of natural resources, using these simple tips could curb costs as well as reduce our carbon footprint on our environment.  Homeowners will see the reduced cost benefits with very little effort, all while reducing carbon emissions," Goslett concludes.