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The effect of the CPA on Sectional Title

The Consumer Protection Act (Act No 68 of 2008) (CPA) was signed into law on 24 April 2009. The Act sets out the minimum requirements to ensure adequate consumer protection in South Africa. This Act constitutes an overarching framework for consumer protection. All suppliers of goods and services will need to take note of the new measures and ensure that they are able to comply. The CPA came into effect on 31 March 2011.

The question that interests me is to what extent the CPA impacts on the Sectional Title Industry.

CPA and Bodies Corporate
The relationship between a Body Corporate and the owners of sections within a Body Corporate is such that the owners are members of the Body Corporate by law. Although a Body Corporate organises certain services to be delivered to the advantage of owners (e.g. security, garden maintenance, maintenance of the buildings and insurance of the buildings), the Body Corporate is not a service supplier as defined in the Act. Accordingly the CPA doesn’t apply to this relationship and owners cannot approach the National Consumer Commission to complain about substandard service from the Body Corporate. As will become clear, service providers to the Body Corporate will however have a liability not only towards the Body Corporate, but also towards the end receivers of any service.

CPA and the relationship with clients of a Managing Agent
A Managing Agent who advertises and contracts to deliver management services to Bodies Corporate is certainly a Service Supplier in terms of section 1 of the CPA. Accordingly, the management agreements with the Bodies Corporate fall under the jurisdiction of the CPA, unless the Body Corporate has a turnover that exceeds R2 million per annum. It is however important to realise that the definition of a consumer includes “a recipient or beneficiary of those particular services”. The individual owners of units in a Scheme are therefore also customers and can insist on the protection of the Act. Even tenants could form part of the customer base according to the Act.

Chapter 2 of the CPA provides the Consumer with a number of fundamental rights, including protection against discriminatory marketing, the right to select suppliers, the right to a cooling off period, etc. Specifically, parts F (Right to fair and honest dealing), G (Right to fair, just and reasonable terms and conditions) and H (Right to fair value, good quality and safety) will apply to the management agreements and service delivery of Managing Agents. To what extent clients will be able to rely on these sections in practice when unhappy with the Managing Agent remains to be seen. In principle, however, they will be able to insist on compliance from a Managing Agent and can direct a complaint to the enforcement agencies in terms of the CPA.

In my opinion, one of the instances that might attract attention soon is the question of whether the fees charged for Clearance Certificates by Managing Agents are fair. It is a statutory obligation on the conveyancer (section 15(3) of the Sectional Title Act) to get a certificate before a sectional title unit can be transferred from one owner to the next. No fee is prescribed for this service. As a result, some Managing Agents charge exorbitant fees. I think that it is likely that a consumer will take the matter to the National Consumer Commission specifically referring to sections about the right to fair value.

Section 14 of the CPA provides the consumer with the right to cancel fixed term agreements with only 20 business days’ notice. It obliges the supplier to notify the consumer of the expiry date of the agreement not more than 80 and not less than 40 business days before the expiry date. It has been one of the most controversial sections for the whole of the estate agency profession. Letting agencies (commercial and residential) have indicated serious issues and it is likely that the EAAB will apply for exemption in terms of Section 5(3) of the Act. The banking industry, for example, received exemption from the Minister in March 2011.

Fortunately for Managing Agents, section 14 does not apply to agreements between Juristic persons. This means that as before, the duration of management agreements will be governed by the Management Rules in terms of the Sectional Title Act.

Common sense can help
The CPA intends to promote fair and equitable conduct in the market place rather than criminalise conduct. Most businesses will at any rate strive to give their customers a proper service even without the Act making it a legal obligation. In that sense, good business practice and common sense will keep you clear of transgressing the Act in most cases, even if you are not familiar with it. It is nevertheless worthwhile to get hold of the Act and read through Chapter 2. By doing that the risks of non compliance for a specific Managing Agent can quickly be identified and the necessary procedures implemented to reduce or even eliminate those risks.

Article reference: Paddocks Press: Volume 7, Issue 8, Page 2

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