Buyers should guard against putting in more than one offer to purchase, as the cooling-off period for immovable property is only applicable in certain instances. A purchaser should be 100% sure that he or she wants the immovable property before signing any contract.
"As soon as the offer to purchase has been signed by both the purchaser and seller, it immediately becomes a legal and binding sale agreement," warns Fanie Botes, Director at Millers Inc.
"The question often asked by purchasers or consumers is whether goods can be returned after being purchased and whether a contract can be cancelled after being entered into.
"As a purchaser or consumer, you have a right which allows for the cancellation of a contract or the return of goods within a certain period of time. This right is known as the cooling-off right," says Botes.
However, many are under the misconception that the Consumer Protection Act (CPA) gives them a cooling-off period when entering into a Property Sales Agreement, warns Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.
Cooling off applies to properties under R250k
A 5-day, cooling-off period is only applicable in certain instances when buying property.
To understand the legal rights and implications of an offer to purchase, section 29A of the Alienation of Land Act states that residential property transactions of R250 000 or less are subject to a cooling-off period of five working days from the signature of the Offer to Purchase.
Botes says in this instance the seller will have ten (10) business days after the cancellation of the agreement by the purchaser to refund the purchaser of the purchase price in full or refund any monies paid by the purchaser.
"Every offer and/or sale agreement must state that the purchaser is entitled to revoke the offer or terminate the sale agreement," he says.
And yet many fail to realise the implications of signing an OTP for the immovable property over the R250k threshold.
Goslett says, "Once an Offer to Purchase has been signed by both the buyer and seller, it immediately becomes a legal and binding Sale Agreement. The cooling-off period during which a buyer may cancel the agreement within five days from the date of signing the initial offer is so seldom applicable that buyers should never falsely assume that they can get out of an offer without any legal recourse.
"Instead, buyers should only sign one offer at a time and wait to hear the outcome before signing any other offers," he advises.
Direct marketing provision
In terms of section 16(3) of the Consumer Protection Act, a purchaser has the right to cancel the purchase of a property within five business days – only if the sale is a result of direct marketing.
"Direct marketing means that the person has been approached directly either in person, by mail, or by electronic communication for the purpose of promoting or offering to supply goods or services," says Goslett.
"The cooling-off period will not apply to any sales that are a result of any other type of marketing, such as print advertising and show houses. It will also not apply if the purchase is made by a client with whom the estate agent is already working," warns Goslett.
Private seller protection
The Act also does offer protection to buyers who are purchasing from a private seller. Consumers are only protected if they enter into a transaction with a supplier in the ordinary course of the supplier’s business.
"This means that sellers who do not earn a living from selling or buying property are excluded from the CPA," says Goslett.
Unlike the Alienation of Land Act, the CPA states that if the cooling-off period does apply, the five days do not start from the date that the offer is signed, but rather the day the property is transferred into the buyer’s name.
“Considering that the transfer can take between three and six months after the offer is signed, cancellation of the agreement at this point could prove to be extremely problematic for all parties involved,” Goslett warns.
Botes adds the cooling-off period is "only applicable if the purchaser is a natural person and the immovable property is bought for residential purposes. A purchaser of agricultural land does not enjoy a cooling-off right".
Other instances where the cooling-off period will not apply include where the purchase was at a public auction; the seller and purchaser have previously entered into a deed of alienation of the same land or a similar transaction for the same land; the purchaser has reserved the right to nominate or appoint another person to take over the rights and obligations of the agreement, and the purchaser purchased the land by the exercise of an option.
Submit only one offer at a time
Goslett reiterates the importance of submitting only one offer at a time.
“Buyers need to be certain that they want to purchase the property before they sign the agreement. If a buyer has signed an agreement, but would no longer like to purchase the property, it is best for them to be upfront with the seller and let them know as soon as possible, rather than breaching the contract.
"The seller might be willing to let the buyer off the hook and look for another buyer, rather than drawing out the situation longer than necessary. However, it is also possible for the seller to pursue the matter legally, which could leave the buyer with a very expensive impulse purchase on their hands. To play it safe, buyers should always be 100% sure that they want the property before signing any contract,” he says.
Article sourced from Property 24
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