On whose side is the Consumer Protection Act?
The decision to sell a property is usually not one taken lightly. And it’s not an endeavour that is braved alone: most homeowners opt to enlist the assistance of an experienced estate agent to help them sell their home.
But because so many parties are involved in the transaction, there needs to be legislative and contractual guidelines that protect the interests of all parties involved. One of the most -overlooked legislative guidelines is actually one of the most important ones, The Consumer Protection Act (CPA).
The role of the CPA
The CPA aims to regulate the relationship between consumers and suppliers of goods when a business transaction is conducted. In the property market, one of these suppliers is the estate agent, and, somewhat paradoxically, the consumer (in this instance) is the seller.
Real estate transactions consist of numerous legal documents, such as the purchase agreement and title deed transfer, and one that many sellers forget of when thinking in terms of a consumer’s rights, the estate agent’s mandate.
An estate agent’s mandate is a legal agreement between the seller and the estate agent that gives the agent the legal right to market and (hopefully) sell the seller’s property. This allows the seller to enjoy the knowledge and experience of someone who knows the ins and outs of the property market to ensure the most efficient and profitable experience.
However, estate agents run a costly risk when entering into a sole mandate because they are required to pour additional funds into their marketing strategies. It makes sense, then, that agents may err of the side of caution when uncertain of a property, and provide a service that does not quite live up to the seller’s expectations. This is why it is vital that the seller understands their role as consumer in this relationship.
A fixed-term mandate
As a failsafe to ensure that sellers are not stuck in a contract that is no longer beneficial to them, section 14 of the CPA stipulates that a mandate must be for a specific fixed term and may not run for longer than 24 months. The estate agent is legally obliged to notify the seller before the contract comes to an end, giving them the option to renew the mandate or to cancel it. This notification may not be sent earlier that 80 days before the expiration of the mandate and no later than 40 days before the expiration. If the seller chooses not to renew the mandate for a fixed term and neglects to cancel it, the mandate will continue to exist on a month-to-month basis until its cancellation.
However, a mandate can be cancelled during its fixed term.
According to section 16, the consumer is awarded a 5-day cooling off period when a mandate is signed as a result of direct marketing. During this period, the seller may cancel the mandate at any time, effective immediately, with no penalty payable. Once the cooling off period has expired, the seller must give 20 days’ notification of the cancellation. This notification can be given through any written medium, including e-mail, fax, letter, or even SMS.
If a seller cancels the mandate before its expiration, they may be liable to pay a cancellation penalty. According to law, any penalty must be fair. This penalty is there to cover only the costs already accrued by the estate agent, including telephone and travel expenses, as well as marketing costs.
Section 48 of the CPA makes it clear that a mandate agreement should contain clearly defined and unambiguous terms that are fair, reasonable, and just. A clause must also be included that clearly details the cancellation process, and should preferably detail any applicable cancellation penalties. Section 22 also stipulates that the wording of the mandate should be easily understood and unambiguous, allowing the seller to understand without any question what the repercussions of cancellation are.
If you need assistance getting out of a mandate and are unsure of your legal position in terms of the CPA, get in touch with Madeleyn Inc. for trusted legal assistance.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).