Friday, March 18, 2011

Consumer Protection Act - Update

Updated communication from TPN and Marlon Shevelew & Associates

Just to advise that at this juncture there are still no finalized regulations.

In other words, and notwithstanding the imminent general effective date on 1 April we still have no idea whatsoever:

• Whether the property industry is excluded from the application of the Consumer Protection Act (“CPA”) - (SAPOA, EAAB, RHA, BUSA etc. still have heard nothing)

• If the property industry is included, whether or not various sections which directly impacts the property industry have been amended. To this end there may be amendments to the penalty amount as per section 14 of the Act, the duration of a residential lease as opposed to a commercial lease, the 20 business days arbitrary cancellation by a consumer in terms of section 14 etc.

As to the definition of “ordinary course of business”, (a term, which has been thrashed about by numerous industries) this again is problematic for the property industry as only upon our industry having a clear meaning thereto will we be able to determine whether or not the CPA and Section 14 (the cancellation of fixed terms agreements) will apply to mandates and lease agreements between landlords and their tenants. For instance:

• Some say if the landlord owns one property, earns a rental income, and the tenant is an individual then the CPA does not apply irrespective of whether there is a rental agency involved.

• Some say if there is a rental income earned and declared then it is in the landlord’s ordinary course of business, irrespective of the landlord’s occupation and the fact that the tenant is a private individual.

• Some say if the rental income earned exceeds the landlord’s normal occupational income then it is in your ordinary course of business despite the landlord not being a property speculator as such.

The general interpretation and one which Marlon Shevelew is prepared to endorse, albeit somewhat precipitately, is that the Act applies to all, save for those whom are specifically exempted and included. Accordingly, private individuals entering into leases with landlords (who are not property speculators or serial property renters in their normal course of business) should fall out of the protection of the Act. For the sake of clarity, tenants (renting in their individual capacity) who lease from landlords (individual capacity) will have no protection of the Act, for example cancelling the lease on 20 business days notice.

The rental agent, however, is in a precarious position as they provide services to their consumer (the landlord) and their landlords consumers’ (tenants) and the question remains…. What does the rental agent tell the tenant as to whether the Act applies or not????.

The short answer is that we do not know how a Consumer Protection or Rental Tribunal or Court of law will perceive the ordinary course of business of a person, and to listen to the hype and assume that just because two private individuals are not contracting in the ordinary course of the landlord’s business, irrespective of the involvement or not of the rental/estate agent, is a dangerous view, as a failure of a rental agent to properly advise a tenant could result in dire implications for the rental agent.

Marlon suggests, err on the side of caution and ensure that rental agents clearly explain the Act and all its applicable provisions to their landlords and their landlord’s tenants.

In conclusion, TPN and Marlon Shevelew understand the concern from the property industry regarding updating lease agreements and other related documentation. We have undertaken to compile a documentation pack which will be maintained on an ongoing basis as the regulations are finalized and the interpretation of the Act by the various tribunals or courts become clear.

Our joint intention is to host an updated CPA seminar; the timing of this seminar will depend on the finalisation of the regulations, findings of any Tribunals or courts etc.

2 comments:

  1. This is a good thing to do. Maybe it should be put into practice in many countries in order to protect tourists too. Last year I travelled to Argentina and stayed in an apartment in buenos aires . I was in commercial area of Palermo and people were buying like crazies, that should have an end, it is not healthy!
    Jules

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