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New law to hit property market

Johannesburg - The widely debated Consumer Protection Act that comes into force on April 1 will give the property industry a headache.

It will affect buy-to-let investors in particular, as well as developers who sell property off plan.

Although legal experts believe that this legislation will be a welcome improvement on the existing consumer-protection measures, they have a problem with the fact that property-related contracts will be treated the same as contracts for ordinary trading commodities.

Schalk van der Merwe, property attorney for VFV Mseleku, said he was unable to see why the rules applicable to a cellphone contract could be used to regulate property lease contracts – or how the purchase of a toaster could be handled in the same manner as the purchase of a house worth R2m from a developer.

He said that, according to the new act and proposed regulations, a cellphone contract was a fixed-term contract that could not be entered into for more than two years.
 
At any stage during this period it could be terminated by the subscriber giving only 20 days’ notice.
 
The supplier would be able to cancel it only if there was substantial default on the part of the subscriber.

He said that someone who had bought leased property and arranged bank finance on the strength of the lease contract would be affected if the tenant could cancel at any stage.
 
Not only did this cause huge uncertainty in the property market, but it gave rise to the question of whether a bank would provide finance on this basis, he said.
 
Further problems that could arise were if the landlord – who is obliged to warn the tenant, two months before expiry of the lease, that the contract will end – forgets to warn the tenant.

He might then be saddled with a tenant who could stay on at last year’s rent as long as he wished.

A landlord cannot enter into a contract for longer than two years and, if the tenant wishes to cancel his rental contract early, he need only pay 10% of what he owes for the remainder of the lease period.
 
Van der Merwe reckoned that the property industry should receive at least partial exemption under the law, since legislation to protect tenants already existed – such as the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act.

- Sake24.com

For business news in Afrikaans, go to www.sake24.com.


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