1. WHAT IS 'MARKETING'?

The Chartered Institute of Marketing defines marketing as "the management process responsible for identifying, anticipating and satisfying customer requirements profitably".
Sellers and buyers alike are 'consumers' of estate agency services.

2. WHO IS AN ESTATE AGENT'S TARGET MARKET IN RESPECT OF THE MARKETING AND ADVERTISING OF ITS SERVICES?

The target market of the services of estate agents is buyers and sellers of property.

When it markets its services to sellers, it does so with the view to securing a mandate to sell a property.

When an Multi-Listing estate agent markets a Multi-Listing Mandate, it does so on the basis that a such Mandate will be beneficial to the seller in procuring interested buyers and implicit in this is that they will deal with a select group of experienced and reputable estate agents to the exclusion of others, and that the property will sell at a market related price.

When it markets its services to buyers, it does so with the view to securing offers to purchase which are market related in relation to properties on their books, having regard to the actual condition of such properties, which offers it can then present to sellers.

3. WHAT DOES 'FAIR AND RESPONSIBLE' MARKETING OF ESTATE AGENCY SERVICES ENTAIL?

The marketing of an estate agent's services and the marketing of the properties listed with estate agents pursuant to the mandates that have been signed, are inextricably linked.

It is implicit that estate agents would provide potential buyers with reliable, honest and accurate information in relation to the properties it advertises and markets, and its services in relation thereto.

Every advertisement of a property in respect of which an agency has a mandate, carries the name and logo of the estate agency concerned, and will also often contain a reference to the website of the estate agency.

An estate agency professes to be an area expert of the properties on their books, and market assessments are carried out by agencies within a particular area on that basis.

In order to find a 'willing and able' buyer for a property, the property must be correctly priced.

In order for an agent to correctly price a property, an agent must conduct a thorough inspection of the property, and familiarise him or herself with every aspect of the property – including any defects the property might have as it may affect the price and it may influence the buyer in putting in an offer.

4. CONSEQUENCES OF A FAILURE BY AN ESTATE AGENT TO ACT FAIRLY AND RESPONSIBLY IN THE MARKETING OF ITS SERVICES

If an estate agency fails to conduct a thorough inspection of a property, and markets a property at a certain price in circumstances where it later turns out that there were major undisclosed defects to the property which were easily determinable by a qualified and experienced agent, the estate agency will most certainly be exposed to potential claims from the buyer – such claim will not be based on any contract with the estate agent (or the sale agreement itself), but it will be based on the estate agency's failure to adhere to the standard of conduct which it professes to uphold (and which the market demands) in relation to the delivery of its services as an estate agent.

The seller of the property may still enjoy the protection of the 'voetstoots' clause in the sale agreement as the seller is not bound to the CPA – and this may leave the estate agency concerned wide open to potential claims from a dissatisfied buyer where no effort was made to check for defects.

5. DECLARATIONS BY SELLERS TO DISCLOSE DEFECTS – HOW DOES THIS PROTECT AN ESTATE AGENCY?

The so-called Seller's Declaration protects the estate agent against potential claims, in the following manner:

1. The market assessment by the agent is now based on accurate information and no misrepresentation is made with regard to the inherent value of a particular property;
2. The seller is forced to apply his or her mind to the condition of their property, and to disclose any defects they may be aware of to the agent, prior to the marketing of the property, or the marketing of the estate agency's services in relation to that or other properties;
3. The agent will ensure that their marketing and advertising activities are aligned to the actual condition of the property and that defects are either attended to prior to the sale taking place, or that the purchaser takes possession of the property, well knowing the condition of the property which they are buying.
4. It shows that the agent has taken reasonable care to ensure that it fulfils the expectation that was created in the market place, namely that it would provide a professional service;
5. It creates an atmosphere of transparency and buyers know exactly what they are buying;
6. The number of disputes arising from sale transactions are significantly reduced as it facilitates the resolution of disputes  - both parties have a much clearer understanding of what was bought and sold;
7. It protects both the listing agent and the selling agent as there is now a very clear description of the property and what may be excluded or  included in the sale – sellers often (mistakenly) assume that information that was given to the listing agent has been passed on the selling agent.

A buyer should not succeed in any claim against the agent on the basis of false or misleading marketing or advertising where an agency has disclosed all defects they were aware of, or could reasonably have become aware of, prior to a sale taking place.
The relevant provisions of the CPA are as follows:

Consumers right to fair and responsible marketing:

General standards for marketing of goods or services

29. A producer, importer, distributor, retailer or service provider must not market any goods or services.

1. In a manner that is reasonably likely to imply a false or misleading representation concerning those goods or services, as contemplated in section 41; or
2. in a manner that is misleading, fraudulent or deceptive in any way, including in respect of—

1. the nature, properties, advantages or uses of the goods or services;
2. the manner in or conditions on which those goods or services may be supplied;
3. the price at which the goods may be supplied, or the existence of, or relationship of the price to, any previous price or  competitor’s price for comparable or similar goods or services;
4. the sponsoring of any event; or
5. any other material aspect of the goods or services

Consumers right to fair and honest dealing:

False, misleading or deceptive representations

41(1) In relation to the marketing of any goods or services, the supplier must not, by words or conduct
           (a) directly or indirectly express or imply a false, misleading or deceptive representation concerning a
                 material fact to a consumer,

45(b) use exaggeration, innuendo or ambiguity as to a material fact, or fail to disclose a material fact if that
           failure amounts to a deception, or

        c) fail to correct an apparent misapprehension on the part of a consumer, amounting to a false, misleading
            or deceptive representation, or permit or require any other person to do so on behalf of the supplier.

(3) Without limiting the generality of subsections (1) and (2),  it is a false, misleading or deceptive representation
    to falsely state or imply, or fail to correct an apparent misapprehension on the part of a consumer to the effect,
      that

      c) any land or other immovable property

         i) has characteristics that it does not have;

        ii) may lawfully be used, or is capable of being used, for a purpose that is in fact unlawful or
           impracticable, or

        iii) has or is proximate to any facilities, amenities or natural features that it does not have, or that are not
              available or proximate to it.

Mandate agreements need to comply with the requirements of the CPA in the following respects:

• Mandate agreements must be drafted in plain and understandable language (the plain language provisions In the Act). It is advisable to have mandate agreements available in a language which is best understood by a consumer. For example, in Kwa-Zulu Natal mandate agreements should also be available in isi-Zulu, and in the Western Cape, Afrikaans;

• Mandate agreements must not contain terms that are unnecessarily onerous on the seller - the court or the Consumer Tribunal will have the power to vary or strike out terms that are unfair, unreasonable or unjust and agents may find it difficult to claim commission based on such mandates, or may find their commission reduced by the court or Consumer Tribunal;

• In terms of the Act, agreements must be interpreted to the benefit of the consumer, especially where an agreement contains an ambiguity, restriction or limitation and estate agents can no longer rely on the onerous conditions contained in their existing mandates. Agents may find that the courts will make a value judgment and not uphold or enforce commission claims where such claim is based on mandate agreements which contain wording that can be regarded as unconscionable or unfair, or where a consumer (seller) did not fully understand the meaning of a mandate agreement signed by him.

To get a copy of the mandate please contact the author.

The implementation of the Consumer Protection Act has been postponed to the 1st of April 2011 as the Minister of Trade and Industry is still in the process of finalising the regulations to the Act.  They are also putting in place the structures required to implement the Act, namely the Consumer Commission and the Consumer Tribunal which will deal with complaints and disputes.

The Consumer Protection Act brings about a fundamental change to our common law which up to now has regulated contracts concluded between suppliers and consumers.  It also deals with the protection of consumers in general.

It has created basic 'Consumer Rights' - such as the right not to be discriminated against on the basis of for example sex or race in the conclusion of contracts, and outlaws 'unconscionable conduct' on the part of a supplier of goods or services and protects consumers against unfair or misleading marketing practices.

Estate agents will be well advised to familiarise themselves with the provisions of the Act as they will now also have a legal duty of care towards buyers in addition to their duty in terms  their mandate to their sellers.

In terms of the Consumer Protection Act, an estate agent must ensure that his or her marketing of a product (i.e. the property to be sold) ties up with the actual nature and quality of the property that is sold.  The days of 'Sales Talk' is over and if an agent is aware of a defect or potential problem with a property, they would be duty bound to bring this to the attention of the buyer, failing which they may face a claim against their agency by virtue of their false or misleading conduct. 

By way of example, if an estate agent makes a statement to the effect that a property is zoned commercial when this is not the case, and if this has a material effect on the value of the property purchased, the buyer may well in terms of the CPA have grounds to claim the difference between the purchase price paid and the actual market value of the property from the agent.

It is thus critical that estate agents make themselves fully acquainted with the nature and extent of a property, and of defects which are reasonably foreseeable before they take a property on their books.  It may also be a good idea to obtain an indemnity from a seller to protect the agent against sellers who may not have made a full disclosure to them at the time that the property is listed with the agency and the mandate is signed.

Estate agents should also review their mandates with sellers to make sure the terms thereof are just and fair, if not, they may have difficulty enforcing commission claims.

The Minister of Trade and Industry, Dr. Rob Davies, has deferred the general implementation date to 1 April 2011.

The postponement will give business and the public sufficient time to prepare them for compliance with the new law.

However, the regulations are still outstanding and it is difficult to get a full picture of the impact.

The public and stakeholders can approach the National Consumer Commission for assistance and guidance as soon as their establishment is announced, which is expected in the third quarter of this financial year.

The act focuses on the protection of the consumer to “promote a fair accessible and sustainable marketplace for consumer products and services and, for that purpose, to establish national norms and standards relating to consumer protection.”

The act is the result of the intention of the Department of Trade and Industry to “create and promote an economic environment that supports and strengthens a culture of consumer rights and responsibilities.”

It seems at this stage that the act only applies to transactions that are concluded in the ordinary course of the supplier’s business. Therefore it would for instance apply to property sold by a developer and to the services provided by estate agents to sellers, but not to once-off transactions between buyers and sellers of property.

Therefore, developers, speculators and institutional investors with large property portfolios who sell property in their ordinary course of business, cannot exclude their liability for defects by way of a voetstoots clause.