WHAT IS THE COOLING-OFF PERIOD WHEN BUYING A HOME?
When buying a property, you have to be 100% sure of your decision because once the offer to purchase is signed by both the purchaser and the seller, it becomes a legally binding document. But, what if you change your mind or realise it was not the right decision? Is it possible to cancel the contract? Well, in certain very limited circumstances where the cooling off period is applicable, yes…
How does the “Cooling-off Period” work?
The cooling-off period is useful in certain circumstances but is not a solution for simply changing your mind. In terms of The Alienation of Land Act, residential property transactions of R 250 000.00 or less are subject to a “cooling-off" period of five working days, calculated from the date of signature of the Offer to Purchase. It does not apply to residential properties sold for more than R 250 000.00. This provision remains in place and is not affected by the Consumer Protection Act. It should also be noted that the cooling-off period is only applicable if the purchaser is a Natural Person (Natural Person is defined as not a Company, CC or Trust) and the immovable property is bought for residential purposes. A purchaser of agricultural land does not enjoy this cooling-off right.
What does the Consumer Protection Act state?
According to Adrien Goslett (CEO and Regional Director of RE/MAX of Southern Africa), many people are under the misconception that the Consumer Protection Act (CPA) gives them a cooling-off period when entering into a Sales Agreement. But, that is not entirely the case. 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. 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 showhouses.
What is considered “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. It is simply a system of marketing where the marketer communicates directly with a customer with the goal of extracting a measurable response and/or concluding a transaction. Every person has the right to privacy, this includes the right to refuse to accept, require the cessation of further communication, and pre-emptively block communication for the purposes of direct marketing.
In the event of a Private Sale
The Act also offers protection to buyers who are purchasing from a private seller. However, consumers will only be protected if they entered into a transaction with a supplier in the ordinary course of the supplier’s business. This simply means that sellers who do not earn a living from selling or buying property are excluded from the Consumer Protection 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.
What to take away from this?
It is imperative that you only sign one Offer to Purchase at a time and that you are 100% sure when doing so, as it is legal and binding the moment it is signed. Don’t rely on the CPA’s cooling-off period to get you out of the contract, because it is only applicable in much fewer circumstances than you think. Many people can relate to the feeling of regret or despair after spending hard-earned money. To avoid this, before you make a life-altering purchase, consult the friendly and professional team of real estate professionals at RE/MAX of Southern Africa to help steer you in the right direction.