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Property Market to Be Strangled by Over-Protectionism?

Category Property market overview

It all began with the CPA (Consumer Protection Act) that came into effect in 2011 with the aim of protecting consumers from unscrupulous lenders, retailers and so forth. Now two proposed laws aim to regulate the property market in significant ways in an attempt to protect both buyers, sellers and local municipalities: one is the Property Practitioner’s Bill proposed by the EAAB (Estate Agency Affairs Board) and the other (as yet unnamed) is being proposed by SALGA (the South African Local Government Association).

The Property Practitioner’s Bill and Home Inspections

You may not have heard of a burgeoning new industry in the real estate market – the home inspection business. Essentially these home inspection agencies offer to investigate a property on behalf of, and at the cost of, a prospective buyer, an estate agent or even the seller. They tend to cover issues such as leaks, insulation, damp, structural issues etc. However they may not by law cover electrical issues as an Electric Certificate of Compliance must be obtained from and issued by a qualified electrician.

“While these kinds of inspections can certainly benefit a prospective buyer in identifying issues with the property that might not be readily apparent there are a few issues with this kind of service”, explains Bruce Swain, MD of Leapfrog Property Group, “one of them being that few buyers would be willing to pay money for a report on a property unless they were absolutely invested in buying it. An inspection also doesn’t force the seller to accept a buyer’s offer – especially if that’s been decreased due to problems that have been highlighted”.

 While details on the proposed bill remain murky there is talk of the EAAB pushing for these inspections to become mandatory - something that would increase the red tape as well as the expense incurred by buyers (or possibly sellers). “As Leapfrog we’re 100% behind protecting both sellers and buyers from bad deals but believe that this is where a qualified, experienced agent is of greater benefit – adding an additional cost to the transaction will likely prove prohibitive to some and still doesn’t offer either party a guarantee of satisfaction in any event”.

The SALGA (South African Local Government Association) Proposal

Anyone following the news knows that many municipalities are struggling to collect outstanding rates – to the tune of almost R100 billion. According to a report in the latest Weekend Argus, SALGA now wants to introduce a law that will enable the creation of an agency which can attach people’s salaries.  

“Naturally municipalities need to be able to collect debt, that’s not up for debate. I do however have serious qualms about establishing another agency (which leads to more expenditure in terms of salaries, office space etc) to do what the courts are already set up to do. All this law would essentially do is to create another rung in the legal system i.e. this new agency, the magistrate’s court, high court and the supreme court of appeal. Why add another tier to a system that’s already more than capable of handling these cases?” asks Swain.

Another question is what recourse home owners will have if their salaries have been attached by this agency due to incorrect billing by the municipality?  

It’s also already in a seller’s best interest to pay their municipal bills as they won’t be able to sell the property without a certificate from the municipality. This may of course only force them to settle their account once they want to sell but, in the interim there’s nothing stopping local government from taking them to court.

At the end of the day attempting to protect people (whether as individual or as organisations) is certainly a noble pursuit but it can over complicate matters – leading to greater expense and effort. Swain believes that the old adage of “buyer beware” remains true and a buyer’s best protection is still to do their homework before buying. He also believes that SALGA would do better by working to improve the current system, as opposed to complicating it further.

 

Author: Leapfrog Property Group

Submitted 04 Aug 15 / Views 3189