‘Cooling off’ change will help buyers

2009-01-05 00:00

Many more purchasers of immovable properties will enjoy the benefits of the “cooling-off” right if recently announced legislative proposals are adopted.

According to Shepstone & Wylie’s David Warmback, the Department of Trade and Industry, which administers the Alienation of Land Act 68 of 1981, is contemplating increasing the 10-year-old prescribed monetary threshold from R250 000 to R500 000, in respect of a purchaser’s right to revoke an offer or terminate a deed of alienation in property transactions.

The Trade and Industry minister, in December 12’s Government Gazette, called for those who wish to comment on the proposal to submit written representations by no later than February 28.

The right of a purchaser to revoke an offer or terminate a deed of alienation, known as the “cooling-off” right, was introduced in 1998.

It is intended to protect purchasers of immovable properties who do not have enough time to consider the consequences of a purchase properly. The cooling-off period gives a buyer a five-day period to reconsider a purchase and, if not satisfied, to get out of it.

The right only applies in certain circumstances, including when a property is bought for R250 000 or less; when the purchaser is an individual; and when the purchaser has not reserved the right to nominate another person to take over his rights.

While the R250 000 threshold was appropriate in 1998, Warmback says that “with the rapid escalation in property values, there have been less and less transactions which fall within the threshold”.

Warmback believes the proposed increase will be welcomed by purchasers, but many in the real estate industry will view it with trepidation. “When the legislation was first introduced in 1998, the cooling-off right led to much confusion and furthermore it was evident that the right is open to abuse,” he said.

•Make representations to Segoane Monnye of the Consumer and Competition Policy and Law Consumer and Corporate Regulation Division, Private Bag X84, Pretoria 0001, on fax 012 394 2525 and by e-mail to segoanem@thedti.gov.za.

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