SA’s new consumer protection legislation came into effect this month and has introduced a host of new regulations which will affect auctions, particularly sales in execution, which are conducted by the sheriffs of the court.

The Consumer Protection Act replaces the many laws regulating consumer protection with a single comprehensive framework for protecting consumer rights.

Much of the detail regarding how the act should be applied is set out in the auction regulations.

Auction Alliance CEO Rael Levitt says: “Although it was hoped that the Department of Trade and Industry would give auctioneers an opportunity to properly prepare and comply with the amended regulations, the new regulations will come into immediate effect. This means that sheriffs and execution creditors, largely banks, are now forced to comply with the new act and will have to immediately revisit various aspects of their preparations, including policies, procedures, business practices and all agreements and documentation.”

The final regulations have introduced a number of significant changes to the draft regulations that were released in November.

“Sales in execution auctions conducted by the various sheriffs around the country fall under consumer protection, and while bidders should find it easier to get involved in these judicial auctions, some of the new regulations may be extremely difficult for the smaller sheriff’s departments to implement,” Mr Levitt says.

As an example, he says that many sheriffs do not register bidders for real estate sales in execution, but now they will not only have to register each bidder with a paddle, but will have to ensure that they comply with the requirements of the Financial Intelligence Centre Act.

This will be extremely difficult for sheriffs to do at on-site sales or on the court house steps.

A controlled set of auction rules will create an environment of openness and transparency and will lift the veil on an industry, which for generations has operated under the radar.

Sales in executions will now be regulated, and the Department of Trade and Industry will regulate all sheriffs’ auction sales. This will make these sales one of the world’s most regulated auction environments.

The auction laws take modern business practice into account and go into detail about what auctioneers, including sheriffs, must say at an auction, how the sheriffs advertise and what their contracts contain.

“As an example there are more than 20 rules dealing with advertising, and the regulations go into great detail about what information sheriffs must disclose to the public,” Mr Levitt says.

“Another very difficult regulation for sheriffs is rule 28(5) whereby the sheriff must afford consumers a reasonable period of time and opportunity to inspect the goods and properties on offer prior to the commencement of the auction,” he says.

Many sheriffs cannot get possession of a property, especially if debtors are restrictive. Many buyers at sales in executions have complained that they cannot see properties prior to sales in execution.

“We agree these laws need to be clarified to offer a better understanding to South Africans bidding at auctions. When the public become aware of the effects and changes these laws will bring, they will be attracted to an industry that is better regulated and offers them better protection.

“Assets will be sold in a more transparent manner and the opportunity for people to be duped into paying more than they were willing to bid will be a thing of the past.”

These new laws are coming at a time when sales in execution have grown sharply due to the distressed property market.

However, this will open up a large part of the real estate market, which has been hidden for a long time, Mr Levitt says.

Source: Business Day