The Consumer Protection Act, No 68 of 2008, applies to all auctions conducted since 2011 when the Act became finally effective.
Sections 45 and 65 of the Act, and regulations 18 to 33 apply to auctions conducted in South Africa.
Regulation 24(b) prohibits an auctioneer from charging or receiving any fee or commission in respect of the sale of immovable property until the buyer and the seller have signed a “written agreement in respect of the sale of such immovable property”.
Regulation 24(c) prohibits the auctioneer from charging or receiving any fee or commission from the buyer if the seller backs out. If the buyer has already paid a fee to the auctioneer, the auctioneer must immediately refund the buyer the amount paid for commission and the deposit on the sale.
Regulation 24(f) makes it clear that the auctioneer is entitled to payment from the seller of a maximum of 10% of the purchase price or total costs of advertising and conducting the auction if the seller defaults.
According to section 65 of the CPA, an auctioneer must keep the buyer’s money (the deposit and the commission) in a separate account from the auctioneer’s own funds.
I’ve assisted a buyer who placed a winning bid on property (the CPA calls it “immovable property”) at an auction, but was left in the lurch when the seller backed out of the sale because the offer was less than he had expected. The buyer had paid a hefty deposit and the auctioneer’s commission to the auctioneer, but the auctioneer said it was a valid sale and refused to pay the money back to the buyer. A formal letter of demand and some pressure (we threatened to report the auctioneer to his professional body and to the National Consumer Commission for disregarding the CPA) eventually persuaded him to refund our client in full.
If you are in this position, I recommend you send a written demand to the auctioneer for payment within 72 hours. If he doesn’t pay in full by the deadline, you can take the following steps:
- Breach of the CPA- I suggest you lodge a complaint with the National Consumer Commission (NCC). It should be a simple matter for the NCC to investigate and refer the matter to the National Consumer Tribunal for hearing. The Tribunal can impose a fine of up to R1 million on the auctioneer.
- Breach of the code of conduct of the auctioneer’s professional body- I urge you to also lay a charge of misconduct. If the auctioneer is registered with SAIA ((SA Institute of Auctioneers), see their code of conduct here: https://www.auctioneering.co.za/uploads/documents/SAIA_Code_of_Conduct.pdf If the auctioneer is registered with SAPAA (SA Professional Auctioneers Association), see their code of conduct here: http://www.sapaa.co.za/wp-content/uploads/2017/02/SAPAA-Code-of-Conduct.pdf
- The auctioneer may be guilty of theft- you could lay a charge at SAPS.
The Consumer Goods and Service Ombud has also published an advisory note on auctions- you can find it at http://www.cgso.org.za/wp-content/uploads/2016/05/Advisory-Note-16-Auctions.pdf