sales
30 May 2006
This communication alerts the media, business and the public about scams or
unfair business practices prohibited in terms of the Consumer Affairs (unfair
business practices), Act 71 of 1988. This consumer alert pertains to the
prohibition of hidden liabilities on property sales.
What is public property syndication?
Public property syndication is a group of investors invited by word of mouth
or various media such as radio, television, telephone, newspaper and magazine
advertising, brochures and direct mail to participate in property schemes by
investing in entities like companies, close corporations, trusts, partnerships
or individuals.
The sole assets of these entities are commercial, retail, industrial or
residential properties and the investors are told that they share the benefit
of net rental growth through proportionate share income.
What is the property syndication disclosure document?
The property syndication disclosure document should contain all prescribed
information on the terms and conditions of investment to enable the investor to
make an informed decision. This should include the risks involved if investors
are unable to sell when they want to, the length of the investment term and if
the investors are responsible for finding their own buyer(s) if they decide to
sell.
Types of property syndication schemes
There are two types of property syndication schemes:
* Public property syndication schemes invite members of the public to
participate through media such as radio, direct mail, television, newspaper or
magazine advertising.
* Private syndication schemes to not employ the media to invite members of
the public to participate, but approach friends and family only take up shares
in the scheme.
In both instances the promoters are required to disclose the information on
public property syndication listed previously.
Why is withholding of information on public property syndication
prohibited?
The consumer affairs committee conducted an investigation into the
syndication schemes and Notice 2137 of the investigation appeared in Government
Gazette 26833 of September 2004.
The committee found that:
* some property syndication schemes or their agents withheld material and
relevant information from consumers intentionally or unintentionally
* such withholding of material and relevant information from consumers was
harmful to them, notably to non-professional investors such as the uninformed
and certain elderly consumers
* there is no market for these unlisted shares in which share prices are
determined by supply and demand.
The Minister promulgated the final requirements that compel all promoters of
public property syndication schemes to make the necessary disclosures to
investors in writing.
Any person who does not comply with these requirements commits a criminal
offence and shall be liable on conviction to a fine not exceeding R200 000 or
to imprisonment for a period not exceeding five years or to both that fine and
that imprisonment. This notice became effective on 30 March 2006.
What actions can you take if you are an investor in a property syndication
scheme?
If you see or suspect that a public property syndication scheme or its agent
withholds material information, you can contact the customer contact centre at
0861 843 384 (ask for consumer help line) or write to the dti at:
The dti
Consumer Complaints
Consumer and Corporate Regulation division
Private Bag X 84
Pretoria
0001
Enquiries:
Henriette van der Merwe
Tel: (012) 394 1640
Cell: 082 572 8184
Please address all your media enquiries to:
mediarelations@thedti.gov.za
Issued by: Department of Trade and Industry
30 May 2006
