Under the new Consumer Protection Act full disclosure of property defects or potential defects has become essential.
From 1 April 2011, developers, speculators, and investors with property portfolios who sell property in their ordinary course of business can no longer rely on the Voetstoots clause to limit their liability for defects. In fact the new act makes it illegal not to specify these in writing. Failure to do so can have dire consequences and could even lead to the cancellation of the sale and a full refund of the purchase price.
Previously the voetstoots clause (voetstoots is a term derived from Roman Dutch Law and means literally “as is”) protected the seller who was able to rely on the fact that it was the buyers responsibility to examine the property for any defects on the principal of caveat emptor or “buyer beware.” Previously an aggrieved buyer had to prove that a seller deliberately withheld information on a defect or was ignorant of a defect that any conscientious seller should have known about.
Under the CPA, no matter how little the seller knows, or could have known, the seller can be held liable for a defect which is discovered by the buyer after transfer takes place.
This has led to a growth industry in the form of Home Inspectors who, for a fee, will check the entire property from top to bottom and produce a detailed report which can be shown to the buyer. This is intended to remove the uncertainty from the sale and to help prevent “nasty surprises” from cropping up once the property has changed hands.
In practice very few people have the required expertise in such a wide spread of disciplines — plumbing, electrical, structural, waterproofing, finishing, etc. Furthermore, the average inspector is unlikely to do better in the way of identifying defects than the average owner doing a comprehensive inspection on his own.
The boundaries of a property are of critical importance and it is essential to establish that the boundary walls are correctly positioned and that they do not encroach on adjoining properties. Agents acting on behalf of sellers should make sure that they have access to site diagrams that indicate exactly the extent of the property. Sellers and their agents should also be aware of any proposed zoning changes in the area.
It is incumbent on the agent to show any defects to the buyer that the seller has revealed. In addition the agent needs to be proactive about physically examining the property and needs to ask probing questions of the seller regarding crime in the area, municipal services problems, noisy neighbours or noisy dogs. Failure to do so will provide buyers with grounds for legal recourse, compensation and even grounds for cancellation where appropriate.
If there is anything you would like to add, please feel free to do so in the comments.