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Property Defects Full Disclosure Required By Consumer Protection Act

Property defects must be fully disclosed

Property defects must be fully disclosed

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.

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107 Comments

  1. siya says:

    Hi John

    I bought a house last year through an estate agent. I have recently been suspecting a problem with my neighbour’s fencing. Then I went to the municipality who gave me the sketch of the site and indeed my site has been encroached on. Can I hold the estate agent liable because the neighbour is in denial and a surveyor will cost me.

    • John says:

      Hi Siya,

      This is a more common problem than one would imagine. Often the boundries are at variance with the site diagram, or the property may be incorrectly described. For example, the extent of the property may be less than the area conveyed in the Offer to Purchase (OTP). There may be an error in the Title Deed of the property.

      It’s important to get all the facts so that you know who’s to blame, and what to do to fix it. There may several options to consider in reaching a solution. An attorney would certainly help to bring some clarity to the problem. You should do your best to see one as soon as possible.

      To keep the costs down, your attorney might be able to help you negotiate reasonable compensation with the liable party, be it your neighbour, the seller or the agent, doesn’t matter.

      Best of luck, and thanks for your contribution.

  2. ashley says:

    Hi we bought a house about 8 months ago i only now noticed some defects that have occured, the defects were not there when i bought the house it took some time for the damage to take place, the celing is cracking and the roof is leaking due to there not being plastic in the roof, what do i do? cani contact the seller to fix the issues? thank you for your time.

    • John says:

      Hi Ashley,

      When considering legal recourse, it’s always a good idea to consult with an attorney.

      The CPA requires a seller’s disclosure of defects only if the seller is a ‘supplier,’ as is mentioned in the above article. It’s more likely that your contract contained a voetstoots clause. To claim damages you may need to prove that the defects you mentioned were pre-existing, that this was known to the seller and that it was purposely hidden from you.

      You could start by discussing a compromise with the seller and see what comes up. You might be pleasantly surprised.

  3. Natalie says:

    Hi John,

    My husband and I signed an offer to purchase on a home. The contract stated that we were aware of the existing cracks on the premises. The agents assured us that work was done to repair the cracks and that it was still under guarantee according to the Engineering report. We thus signed in good faith that the report existed and was recent.

    Consequently, we discovered that the report had expired in 2010 and was no longer valid. We then had an Engineer inspect the property and estimate the cost of the repairs which amounts to about R200 000. From a affordability point of view we could not go ahead with the purchase and cancelled the sale, based on the fact that the correct information was not disclosed.

    The seller is now holding us liable for damages and the agent says they did not do anything wrong. What would you advise us to do?

    Thank you

    • John says:

      Hi Natalie,

      Apparently, the agent and the seller have been less than honest with you about the nature and extent of the ‘cracks’ on the property. You need the professional help of an attorney to help you deal with the sellers claim against you.

      Best of luck.

  4. Lorraine says:

    Dear John,

    I need advise on Non-disclosure. We have just taken occupation of the house we are in the process of buying to find out that the house and area are very high in crime. When we first saw the house it was my first question to the estate agent and she said she was not told of any issues. I asked this repeatedly.

    We moved in to the house on the Saturday and we saw the owner on the same day. I again asked about security and he said he had no issues in 10 years. My main issue when buying a house was the safety. I fell that if they told me the truth I would not have bought the house at all.

    Since moving in we have found out that the owner was held at gunpoint in his home and robbed. The man across the road was hijacked. Every single neighbour around the property has either be robbed or hijacked.

    What are my rights? I feel the owner should have told me the truth. And the owner put a clause in the OTP that he is not responsible for the alarm, etc. We said that was fine since we were under the impression it was a safe place to live. Please can you give me some advise here on what our rights are.

    Thank you Lorraine

    • John says:

      Hi Lorraine,

      As mentioned in the above article, failure to disclose issues such as noisy neighbours or problems with crime may provide buyers with the grounds for legal recourse, compensation or even cancellation where this is appropriate.

      If you are considering cancellation it’s important that you seek the professional help of an attorney who can peruse your documentation and advise you as to what remedies may be available to you. You would need to see an attorney other than the conveyancer who is attending to the transfer.

      Good luck.

  5. N Hadebe says:

    Hi John

    My fiancé and I put through an offer to purchase, but our offer was a back-up offer. After two weeks of looking we found another unit that we were interested in and decided to withdraw the back-up offer as it was not into effect as yet, (however we were already granted a bond for the property which we cancelled).

    Now the estate agent and the seller are threatening to sue us and to apply for an interdict for any bond that we apply for, due to us not continuing with the sale. After the first offer that was already in place before us didn’t go through, do they have the right to do so?

    Thanks

    • John says:

      You signed an Offer to Purchase (OTP) that was subject to the granting of bond finance. This OTP became legally binding on you the moment your bond finance was approved. At that point it was too late to withdraw from this offer. You should not have entered into the second offer before your first offer was withdrawn. At the very least your second offer should have been made subject to the suspensive conditions of your first offer not being fulfilled.

      You now have the choice of withdrawing from either of the two sales that you have entered into, and paying the respective penalties applicable to cancellation. The moment you receive a legal demand you should immediately consult with an attorney, not the conveyancing attorneys involved with either sale, as these are acting in the interests of the sellers.

      Good luck.

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