Sellers must disclose property defects

31 May 2012

The past few years have seen the property market being more and more heavily impacted by legislation.

To summarise, Reynolds explains a voetstoots clause will protect a seller from any latent or patent defects: a patent defect is visible and obvious to all, and the purchaser therefore buys the property with full knowledge of this defect. A latent defect is more contentious: a latent defect, as the word implies, is “hidden” and requires a trigger in order to activate it. “It is impossible for a seller to have any knowledge of a latent defect (since it is hidden) and hence, the voetstoots clause protects the seller in the event that this latent defect suddenly emerges after transfer has taken place.”

“The National Credit Act has served us well, buffering our economy from the financial devastation experienced in global markets, and now that the Consumer Protection Act has been in force for almost a year, we are beginning to see its influence,” says Carol Reynolds, area principal for Pam Golding Properties in the Durban North and La Lucia areas

She says the Consumer Protection Act applies mainly to new sales by developers, who sell properties in the ordinary course of their business directly to the public, and its impact on once-off private second-hand property sales is minimal.

There has been much confusion regarding the ambit of the Act, and furthermore, the public have been left questioning whether or not the voetstoots clause still applies, says Reynolds.

“It is now clear that the voetstoots clause does indeed remain in full force in property sales where the CPA is not applicable.

“It is, however, true that the CPA has resulted in the seller’s obligations to disclose being more closely scrutinised by agents and purchasers alike,” she says.

 In general, she says the largest area of contention pertains to latent and patent defects and the rights of purchasers and sellers in respect of same.

To summarise, Reynolds explains a voetstoots clause will protect a seller from any latent or patent defects: a patent defect is visible and obvious to all, and the purchaser therefore buys the property with full knowledge of this defect. A latent defect is more contentious: a latent defect, as the word implies, is “hidden” and requires a trigger in order to activate it.

“It is impossible for a seller to have any knowledge of a latent defect (since it is hidden) and hence, the voetstoots clause protects the seller in the event that this latent defect suddenly emerges after transfer has taken place.”

She says the purchaser consequently buys the property “as is” and accepts liability for any latent defects that may emerge post-transfer.

Reynolds says the big issue, that exposes a seller to legal action, is fraudulent non-disclosure: this occurs when a seller is aware of a defect, and fails to disclose this defect to the agent and/or the purchaser. If a seller takes steps to conceal this defect, his intent is clear, and his actions are fraudulent, and he will not be able to hide behind the protections afforded by a voetstoots clause.

It is therefore imperative for sellers to disclose all known defects to their agents before placing their properties on the market. The agents are then obliged to disclose these defects to their potential purchasers.

A problem arises where a seller is aware of a defect and undertakes to repair it prior to marketing his property, she says. “In this situation, it can be argued that there was no defect at the time of marketing, as the defect had been fixed.”

 To protect all parties, once the defect has been repaired, she says it is advisable for the seller to produce proof of the repair to the agents, by way of a warranty from the contractor who remedied the defect. If it emerges that the defect has not been repaired properly, then the onus is on the seller to claim against the contractor and ensure that the defect is fixed.

Reynolds says in a recent situation, a seller repaired his pool, but it emerged post-transfer, that the repairs had not been done properly, and hence the problem re-emerged.  “The purchaser sought legal advice, and the seller was found liable in that instance. The purchaser then had a claim against the seller, who in turn had a claim against his pool contractor.” 

“It is always better to avoid lengthy and costly litigation, and therefore, as agents, we undertake to ascertain if there are any known defects prior to marketing a property.”

She says sellers should be mindful of their duty to disclose, and should advise the agents of all known defects in advance.

“Having said that, a seller cannot be expected to know about latent defects, and therefore, purchasers need to be aware of the risks associated with purchasing a second-hand property particularly given that the voetstoots clause is designed to protect the seller; and the Consumer Protection Act is not a protective shield for the purchaser in these circumstances."

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