A property practitioner may not accept a mandate from a seller/landlord of a property without first obtaining a completed and signed mandatory Disclosure Form (DF). The DF is in a legislated prescribed format. The completed DF must be disclosed to all prospective purchasers and they may or may not decide to submit an Offer to Purchase based on the disclosures in the DF.
This is according to Laurence Van Blerck, Professional Practitioner in Real Estate who says that
similar forms have been in use by most estate agencies since 2011 but now, by virtue of the Property Practitioners Act, it is now required to be completed, signed and attached as an annexure to Agreements of Sales and leases.
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According to Van Blerck, when a purchaser becomes the new owner of second-hand property, it is a case of “what you see is what you get and what you don’t see, you also get.” So, is the new law going to result in the disclosure of all defects prior to purchase, for example, the whole truth and nothing but the truth?
What is the purpose of the DF?
Its intention is to protect consumers in the property industry and therefore the common practice to provide a DF to purchasers has now been strengthened by this new law, he says.
It is supposed to be a written record of defects in the property and also serve as reminder for the purchaser of the right to have the property inspected at their own cost. It is a checklist for the seller to disclose defects, especially the latent (not immediately obvious, hidden from view) defects that the seller may be aware of.
Completion of the DF
If the DF is not properly completed it may create problems later in the sale process or, even worse, after the change of ownership. The DF needs to be carefully and honestly completed and the property practitioner should assist sellers in this regard. Defects should be properly disclosed or properly fixed before sale to avoid disputes, says Blerck.
Is the DF effective protection for a purchaser?
This new law may falsely raise the expectations of purchasers. Why?
The definition of defects in the DF is limited and the DF cannot be described as complete or comprehensive in any way. Is the DF a warranty or guarantee for the purchaser that there are no other defects? No, absolutely not.
Does it weaken the protection that the “voetstoots” (buying “as is” with all existing defects) clause offers the seller? No, assuming that the seller does not provide a guarantee or warranty elsewhere in the Agreement of Sale which conflicts with the voetstoots clause.
The DF form is not a:
- Comprehensive list of all
- List of repairs to be rectified by the seller prior to change of ownership.
- Substitute for a thorough inspection by the prospective purchaser.
Agreements without the DF
If the DF is not attached to an Agreement of Sale, is the sale still valid? Yes, but then it must be interpreted that there is no disclosure of defects to the purchaser. Therein lies a danger that a seller may be sued by a purchaser or a tenant may seek to cancel a lease, should a latent defect be discovered after the conclusion of the sale/lease agreement, notes Blerck.
A property practitioner who accepts a mandate from a property owner without first obtaining a completed and signed mandate may be held liable by an affected consumer and face sanction in terms of this new law.
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Private sellers (no property practitioner involved)
The DF does not apply to private sellers (unless the private seller is a developer).
Landlords and tenants
The Rental Housing Act requires that ingoing and outgoing inspections must be undertaken and the new law does not change this. Both onging/outgoing inspection and DF must be completed. In summary, the ongoing/outgoing inspections deal with wear and tear during the lease period and the DF deals with matters such as boundary issues, permanent defects etc.
Deceased estates, absent owners and investors
An executor of a deceased estate, an absent owner/landlord who has never visited the property is not in a position to disclose defects due to lack of knowledge and they should state this fact when signing the DF, he says.
Commercial property
Does the DF apply? Yes, definitely, even though it may be an administrative inconvenience for an owner where multiple agents may be mandated to sell or lease a property. It is a standard form so it simply needs to be completed once only and then circulated to all mandated agents.
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Vacant land
Should it be completed? Yes, there may be boundary line, servitude or sinkhole issues.
Advice for prospective purchasers
Undertake a thorough inspection of the property. It is your duty, says Blerck.
He says the DF should be read, considered carefully and signed before the Offer to Purchase. Make sure you know which items are included in the sale and their condition on date of transfer.
Also, examine the following carefully:
- Title Deed (you may wish to consult a conveyancing attorney)
- Building plans
- The DF
Consult an expert if you need a second opinion. In terms of the new law, a purchaser may lodge a complaint regarding defects against a property practitioner.
Advice for prospective sellers
Blerck says you still have the right to use the voetstoots clause and benefit from its protection. Sellers will adopt the standpoint that they should not be made liable for any defects that they, the seller, are not actually aware of.You have always had a duty to disclose any defect which is not obviously evident.
Ensure that the clauses in the Agreement of Sale and the DF do not contradict each other.
When selling “voetstoots”, don’t warrant, for example, that fixtures and fittings are in good condition. Should a seller be concerned about completing the form? No, not all. Simply complete it to the best of your knowledge and belief, he says.
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