Real Estate sellers, buyers and property professionals need to understand both how common law applies to certain property transactions, and under which circumstances the consumer protection act applies.
The CPA only applies when the seller is a property developer or an investor that buys and sells the property as a business (see our next article where the property professional gets involved).
Common law applies where the sale of a house or holiday home takes place between a homeowner and a willing buyer.
Common law takes two positions regarding the liability of the seller:
- Voetstoots clause excluded in the offer to purchase.
Duties and risks of each party involved (According to common law).
The seller
- The seller will not be held liable for any clearly noticeable patent defects on the property.
- The seller will (must) disclose all hidden latent defects that may exist.
The Buyer:
- The buyer is responsible to do or get a comprehensive condition inspection done on the property, to determine visible patent and latent defects before signing the sales agreement.
- Should the buyer detect any latent defect after purchase, the seller is liable, and the buyer may claim compensation.
- Voetstoots Clause included in Offer to Purchase.
The Seller:
- Has a duty to disclose all hidden latent defects to the buyer.
- Is not liable for patent or latent defects that have been disclosed.
The Buyer:
- Agrees to buy the property (as it stands) with full knowledge of all (patent and latent) defects.
- The onus is on the buyer to inspect or have the property inspected before purchase.
- The buyer must be sure that there are now visible or obvious patent defects.
- Is allowed to claim compensation should undisclosed defects be detected after purchase, provided he can prove that the seller knew about the defects and failed to disclose them (this can be difficult to prove).
Seller’s duty of disclosure.
The seller has the duty to disclose any defects the seller is aware of which are prevalent, especially those which are not obvious (latent defects).
If the seller hides defects in the property on purpose, the seller will not be protected. Therefore, the voetstoots clause will not protect a seller who knows of a defect in the property but does not tell the purchaser about the defect. (We would recommend that the seller/property professional get an independent property condition inspection done that will include a condition report and a property defects declaration document)
The seller can be held liable for misrepresentation by way of the purchaser instituting a claim for damages against the seller.
Property Defects Declaration
According to section 67 of the property practitioners act 2019 (2022) all sellers must complete and sign a property declaration document before the property professional is allowed to sign a mandate to market the property. This declaration must be handed to the potential buyer before he/she makes an offer to purchase the property.
Next – Article no 3 : The Property Professional and the Consumer Protection Act.