Who is liable for property defects from signing a Sale Agreement until date of registration?
Category 3%.Com Properties
Introduction
Buying a house can be both exciting and nerve racking as it is a huge financial investment and a long-term commitment.
And it is not a simple process either - there are grey areas like who is liable for property defects, between the period of when the Sale Agreement is signed, and when the property is transferred - a period of about 3 months.
There is not a clear-cut answer and there are numerous variables to consider such as latent defects, patent defects, the 'voetstoots' clause, passing of risk, and warranties.
Think of it like this: when you buy a car, you would first take it for a test drive before you decide to buy it. Right?
Use the same approach when you buy your dream house. Make sure you inspect the property as much as possible.
If you need to view the property 5 times before you decide to buy it, do it. If need be, get a professional to inspect the property and to provide you with a detailed report. This way, you conclude the deal with confidence and peace of mind.
The Property Practitioners Act ('the Act') came into effect on 1 February 2022. The Act requires of the Seller to complete a Disclosure Form, listing all known defects on the property. The Disclosure Form must be attached to the Sale Agreement.
The Disclosure Form is important because it protects both the seller and purchaser.
You can read more about this by clicking here: Disclosure Form.
But, you cannot rely solely on the honesty and/or knowledge of the Seller. It is far better to engage the services of a professional to inspect the property.
What are Patent & Latent Defects?
A patent defect should be clearly visible to the naked eye by a prospective purchaser. Such defects can range from cracks, damaged gutters, broken windows, glass that is cracked, or even broken tiles etc. It is the responsibility of the prospective purchaser to inspect the property properly before he buys.
On the other hand, latent defects are not clearly visible to the naked eye of a lay person. Latent defects may include water damp, termites, a rusty geyser, a leaking roof, broken pipes, pool pumps etc.
The seller is liable for latent defects if he knew of it, but did not disclose it to the buyer - the place to do it is in the Disclosure Form and the onus rests on the purchaser to prove this.
Here again, the help of a professional can be invaluable as they can assist to identify latent defects before you sign on the dotted line.
Voetstoots Clause
Most agreements have the so-called 'voetstoots clause,' which means you buy the house as is, or as it stands.
The voetstoots clause protects the seller against liability arising from latent defects in the property and of which the seller did not know or could not reasonably have known. However, if the seller knew or ought to have known of the defect and omitted to disclose it to the buyer, the voetstoots clause will afford him no protection and he will be liable for such latent and undisclosed defects.
Passing of Risk
Under common law and, in the absence of any contrary arrangement between the seller and buyer, the purchaser is liable for any damage or destruction of the article sold, once the agreement is concluded and final ("perfecta") - even before the article is delivered to the buyer.
This means that the purchaser is liable for damage to the property even before occupation!
HOWEVER,
Most sale agreements have a so-called "Possession and Risk - clause".
This clause is critical, because, it stipulates that only on registration of transfer of the property, 'Possession and risk' will pass to the purchaser.
That is why it is so important that the seller keeps the property insured until date of transfer, when the purchaser's insurance will kick in and he takes ownership (possession) and risk of the property.
Express Written Warranty
A warranty is nothing different to any other undertaking stipulated in the agreement. In other words, any undertaking in a written and signed agreement is by law a 'warranty.'
That is why the Disclosure Forms is so important. By law, it must be attached to the Sale Agreement and therefore it forms an integral part of the agreement, including a long list of possible warranties. That is also the reason the Disclosure Form should be completed with the assistance of a reputable and experienced agent or an attorney.
More importantly, should the seller not know the condition of a feature of the property, he should say so and not make false promises. (For instance, where the seller is unaware of water damp or rusty geysers, he must indicate this in the Disclosure Form not as simply 'Yes' or 'No', but as 'Unsure''). Otherwise, the seller may unwittingly bind himself to a long list of warranties.
Conclusion
It is of the utmost importance that both parties (Seller and Purchaser) are aware of the terms and conditions in a Sale Agreement and possible warranties.
Seller, make sure your property is properly insured until date of transfer.
Purchaser, make sure the 'Possession and Risk' clause is included in your sale agreement.
If you find yourself in a difficult legal situation, contact us and we will be with you every step of the way. 3%. Com Properties - Lawyers selling properties, it makes sense ®. www.threepercent.com
The Seller and Purchaser must be aware of the terms and conditions in a Sale Agreement, when purchasing a property.
Author: 3%.Com Properties