Most Costly Mistake To Make When Buying Or Selling Property

Since the introduction of the Consumer Protection Act (CPA) on 1 April 2011 players in the property market have been debating over the effect that the CPA will have on property transactions with the imminent death of the “voetstoots” or “as is” clause.

Although the majority of media reports deal with the implications of the CPA from the seller’s perspective, potential property buyers must be made aware of what some sellers are doing to combat their increased liability in terms of the act.

Implications for the Seller

The “voetstoots” clause has for many years offered the sellers of property some measure of protection. Most sellers of second-hand property have in the past relied on the “voetstoots” or “as is” clause to protect themselves from any claim for defects that may become apparent after the sale of the property. In terms of common law however, buyers were able to sue the seller despite the inclusion of the “voetstoots” clause if the property was defective at the time of the sale and the seller knew of the defect but failed to disclose the defect to the buyer knowing that the defect would have influenced either the price of the sale or that if the buyer was aware of the defect would not have purchased the property.

In terms of the CPA it is now required that all material facts be disclosed and any misapprehensions on the part of the consumer be corrected by suppliers of goods or property, if failure to do so could be interpreted as deception.

In terms of the act the house buyer is entitled to expect that the property being purchased complies with all relevant legal standards, is of good quality and has no undisclosed defects.
The act defines “defects” as any imperfections that render the property less acceptable than “persons would reasonably be entitled to expect in the circumstances”

In terms of Section 55(5) of the CPA “it is irrelevant whether a product failure or defect was latent or patent, or whether it could have been detected by a consumer before taking delivery of the goods.”

In other words unless a house is in an immaculate condition the chances are that the buyer will be able to claim for the repairs of any defects making it a risky business to sell your house.

Sellers and agents who wish to protect themselves from liability under the CPA can commission a home inspection report at the outset and make the findings available to any potential buyers. This way all potential buyers will be aware of all defects and the costs to have these defects repaired. In terms of Section 55(6) of the CPA the buyer waives his right to receive a property free of defects if the buyer has been informed in detail of any defects and the buyer has “expressly agreed to accept the property in that condition”.

If however any undisclosed defects are discovered within six months after the buyer has taken delivery of the property then in terms of the CPA the buyer can demand redress. In terms of Section 56(2) of the act this redress places an obligation on the seller to “repair, replace or refund” Should the seller have the defects repaired then a further three month implied warranty is applicable in terms of Section 56(3).

It should be noted that a private once-off sale by people who do not sell property in their ordinary course of business is not within the ambit of the act and these sellers may still rely on the “voetstoots” clause.

To re-cap – the CPA now offers the buyers of property the right to purchase property without any defects unless the defects have been disclosed and the buyer expressly agrees to purchase the property with full knowledge of the defects. Furthermore the buyer is granted the right to redress if any undisclosed defects are discovered within six months of taking transfer of the property.

Implications for the Buyer

Without the protection offered by the “voetstoots” clause and with the added liability that the CPA has bestowed upon the sellers it is not too surprising to hear that often buyers are being asked to sign disclosure documentation before the property has been checked by an accredited home inspector.

There are many latent defects that only a qualified building inspector or structural engineer are likely to identify. By signing off disclosure documents in respect of key areas such as geyser conditions, damp problems and roofing you may be signing away your rights to a claim for defects in these areas making them your problem.

Buyers should not sign any sales agreements before an accredited home inspection has taken place and all sales agreements should be subject to a favourable inspection report.

A professional building inspector should provide a comprehensive report on the condition of both the exterior and interior of the property, disclosing any defects and recommending repair solutions. With this report you as buyer will be in a better position to make an informed decision as to whether or not you should purchase the property.

In countries such as the US, UK and Australia it is standard practice to make use of an accredited home inspector when buying property.

The purpose of the Consumer Protection Act is not to discourage people from buying or selling property but rather to protect consumers (buyers) from unscrupulous business practices. Unfortunately there will always be some who manage to find a way to circumvent the law to protect their own interests.

In Conclusion

Whether you are wanting to buy or sell property not making use of an accredited home inspector to highlight any defects may prove to be one of the most expensive mistakes you make.

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