Hidden defects and unjustified claims
Have you recently bought your dream house, only to discover a defect that was clearly hidden from you? Perhaps you have recently sold and must defend yourself against the buyer’s unjustified claims of damages. Thankfully, there are a few protections in place to help sellers and buyers who find themselves in these kinds of situations.
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, explains that defects are one of the leading causes of disputes during real estate transactions. “Complaints often arise over who is responsible for fixing the issues. The problem is that too few people are aware of what legal protections they have when it comes to these matters,” he notes.
Goslett admits that these sorts of issues can become complicated; but, in general, the seller of a property has the responsibility to disclose to the buyer any known defects in the property at the time of finalising and signing the offer to purchase.
“If a flaw is discovered after the property has been sold, the onus will be on the buyer to demonstrate that the seller had known about the flaw and purposefully or fraudulently concealed it from the buyer during the closing. The responsibility cannot fall on the real estate practitioner unless the seller told the agent and the agent did not disclose the information to the buyer or purposefully hid the information from the buyer,” Goslett clarifies.
To assist towards protecting all parties involved, the newly introduced Property Practitioners Act 22 of 2019 (Act) enforced a new property defects disclosure form to be provided by the seller to the buyer before an Offer to Purchase can be signed. According to Section 67 of the Act:
“A property practitioner who fails to comply […] may be held liable by an affected consumer. […] Nothing in this section prevents a consumer, for his or her own account, from undertaking a property inspection to confirm the state of the property before finalising the transaction.”
This defects disclosure form is not to be confused with the inspections that need to happen to issue the necessary compliance certificates. This form merely acts as a way for sellers to disclose a list of any known defects to the buyer. This can be useful to demonstrate which defects were explicitly communicated to the buyer.
“If the problems are noted, the seller will have good evidence to support the claim that the buyer knew about the defects and is not entitled to damages for concealment. It is also a good idea to list any flaws that the seller will fix before the buyer moves in as a way to safeguard the buyer from a seller who tries to invoke the voetstoots clause after the transaction has been completed or later retracts their assurance to fix the flaw,” Goslett suggests.
Explaining what he means by “voetstoots”, Goslett explains that, in the simplest terms, it signifies that the buyer purchases the property “as is”. The voetstoots clause, however, will not shield a seller from responsibility if the seller knew about the defect and purposefully kept it from the buyer. It also cannot protect the seller if it was agreed to in the sales agreement that the seller would fix the issue on their own account.
As a final word of advice, Goslett recommends hiring an independent property inspector to verify that the house you buy is in excellent condition. “While this will be at the buyer’s own expense, it may help them avoid a lot of money and frustration in the long run. Although a local RE/MAX agent is knowledgeable enough to offer buyers and sellers some broad guidance on these matters, it is preferable to obtain qualified legal assistance if problems do occur,” says Goslett.
An article published on Property24 on May 9, 2022, features Andrea Tucker, Director of MortgageMe, who explains how the Property Practitioners Act (PPA) has been helping buyers make more informed decisions since its implementation on February 1, 2022.
Among many significant changes this consumer-focused piece of legislation is bringing to the real estate industry, a highlight is that it is now a legal requirement for sellers to disclose all property defects they are aware of, which has always been best practice but is now mandatory.
“In what is arguably one of the biggest investments you will ever make, this new act ensures that you have all the facts at hand before you sign on the dotted line,” explains Tucker.
The property defects disclosure form needs to be signed by all parties and attached to the sale or lease agreement. This places a legal obligation of fairness to both the buyer and seller on the agent or the ’property practitioner’, a term now used to describe estate agents as well as commercial property brokers, bond originators, lawyers, auctioneers, property developers and other professionals in the property industry.
What does this mean?
The PPA compels homeowners wishing to sell or rent their house to make a written disclosure to every potential buyer or tenant disclosing all known patent and latent defects of the property.
Some common examples of patent defects, or those that can be seen by the naked eye, include cracked walls, broken windows, chipped paint, broken tiles, rotting woodwork and any other obvious damage.
Latent defects, which are harder to detect and often require the help of professionals to recognise, include unsteady walls, rising dampness, leaking roofs and other structural issues.
Tucker says while not mandatory, a home inspection done by an independent property inspector makes good professional sense on the part of the agent selling the house, and the report can be used as a disclosure document. Sellers who conceal defects in their properties can be sued by buyers for false advertisements.
“A professional property inspection will bring peace of mind to buyers and increase trust between buyers, sellers and the agent,” says Tucker.
The Act also requires that every person or business who earns a commission or a fee from the sale or lease of property holds a valid Fidelity Fund Certificate (FFC) from the new Property Practitioners Regulatory Authority (PPRA) and can prove that they are tax and BBBEE compliant.
“This will assure buyers, sellers, tenants and landlords that the agent they are dealing with is a properly qualified property practitioner,” explains Tucker.
What to look out for when signing an OTP
When signing an OTP, look specifically for the mandatory disclosure form. It must be provided to any prospective buyer, signed by both the seller and estate agent (property practitioner), and attached to the sale agreement.
If there is anything on that form that concerns you, you are fully entitled to undertake a property inspection to confirm the state of the property before finalising the sale. But it is in the best interests of the estate agent to certify that the form discloses any issues, as they can be held liable for not complying with these requirements, says Tucker.
This new act, created primarily to protect consumers in the property industry, will go a long way to ensure a more regulated industry, cutting down the number of unregistered agents scamming consumers out of deposits and other fees. “The PPA will create more informed buyers, and informed buyers make good decisions.”
Article courtesy of property24