Selling a property with defects: What you need to know

The Purchaser signs an agreement of sale with the Seller. The property is transferred into the Purchaser's name. A month later, there were heavy rainfalls and the roof leaks. Is the Seller liable to repair the roof or the Purchaser, as the new owner?

To understand which party is liable, one must appreciate the difference between latent and patent defects. A latent defect is not visible or can be discovered when inspecting the property. This type of defect impairs the use and enjoyment of the property. Typical examples of latent defects are leaking roofs, dampness and/or structural defects in the foundation, to name but a few.

On the other hand, a patent defect is visible when inspecting the property. Hence, the parties can discuss the options of who will attend to the repairs. The same may be negotiated between the parties, be it the Seller who repairs the patent defect or reduces the purchase price for the Purchaser to repair.

Thus, it is the latent defect matter that triggers the dispute between the parties should it arise. The common law position is as follows:

• If the Seller gives the purchaser an express written warranty that the property is sold free from any defects, and after the sale is concluded, the purchaser confirms that there is a defect, the Seller can be held liable for the repairs. For example, if the Seller declared in the agreement of sale that the roof does not leak and after the sale the Purchaser experiences leaks in the roof, the Seller is held liable as there has been a breach of contract.
• If the Seller misrepresents to the Purchaser regarding the property's condition, the Seller can be held liable. For example, if the Seller is aware that the roof leaks and does not declare the same to the Purchaser, the Seller can be held liable, and the sale can be set aside, or the Purchaser may proceed with the sale and claim a reduction in the price for the damages.

One may ask, but what if the Seller did not know about the latent defect? The answer is yes, the Seller can be held liable if the latent defect existed when the sale was concluded between the parties.

But why is there a voetstoots clause in the sale agreement, which is supposed to protect the Seller by informing the Purchaser that he/she/they are purchasing the property as-is (voetstoots)? The voetstoots clause does not protect the Seller and does not exclude the Seller's liability if the misrepresentation is proven; hence if the Seller was aware of the latent defect and did not disclose same to the Purchaser, the Seller can be held liable.

The Consumer Protection Act, which came into effect on the 1st of April 2011, states the Purchaser has to be informed of all details regarding the property that he/she/they are purchasing. Once the Seller expressly states what condition the property is in and the Purchaser expressly accepts the current state of condition of the property before purchasing the property, the implied warranty of the property's condition falls away. The effect of the CPA has been that the voetstoots clause does little to protect the Seller when it is tomes to defects; hence the Seller is urged to declare all defects of the property to the Purchaser before concluding a sale agreement.

Reference List:

• PRACTITIONERS GUIDE CONVEYANCING & NOTARIAL PRACTICE BY ALLEN WEST
• CONSUMER PROTECTION ACT 68 OF 2008

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE).