A recent court case has highlighted the danger for property sellers who deliberately fail to tell buyers about hidden defects that they are aware of. In other words, if you are selling your property, you need to disclose to prospective buyers any hidden defects in your property that you know about, because a buyer needs to factor the cost of repairing such a defect into the offer to purchase.
In a Norton Rose Fulbright Financial Institutions Legal Snapshot blog “Voetstoots clause does not cover fraudulent misrepresentation”, Anika de Kock and Stacy Smit report that the Supreme Court of Appeal awarded damages to the buyers of a guest house that had a seriously leaking roof because the seller had failed to disclose defects of which he was aware.
Property sales in South Africa are typically covered by the so-called “voetstoots” clause, which essentially means that you buy a property “as is”. But this applies only to “patent” defects and to “latent” defects that the owner of the property is not aware of. Failing to disclose a “latent” defect that you are aware of is not covered by the “voetstoots” clause and amounts to fraud.
The Re/Max website gives a good explanation of the different types of defects and who is liable for what:
Patent defect: this is “a property fault that should be obvious to a reasonable person on inspection”. Examples are wall cracks, sagging gutters, shattered windows, and missing tiles. Re/Max says: “The buyer has the responsibility to thoroughly evaluate the property before making a purchase and will be left with very little recourse if it is later asserted that they were unaware of obvious flaws.” This means you have to thoroughly inspect the property before putting in an offer. You can then discuss and agree on what defects the seller will need to fix before transfer and what repairs will be at your own expense.
Latent defect: this is a fault that is “not noticeable to the untrained eye on casual inspection”. Examples are rising damp, faulty pool pumps or geysers, rusted or leaking interior or underground pipes and leaking roofs. Re/Max notes: “At the time of concluding and signing the agreement of sale, the seller of a property has an obligation to disclose to the buyer any latent defects of which they are aware. However, if the seller was not aware of the defect and the buyer discovers it after the deal has gone through, the seller cannot be held liable for it.”
The crux of the matter is whether a seller is aware of a latent defect or not. De Kock and Smit say a buyer may be successful in a claim for damages against a seller “if the buyer can show that (a) the seller was aware of the defects at the time of the sale; (b) the seller deliberately failed to disclose the defect to the buyer; and (c) with the aim to induce the purchaser to conclude the sale”.
In the case in question, Le Roux v Zietsman and Another, concluded on June 15, the judge put an end to a series of appeals, during which the matter went from the regional court in Limpopo to the Polokwane High Court and finally to the Supreme Court of Appeal. He referred to the trial case, where an expert witness for the buyers testified that the cause of the leaking roof was due to extensive, long-standing structural defects in the roof. The defects were considered latent because they would not have been detectable to an untrained eye. The expert witness testified that it would have been impossible for the seller not to have known about the structural defects.
The couple who bought the property had related that, three months after moving in, during the first rains of the season, the roof had leaked so badly it could not be used as a guest house. They had to spend a great deal of money to fix the roof, during which time they lost income from the business.
De Kock and Smit write: “The seller had failed to disclose the full extent of the leakage and defects in the roof by reassuring the purchasers that the leaks had been repaired, in order to secure a sale and benefit himself. The seller had a duty to disclose the latent defects in the entire roof and would have been aware that structural defects were causing the leaks. The non-disclosure clearly played a crucial role in the purchasers’ decision of whether to acquire the property or not.”
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