What you need to know when selling or buying

Selling or buying a property is not easy – there’s a mountain of paperwork, and lots of going back and forth between lawyers and estate agents.

At the same time, it’s rare to find a home that is devoid of defects.

Older homes may have many legacy issues, such as faulty electrics, old paintwork and questionable repair work.

Things get more complicated when it comes to what the seller’s responsibility is in terms of declaring anything that’s damaged or in need of repair.

Unfortunately, buyers and sellers are not protected under the Consumer Protection Act (CPA).

The act was introduced to protect consumers and ensure they are treated fairly when they undertake a commercial transaction with a business, either by purchasing an item or by making use of a service.

However, unless you’re buying a home from a property developer or speculator, the CPA does not apply and you will not be protected by its laws because an ordinary property sale is a basic transaction between two consumers – the seller and the buyer.

Adrian Goslett, regional director and CEO of RE/MAX Southern Africa, says the CPA will not have an effect on the voetstoets clause used in agreements of sale in an ordinary property transaction.

“There are instances where the buyer is protected if severe defects are found after the transfer has taken place.

However, it is difficult to determine if the seller deliberately concealed the defect or genuinely wasn’t aware of it,” says Goslett.

TYPES OF DEFECTS

When it comes to selling properties, there are two kinds of defects – a patent defect is clearly visible on inspection of the property, for example a broken window or cracks in the wall.

Patent defects must be listed on the offer to purchase, along with who will be responsible for fixing them.

“Because patent defects are visible or obvious without professional inspection, the buyer has no recourse against these types of defects.

"It is up to the buyer to spot patent defects and then decide if they want to proceed with the purchase,” says Goslett.

Latent defects, however, are harder to detect because they can’t necessarily be seen by the buyer. Examples include a leaking roof or a faulty geyser.

Common law dictates that the seller is responsible for all latent defects for three years from the date of the discovery of the defect.

“Most sellers are aware that they are responsible for latent defects, which is why they include the voetstoets clause in the sale agreement.

"The clause protects the seller against all defects – including latent defects that are unknown to him.

"However, if the seller was aware of a latent defect and deliberately concealed it from the buyer, the buyer has recourse against the seller.

"It is important to bear in mind that the onus will be on the buyer to prove that the seller was aware of the defect, but deliberately hid it,” Goslett says.

HOW CAN YOU PROTECT YOURSELF?

Discovering latent defects can prove to be costly.

However, because some of these defects may only come to the surface months after the sale has gone through, it is important for a buyer to have the property inspected by a professional before they sign on the dotted line.

Hiring a professional to inspect the property beforehand can be expensive because you are paying for the builder’s expertise and time. However, Goslett says it is worth it.

“The price of paying a professional to do the job properly will be far less than the time and hassle caused by dealing with hidden defects,” he says.

If you’re concerned that a property inspection won’t uncover all the latent defects, you can take out insurance for added protection.

Hollard’s Home Warranty, for example, ensures that a professional property inspection takes place, and this is coupled with an insurance policy.

Lee-Ann Dobrescu, head of group business development at Hollard and co-creator of Hollard’s home warranty product, says: “As seller and buyer, you’re both protected against the financial ramifications of any hidden defects that could emerge in the property for two years after the transfer.

"It also means you don’t have to go through stressful and costly litigation to recoup your losses, or defend any claims, should something untoward be lurking behind a voetstoets clause.”

However, taking this route can be expensive.

Hollard says that premiums are determined on an individual basis, but you can typically expect to pay about R12 000 for a warranty on a R1 million home; R17 400 on a R2 million home and R27 500 on a R5 million home.

Hollard does, however, point out that the cost of the home warranty can be covered by the seller – it can be specified in the offer to purchase and the premium can be paid from the proceeds of the sale in the same way an estate agent’s commission is paid.

However, Sean Tucker of Leapfrog Properties in Pretoria is not a full supporter of such products.

“I would say it’s not necessary unless the buyer can see a lot of defects that look serious.

"I don’t think it’s really necessary as the buyer and seller should be able to come to a reasonable conclusion on any defects found. If not, legal action can be taken against the seller,” he says.

Ultimately, you can’t use the CPA in your fight as a seller or buyer of property.

This means you are left with only a few options: get the property fully inspected by a professional; pledge to fix any defects yourself; or insure yourself against any future defects that may occur.

Legal action can be taken, but this can be costly and time consuming, and won’t be a short-term solution to fixing any latent defects.

Under the law, sellers have to disclose any known defects. However, buyers who don’t get properties inspected are in effect taking a chance by not checking for latent defects.

With the cost of building services and supplies increasing, you have to evaluate whether you have the financial stability to take this sort of gamble.