Dealing with unexpected defects when buying a home
Category Advice
No matter how thoroughly a buyer has inspected a property, unexpected defects can appear after the offer to purchase has been signed. Sadly, buyers are not protected by the Consumer Protection Act (CPA) in real estate transactions, as these are considered to take place between two consumers (i.e. the seller and the buyer) and not between a supplier and a consumer. Unless a buyer is purchasing a home from a developer or from somebody whose ordinary course of business is to sell properties, the Consumer Protection Act (CPA) does not come into play.
Instead, property transactions are governed under the voetstoots clause; a legal term that describes the sale of an item as is, regardless of any defects. This is why is so important to have a property thoroughly inspected before a buyer submits an offer. There are two kinds of defects: a patent defect (those which are easily discovered) and a latent defect (those that are not easily picked up by a superficial inspection).
List of patent defects
Because patent defects are clearly visible without a professional inspection of the property, such as broken windows or cracks in the wall, the buyer will have no recourse against these types of defects. It is up to the buyer to spot them and then decide whether to proceed with purchasing the property. To protect both parties from further arguments down the line, all patent defects should be listed in the sale agreement, along with who is responsible for fixing them. This usually is presented in the form of a disclosure document.
Latent defects are trickier
On the other hand, latent defects are trickier to spot and include items such as a leaking roof or faulty geyser. While common law states that the seller is responsible for all latent defects in the property for three years from the date of discovery of the defect, the voetstoots clause protects the seller against all defects that are unknown to him.
To benefit from common law, the buyer will need to prove that the seller was aware of a latent defect and deliberately concealed it from the buyer. Depending on the circumstances and the wording of the sale agreement, any new defects that are discovered before the property is transferred into the buyer's name will likely be for the seller's account unless the defects are caused by the buyer who is occupying the property ahead of transfer.
Discovering defects before transfer
One of the most important decisions to make, when signing an offer to purchase, is when should the purchaser occupy? The options are either "on registration of transfer" or a specific date, pinpointed in the agreement. Taking early occupation, with the cost of occupational rent, does have the benefits of seeing exactly what you're buying. An agreed occupation date before transfer, gives everybody clarity and prompts people to plan ahead.
With regard to defects in a second-hand property, and the rise of consumer protection expectations; there are very real benefits in making sure that the compulsory Property Condition Disclosure is taken seriously and is properly completed. Here again clarity and an honest disclosure is necessary to minimise unexpected surprises.
If sellers make an effort to repair all defects upfront, the transfer will be quick and trouble free, as is required by the compulsory Property Condition Disclosure. A straightforward transfer far outweighs the cost and delay in having a dispute over whether the seller is liable to repair the defects or not.
Also buyers should make a very rigorous inspection on show day. They can take their experts to the property to inspect, before they sign contracts. If defects are discovered before transfer, there is time enough to have them repaired or at least agree to a provision that the cost of repair can be deducted from the selling price and "retained" as a provision by the conveyancer, until liabilities and payment are determined.
Although real estate professionals are equipped with enough knowledge to provide buyers and sellers with some general advice, it is better to seek professional legal council on this topic if issues do arise.
Author: Property 24 - Extracts
