Picture: Melanie Coetzee, legal consultant
Everyone in property knows that the discovery and disclosure of defects in the property being marketed is a primary aspect when the sale is concluded.
Property practitioners have always borne a heavy responsibility to ensure that they get as much information regarding the property’s condition from the sellers as possible and then to ensure that they disclose these defects to prospective buyers in a way which would still encourage an offer being made. Admittedly, this is not easy as buyers in South Africa expect properties to be in perfect condition and are quick to point fingers when faults are discovered.
In addition, the common law principle of voetstoots continue to cause consternation in the property industry. Most property practitioners simply do not know how to deal with this provision, if contained in their agreements, when a buyer starts sending emails highlighting defects in pool pumps, electrical switches and plumbing.
Throw into the mix the obligations contained within section 40 of the Consumer Protection Act 2008 where property practitioners are expressly prohibited from marketing properties if a full discovery and enquiry of defects have not been made and where the lack of enquiry could be treated as fraud on the part of the property practitioners. Buyers are consumers of the services delivered by property practitioners after all and usually make decisions whether to buy or not to buy, and on which terms, based solely on the information supplied to them by the property practitioner.
Many property practitioners have found themselves in hot water at the Consumer Commission following a buyer’s discovery that he would not be allowed to keep pets in a complex after being reassured that it would not be a problem or where building plans are outstanding when no discussions took place surrounding plans between the property practitioner and the seller.
Disclosure under the PPA
This is all about to change when the Property Practitioners Act (PPA) is proclaimed.
The PPA was signed into law on 3 October 2019 and even though much speculation exists that the effective date would be set for 1 April 2021, there has been no confirmation in this regard.
In an attempt to expand the common law and Consumer Law obligations on the part of sellers to disclose all material defects at the property and to assist property practitioners in the process of collecting all material information for the benefit of the buyer, sections 67, 68 and 69 of the PPA expressly obliges property practitioners to:
- Obtain the fully completed disclosure form as prescribed in the PPA Regulations before accepting a mandate to sell or rent;
- Provide a copy of such completed disclosure form to all prospective buyers or tenants;
- Attach a copy of the completed disclosure form to the sales agreement or rental agreement. (Click here for a link to section 67 of the PPA)
If the disclosure form is either not completed prior to the mandate and/or a copy supplied to all prospective buyer and tenants and/or it is not attached to the agreement, THEN it will be accepted that NO DEFECTS WERE DISCLOSED TO THE BUYER OR TENANT. This means that the seller or landlord in a property deal will be completely exposed on defect claims and will have no legal defence to such claims. Property practitioners who fail to follow the rules set out in these sections can be held personally liable for damages on the part of either seller, landlord, buyer or tenant. (Click here for a link to the mandatory disclosure form)
This needs to be repeated for full effect: If the property practitioner puts the property on the market WITHOUT the disclosure form completed and signed by the seller or tenant, even if it is done immediately thereafter, it is assumed that the property is sold as if no defects were disclosed.
If the property practitioner forgets to show interested buyers the disclosure form, it is again assumed that the property is sold as if no defects were disclosed.
Therefore, property practitioners need to get into the habit of using the regulated disclosure form, getting it signed before the mandate is signed and remember to show all prospective buyers the disclosure form.
This is an edited version of the article published originally on Melanie Coetzee’s blog and is shared here with her permission.
About the author: Melanie Coetzee started her own legal consultancy in October 2021 after more than 20 years in corporate law firms. She specialises in property law and in particular foreign investors, exchange control and all elements compliance related, including FICAA, Privacy Laws and Covid-19.