Imagine, if you will, the following scenario : after years of saving up for a deposit and searching around for the perfect home to put down roots in, you finally take the plunge and buy your first home only to discover, after having taken transfer and moving into the property, that the property is fraught with serious defects which were never disclosed to you prior to entering into the sale agreement (“offer to purchase”). Examples of defects are serious damp problems or flooding, a roof that either leaks or gets blown off in stormy weather, serious security concerns in the neighbourhood, a wooden deck that collapses beneath you, foundations that were not compacted, and cause the walls to pull away from the floor, the wrong type of glass installed in the windows so that heat is trapped inside, parts of the property not being reflected on the building plans, outdoor construction which was done with products suitable only for indoor use etc.
Being absolutely horrified at the idea of having to spend thousands of rands on repairs, you raise the issues with the estate agent and the seller only to be met with them washing their hands and relying on the voetstoots clause contained in the sale agreement. A voetstoots clause states that you buy the property “as is” and the seller won’t be responsible to pay for repairs if there’s a defect.
Does the law protect you in situations like this? Fortunately, the answer is a resounding yes. In principle. The details depend on whether you will be able to rely on the protection offered by the Consumer Protection Act (“CPA”), the South African common law, law of delict or law of contract.
The voetstoots clause has its origins in Roman-Dutch law and, practically speaking, means “as is / without guarantee or warranty or at the buyer’s risk.” The effect thereof, in the context of the sale of immovable property, is that the seller does not provide any warranties or guarantees that the property is fit for its purpose or free from latent (hidden) defects and can accordingly not be held liable for these defects or the cost of repairing them. Latent defects are defects which are not visible to the naked eye or upon a cursory inspection of the property, for example, rising damp, structural unsoundness as a result of defective building work, leaking roofs and even where a property has not been erected in compliance with all relevant, necessary and applicable statutory requirements and which, usually, can only be identified by experts such as structural engineers and architects. Patent defects, on the other hand, are clearly visible defects such as cracked windows, cracked walls, etc. The effect of the voetstoots clause is that a seller cannot be held liable for latent defects, the existence of which he or she was unaware of. A typical example of a voetstoots clause will read as follows: “The Seller warrants to the Purchaser that at the time of the sale there are no latent defects in the property known to the Seller. Save for this, the property is sold voetstoots and subject to all the conditions and servitudes mentioned, referred to or contained in the title deed thereof, and any lease thereof, and in the condition the extent such as it now lies.”
The CPA will apply to the sale of an immovable property if both the following requirements are met:
The property is purchased by a legal entity such as a Close Corporation or a company or a trust and the asset value AND turnover of the entity are both less than R2 million OR the buyer is an individual or a couple
and
The Seller is acting in the ordinary course of their business, such as a developer or a person that “flips” houses
There’s a further option- if an estate agent is involved, and he or she misleads the buyer, then the CPA will apply even though the seller may not be selling as part of their business activities, e.g. a couple selling their family home.
The CPA guarantees every consumer the right to receive goods which are, suitable for the purpose for which they are intended, of good quality, in working order and free of any defects. In a major win for consumers, the CPA then goes further to stipulate that it is irrelevant whether a defect is latent or patent, i.e. it does not matter whether it could have been detected by a consumer before taking delivery of the property. This effectively knocks the effect of a voetstoots clause out of the water in instances where the CPA apply.
There is one very important exception, where a consumer has been expressly informed of certain defects in the property (e.g. in a defects list or mandatory disclosure document) and the consumer has expressly agreed to accept the property in that condition or knowingly acted in a way which implies that he or she accepts the property in that condition. In such instances the consumer will not be able to rely on the protection offered by the CPA in respect of those specific defects. A further exception is that immovable property (land or a building) bought at an auction is not covered.
Once it has been established that the CPA applies to the transaction and the property is defective, without such defects having been disclosed to the consumer prior to the conclusion of the sales agreement, the consumer will be able to rely on the protection offered by the Act despite the seller and estate agent seeking to rely on the provisions of a voetstoots clause in an attempt to escape liability.
If a consumer, within 6 months of taking delivery of the goods, realises that the goods are defective, the consumer may insist on the defects being repaired or that the agreement be cancelled and the consumer refunded the price paid for the goods, all of this being at the risk and expense of the seller. If a consumer opts to insist on the seller repairing the defects and, within 3 months from the date of such repairs being completed, further defects manifest, the seller must replace the goods or refund the consumer the price paid for it. These provisions, although commonly associated with the sale of second-hand vehicles, apply equally to transactions for the sale of immovable property which later turns out to be defective.
When it comes to immovable property, however, it is clear that the replacement of the property will not necessarily be a viable option unless you’ve bought in a development where a similar property to yours in still available for sale- and is free from the defect you’ve encountered! Usually, the most appropriate course of action would be to insist on the cancellation of the agreement and a refund of the purchase price being paid. Once the transaction has been cancelled, each party must be placed in the position which they would have been had they not concluded the transaction. This means that the property would have to be transferred back into the name of the seller, at his or her expense and the buyer refunded for any expenses which he or she had incurred in respect of the initial transfer of the property, such as conveyancers’ fees, rates clearance figures, and for any improvements to the property.
Section 48 of the CPA also prohibits suppliers from charging fees which are unfair, unreasonable, or unjust. This means that if you don’t want to cancel the sale, you can claim a refund of a portion of the purchase price paid for the defective property, in proportion to what you would have paid for it had the existence of the defects been brought to your attention prior to the conclusion of the sales agreement (or the amount spent in respect of repairing the defects). Under Section 48 a voetstoots clause, in itself, might also constitute a prohibited (and consequently, invalid) term, due to being unfair, unreasonable or unjust.
Sellers and estate agents are also required to warn buyers of contract clauses that place them at risk, as well as dangers lurking in the property, that would not be evident to an ordinary alert consumer. If harm is caused to a buyer due to insufficient warnings or instructions, the buyer can claim damages to compensate him or her for the harm.
The effect of a voetstoots clause can also be nullified under circumstances where the seller or the estate agent were aware of the latent defect, but did not inform the buyer. This is seen as fraudulent misrepresentation by the law. In terms of Section 41 of the CPA a supplier may not directly, indirectly or even by omission (i.e. by keeping quiet) mislead a consumer or fail to disclose a material fact.
As you can see, it can be quite tricky to figure out whether the CPA applies to a transaction and, if so, which specific remedies would be at your disposal, and we suggest that you contact an expert consumer law attorney to assist you in navigating this potential minefield.
Look out for our next blog where we will delve into the protection offered by the common law in situations where the CPA does not apply.