On 15 June 2023 the Supreme Court of Appeals confirmed that a seller can forfeit the protection of the voetstoots clause if a defect is deliberately not disclosed. This is a tricky business when you are selling a property that has defects that are not disclosed at the time of selling.
What is a Defect
Whether considered a latent or a patent defect, it is considered that this means abnormal qualities or attributes which destroy or substantially impair the quality or effectiveness of the property for the purpose for which it had been sold. Defects are considered the latest in that defects are not visible or discoverable upon inspection by a buyer.
Sellers Are Required By Law To Disclose Latent Defects
In a recent case, a seller was deprived of the protection afforded by the law under the Voetstoets clause. It was concluded that the buyer was able to prove that the seller was aware of a defect at the time the Offer To Purchase was signed. This protection also means the seller was as a result, defrauding the buyer. In this instance and with this case the Seller recklessly told a half-truth. The seller knew the facts but did not reveal them. In this instance the seller is now liable for misrepresentation and the authorities are clear that fraud will no lightly be inferred. The operation of the Voetstoets clause is thus confined to cover those latent defects which the seller did not deliberately conceal in order to induce a contract (Truman v Leonard 1994 (4) SA 371 (SE).
A Little More On Latent Defects When You Sell A Property
In (Banda v Van der Spuy) it was said, it is trite that a seller is liable for all latent defects which render
the property or unit unfit, or partially unfit, for the purpose for which it was intended to be used. A leaking roof is a latent defect which renders the house unfit for habitation. The respondents were aware of one of the causes of the leaking roof, namely inadequate roof design, which resulted in the sagging of the roof, which had not been permanently repaired and which they had concealed. The respondents were unaware, however, of the other cause of the leaking roof, namely the inadequate pitch of the roof. The fact that they were unaware of an additional cause of the leaking matters not. Their fraudulent conduct in concealing the existence of the defective, leaking roof forfeits the protection of the voetstoots clause in respect of this latent defect”.
Buyers Have To Prove That The Seller
It follows that in this case, to succeed in their claim the Buyer has to prove that the Seller:
- Was aware of the defects in the property at the time of the negotiations and the conclusion of the agreement of sale.
- Had a duty to disclose the defects, and
- Misrepresented the status of the defects and/or concealed the existence and/or extent of the defects in order to defraud the Plaintiffs (Buyer).
What Was The Result And What Was The Order
On appeal from: Limpopo Division of the High Court, Polokwane (Makgoba and Madavha, sitting as court of appeal): The appeal is dismissed with costs.
What Was The Resulting Judgement
A fraudulent non-disclosure in respect of latent defects may lead to a successful claim for damages under the action. The action provides relief for a purchaser who discovers the latent defect(s) known to the seller which they fraudulently failed to disclose before the sale of the property to induce the purchaser to conclude the sale.
To succeed with a claim based on fraudulent misrepresentation, a purchaser must show that, the seller at the time of the sale was aware of the defect and that the seller deliberately failed to disclose the defect to the purchaser, and with the aim to induce the purchaser to conclude the sale. Defects are latent in that they would not have been visible or discoverable upon inspection by the ordinary purchaser.
Here Is The Cost Of Non-Disclosure
In July 2011, the Zietsman family bought a guesthouse situated in Tzaneen, Limpopo from the appellant, Mr Le Roux. The Zietsman family paid R1 300 000 for the guesthouse, to make his wife’s dream of running a guesthouse a reality. The property was transferred into their names on 30 September 2011, and they took occupation on 11 July 2011. Barely three months after they had taken occupation of the property, it rained heavily. There was extensive leaking of the entire roof. The guesthouse was flooded with water. And the furniture and linen were soddened. As their funds were exhausted from purchasing the guesthouse, the respondents were compelled to seek extra funding in the amount of R241 281.76 to repair the roof. To add to their woes, for the two months the guesthouse was under repair, they could not conduct any business. As a result, they lost the income which would have been generated during that period.
Consequently, the respondents sued the appellant in the Regional Court of Limpopo, Tzaneen (the regional court) for damages in the amount of R241 281.76 (for the first claim, based on fraudulent non-disclosure) and for R102 725.04 (for the second claim, based on loss of income). Their claims were founded on the delictual liability of the appellant, and not on the implied warranty of a seller that the property sale is free of latent defects. Therefore, the voetstoots clause in the deed of sale (which the appellant initially relied upon but subsequently abandoned) was inapplicable. The trial proceeded on the merits of the claim before one magistrate and the quantum served before another.
The respondents testified in support of their case. They also called the estate agent, to testify on their behalf as well as an expert witness and a civil engineer. The appellant testified in his case and called no expert witness. At the conclusion of the trial, the regional court found in favour of the respondents. And declared that the appellant was liable to pay for the damages in the amount of R167 480.23 for the repairs of the property and an amount of R68 038.00 in respect of the loss of income, resulting from the fraudulent non-disclosure and fraudulent misrepresentation which the respondents had proven. It also directed the appellant to pay the costs, including costs of counsel (on the regional court scale) and the fees of the expert witness. The respondents’ pleaded case was that the appellant was aware of the defects in the roof, that he had a duty to disclose the defects to them, but he failed to do so. They averred that this was a fraudulent non-disclosure, alternatively a fraudulent misrepresentation on the part of the appellant. Furthermore, they averred that the appellant was aware that they intended to use the property for purposes of conducting the business of a guesthouse; that it was impossible to sustain that business without repairing the defective roof; that he was aware of their costs to diagnose and repair the roof; and that the respondents were unable to conduct the said business as a result of the defect and the repairs for a period of two months.
The Role Of The Seller Declaration It is imperative when you sell a property that as a Seller you declare all defects know to you at the time. It is just not worth playing by your own rules to ensure a property sale. A great agent will know and understand the role of the Seller Declaration and it is just not worth being dishonest.
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Eugene Peyper – thank you so much for sharing. Eugene and his team work tirelessly to keep us informed and certainly know how to manage a property transfer from initial submission to over the line every time. For more information about EP Incorporated, click here. Remember on a property sale, Keller Williams works on a win-win outcome. We say this because both buyers and sellers have rights.
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