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As a conveyancer, I keep my clients informed about all of the potential pitfalls in the property world, as forewarned is forearmed. In the property world, knowledge truly is power as it is only when we know the problem that we can come up with a solution. So let’s get started.

When selling a property, it’s important to read the fine print as Sellers may face many hidden costs when selling their property

Before a property may be transferred, the Seller has to “make good”. All outstanding rates have to be settled. The Municipality insists that the Seller pays rates for the next 120 days. All amounts paid by the Seller for the period after the transfer is registered will be refunded to the Seller after the transfer has been registered. Once these amounts have been paid, the rates clearance certificates necessary for transfer will be issued.

When a sectional title property (ie a flat) is sold, all outstanding levies have to be paid before the Body Corporate or Managing Agent will issue the levies clearance certificate required for a transfer to be registered.

A particularly nasty surprise for someone selling their sectional title property is the dreaded special levy. This is a levy raised by the Trustees of a body corporate. The trustees are the owners of the units in the sectional title scheme. Special levies differ from general levies. While general levies are based on the annual budget and are raised by the body corporate at the AGM, special levies are raised at the discretion of trustees. It is a far less consultative process. A special levy is raised when no budget allowance has been made.

If you are selling a property and a special levy is raised before the transfer is registered, you as the Seller, are liable to pay it, even though the Purchaser will benefit from the work done consequent to the raising of the special levy.

The solution? Astute Sellers add a clause in to their Agreement of Sale to prevent this unfortunate situation.

Another cost when selling a property is the estate agent’s commission. This fee is well earned, as there is a great deal of work involved. Estate Agents are able to negotiate a higher purchase price as they have access to a large pool of potential purchasers (through their advertising, networking and marketing), and act as mediators in the transfer process. Estate agents may charge 7,5% plus VAT but are normally negotiable and agree to a lower percentage of commission.

Speaking of Commission… They say God doesn’t punish you twice, but this is not always the case when it comes to paying commission. Sellers can be liable to pay double commission. This can happen where a Seller erroneously gives a sole mandate to more than one agent. The case in point is:

Wakefields Real Estate vs Attree & Others 2011 (6) SA 557 (SCA)

The Attrees mandated Wakefields Real Estate to sell their property. They showed the property to Mrs Howard. She liked the property but lacked funds ($).

The Attrees then gave oral mandates to Pam Golding and Remax. Mrs Howards’ financial position improved $ J and she purchased the property via one of the newly appointed agents. PG and Remax shared the commission.

Wakefields sued the Attrees for their commission. The Court held: ALL of the agents were the effective cause of the sale. The Attrees were liable to pay double commission.

Solution: Mandates should always be written. Be sure to include the % commission.

Also, if you give an estate agent a mandate, commission is payable (incl private sale)

Purchasers can also be held liable to pay commission to estate agents, if they gave them the mandate. This would be the case where:

The Purchaser mandated the estate agent to find them a house and the estate agent approached a person whose house was not on the market. Once again, it is best to have the agreement recorded in writing, and include the % of commission payable.

Something else that often annoys sellers is the fee charged to cancel a bond that has already been paid off. It is such an accomplishment to pay off a bond that most people feel wildly aggrieved by the bond cancellation fee charged. The bond cancellation fee is normally about R2,500.00 plus VAT.

The Seller has to obtain various certificates before a property may be sold. These include an electrical compliance certificate, a water certificate (also called a plumbing certificate), a beetle certificate, a gas certificate (if the property sold has a gas oven or stove) and an electric fence certificate (if the property sold has an electric fence that was installed after 1 December 2012). These certificates are not issued until all is in order, and so the Seller may need to pay for work to be done in order for the certificates to be issued.

The last potential pitfall I will look at today is the voetstoets clause. Let’s begin this heavy topic with some fun trivia.

Definition: Voetstoets literally means “tested with the foot”. It originated from the early Dutch farm settlers in the Cape and has become a legal term in South African law. The farmers would purchase second-hand equipment from each other, such as ox wagons or carts. The prospective purchaser would investigate the item for sale by kicking its frame to test its sturdiness. If satisfied, the transaction went ahead and the seller was not liable if the equipment was faulty. In South Africa, someone can sell something “as it is”, or “without liability” as long as they include a voetstoets clause.

Before we look at the applicability of the voetstoets clause, we need to understand the difference between patent defects and latent defects.

Patent defects are clearly visible upon reasonable inspection. No expert inspection is required. For example: a crack in a wall or window. It is advisable for patent defects to be mentioned in the offer to purchase and if the owner agrees to fix them, this should be clearly stipulated. Recourse? Don’t buy it.

Latent defects are ones which are hidden and are not easily picked up on a superficial inspection. For example: a faulty geyser, damp behind furniture or paint, or a leaking roof. The seller is responsible for all latent defects in the property for 3 years from the date of sale of the property. For this reason, properties are sold “voetstoets”. The voetstoets clause covers the seller against defects, including latent defects.

The effect of the Consumer Protection Act on the Voetstoets Clause?

When the Consumer Protection Act (hereinafter referred to as the “CPA”) came into force on April Fools’ Day 2011, there was much debate as to whether it would turn the voetstoets clause into a dinosaur.

Does the voetstoets clause still exist? Before throwing out the baby with the bath water, we need to look at who the CPA binds. It only applies to transactions where the parties are acting in the ordinary course. So, does it apply to property transfers? Most sellers of properties aren’t acting in the ordinary course. In other words, it’s not something they do every day. But estate agents and commercial developers are. For those of you who are estate agents, this is particularly relevant to you.

Section 55(2) of the CPA stipulates the fundamental consumer right to safe and quality goods. This includes the right to receive goods suitable for the intended purpose, of good quality, in good working order and free of defects.

However, subsection (6) leaves open the door for voetstoets as it states that subsection 2 does not apply where the consumer was INFORMED of the condition and ACCEPTED it in that condition. So, if the consumer was AWARE of the condition and had the opportunity to INSPECT the property, it seems as though there is still scope for the voetstoets clause. Which brings me to recent case law:

Banda v van der Spuy (Supreme Court of Appeal, judgement delivered 22 March 2013)

This was the classic case of the leaking roof. Van der Spuy was the seller. Banda was the purchaser. The roof was thatch. Leaks after heavy rainfall, caused by inadequate support and a 30 degree pitch, rather than the standard 45 degree pitch.Banda was aware that there was a problem with the roof. van der Spuy assured Banda that any problems with the roof would be covered by a guarantee as work had been done to the roof. This guarantee induced Banda to sign the offer to purchase.

The offer to purchase was signed and there after the roof leaked badly. Banda took van der Spuy to the High Court and was unsuccessful. The High Court found that the guarantee provided by van der Spuy was sufficient. Banda took this decision on appeal to the Supreme Court of Appeal. He hired an engineer and was able to prove that van der Spuy was aware of the fact that the roof needed to be replaced and fraudulently concealed this from Banda.

The Supreme Court of Appeal found that van der Spuy acted fraudulently in concealing the existence of the defective leaking roof. van der Spuy was ordered to pay Banda the amount he had to pay for the repairs to the roof, % interest per annum from date of judgment, legal costs and the costs of the specialist engineer. Where a seller is aware of a latent defect at the time of the sale and conceals it from the purchaser, the application of the voetstoets clause is limited. Where a seller acts fraudulently, they will not enjoy the protection of the voetstoets clause.

The seller is still responsible for any deliberately concealed latent flaw and can only rely on the voetstoets clause if the defect was unknown to him/her. The burden of proof is on the purchaser to prove that the seller knew or ought to have known about a defect and deliberately concealed it.

The solutions:

Our advice to purchasers: Check the physical aspect of a building before purchasing it. Request the local authority approval of outbuildings, alterations and additions. Request all warranties and documentation regarding work that has been done on the property. Equip yourself with as much knowledge as possible before you sign the offer to purchase.

Our advice to Sellers and Estate agents: Ensure that you and your Sellers complete a defect list before signing the offer to purchase. Disclose all latent defects to the purchaser at the time of the sale.

Whether or not the Consumer Protection Act applies, the protection of the voetstoets clause is still available to honest Sellers. It just requires more homework. Voetstoets is a technical topic. If you are purchasing or selling a house, or if you are an estate agent or a developer and need some assistance, please don’t hesitate to contact me.

At Michelle Dommisse & Associates, we are happy to check your Offer to Purchase/Agreement of sale before you sign it. No fee is charged, and it may well save you time and money.