Sellers Beware - Disclosure Of Defects On A Written Property Condition Report Is Compulsory

Sellers Beware - Disclosure Of Defects On A Written Property Condition Report Is Compulsory

A latent defect is a flaw in a property that a reasonable inspection before the sale would not have revealed. The buyer could seek legal recourse after the sale if the seller knew about the latent defect and did not disclose it to the buyer fraudulently.

A property seller provides the information in a Property Condition Disclosure to help prospective purchasers make an informed decision about whether to buy the property and on what terms. The seller does not warrant that his or her answers to the various questions accurately reflect the true status of the defect or condition inquired about, but does warrant that his or her answers represent his or her honest and genuine belief about the status.

The Property Practioners Act of 2019

The Property Practitioners Act 22 of 2019 (the PPA) places an obligation on sellers to disclose defects in a property to prospective buyers - before the purchaser makes an offer to purchase. In fact, a disclosure form is now compulsory where the seller must disclose such information. Such disclosure of information regarding defects, especially latent defects, is important as it will guide the purchaser in deciding on whether to proceed with the purchase of the property or not.

Therefore, where a seller, fraudulently so, does not divulge such crucial information to the prospective purchaser, it may result in legal action being taken against the seller and the purchaser may claim damages according to their loss. The PPA aims to ensure fair and informed property transactions.

Defect / Condition Disclosures Form

The prescribed disclosure form includes several questions for the seller - which need to be answered with a "yes", "no" or "not applicable" (unknown):

1. Are you aware of any defects in the roof to any structures on your property?
2. Are you bound to a lease agreement with a tenant in respect of the property?
3. Are you aware of any defects in any part of the plumbing system servicing the property, including the supply of water to the property and the disposal of waste and/or sewerage and/or storm water?
4. Are you aware of any defects in the heating and/or air conditioning systems, including air filters and humidifiers?
5. If your property has a swimming pool, are you aware of any defects in the pool or the pool filtration system including more particularly leakage of water and/or inappropriate amounts of air being drawn into the water reticulation system?
6. Are you aware of any structural defects to the property and/or in the basement or foundations of the property, including cracks, bulges and/or subsidence?
7. Are you aware of any boundary line disputes or any encroachments?
8. Are you aware of any constructions on the property which have been made without proper approved building plans and/or proper permissions from the relevant local authority?
9. Are you aware of any changes which your neighbours and /or near neighbour's plan to make to their properties?
10. Are you aware of any municipal urban planning policies or permissions which are likely to impact significantly on the area in which your property is situated?
11. Are you aware of circumstances or conditions within the proximity of your property which are a source of regular nuisance (i.e. noise or smells) or threat to residents of your property?
12. Are all fixtures and fittings on your property in good working order? This includes items (in no particular order) like electrical plugs and switches, doors and windows, ovens, hobs and extractors, hot water geysers, solar heating systems, garden/external lights and fountains, alarm systems and other security systems, automatic door and gate openers, remote and/centrally controlled systems, intercom systems, doorbells, pool pump, pool filtration system, automatic pool cleaners, pool chlorinator, pool lights, gutters and downpipes, chimneys, irrigation system including computerized controls, air conditioners, underfloor or wall mounted heating systems, extractor systems, bore holes and associated equipment.
13. If any of the fixtures and fittings on your property are not in good working order are you willing to fix such items so that on the day your purchaser takes transfer of your property they will be in good working order?
14. Are you aware of any water leakage or water penetration problems in any of the constructions on your property?
15. Are you aware of any flooding problems on your property?
16. Do you have any reason to believe that the electrical supply to your property is inadequate for the property and ordinary use of the electrical appliances / systems upon your property?
17. Are you aware of any significant defects in your property which you have caused to be repaired in the last 12 months?
18. Do you know what the municipality has valued your property at for purposes of rates and taxes and are you happy with the valuation?
19. Is your property subject to any Home Owners Association?
20. If your property is part of a sectional title development are you aware of the possibility of a special levy being raised in the short to medium term?
21. If your property is part of a sectional title development are the finances of the body corporate in a sound condition?
22. If your property is part of a sectional title development does the original developer have the right to return to the property and to construct any further buildings?
23. If your property is part of a sectional title development are you happy with the management of the body corporate?

The Seller understands and accepts that the estate agent to whom this disclosure document is given shall provide a copy of this document to any potential Purchasers and that this document will be incorporated into any sale agreement with such Purchaser.

The document is designed to communicate to any potential Purchaser of the property to which this disclosure relates, the honestly held beliefs of the Seller of the property and is not designed to represent that the potential conditions canvassed in the questionnaire do not in fact exist. The duty therefore still rests on any potential Purchaser to examine the property properly and thoroughly and if concerned about any potential defect/condition (whether patent or latent) to obtain independent advice from an appropriate expert before concluding any binding sale agreement.

Fraudulent Property Seller Disclosure - Recent Court Case Judgement

The judgement handed down by the Supreme Court of Appeal in Le Roux v Zietsman and Another (330/202) [2023] ZASCA 102 (15 June 2023), is one of the recent cases that focused on whether a seller is liable for fraudulent non-disclosure and misrepresentation of latent defects in a property.

The applicant had sold a property to the respondent, which they intended to use as a lodge. It was put before the Court that when the respondents purchased the property, they conducted an inspection (as most buyers would do before they purchase). The respondents had noticed signs of leaks in the guesthouse before purchasing the property and queried the leaks with the appellant. The appellant, however, assured the respondents that the roof had been repaired and no longer leaked.

The purchase and sale transaction consequently proceeded, only for the respondents to realise barely three months later that the entire roof leaks - damaging rooms and furniture as they were rushing around trying to appease guests whose rooms were rendered uninhabitable after the first seasonal rains pooled in their rooms. The respondents then decided to institute legal action against the applicant. A civil engineer was roped in where after it was found that the leaking problems emanated even from the time the property was constructed, underlying structural defects. The respondents allege that this was never disclosed to them when they purchased the property.

The court found that the main issue was "whether the appellant, knowing the purpose for which the property was to be used, and having knowledge of the latent defect in the property (the leaking roof), fraudulently failed to disclose same to the respondents before the sale with the aim to induce the sale.

The court concluded that the seller's actions amounted to fraudulent non-disclosure and fraudulent misrepresentation to persuade the buyer to purchase the property. The seller was consequently ordered by the court to make good the damage suffered by the purchasers, including losses suffered when they could not accommodate guests.

Property sellers should therefor take note that it appears clear from the above that the highest courts may well favour a purchaser's claim if enough evidence is shown.

The voetstoots clause in the deed of sale was inapplicable because the claim was founded on delictual liability for fraudulent non-disclosure/misrepresentation and not on the implied warranty of a seller that the property is free of latent defects.

What Prospective Property Sellers "Need To Know" When Completing The Disclosure

The average seller does not know enough about building to accurately declare the condition of the home being sold. Therefore NABISA (National Association of Building Inspectors of South Africa) recommends that the seller should disclose all significant defects and declare "what they do not know".

Such "unknowns" will typically be the condition of the roof covering, roof structure and hot water geyser installation. Diagnosis of the cause and solution of wall cracks and damp are also beyond the knowledge of the average seller.

Independent Inspectors Recommended For Prospective Buyers

It is always a wise decision for the prospective purchaser to commission an independent inspection if the seller, or the purchaser, is uncertain about the condition or compliance of any part of the property.

The following issues should be considered when the prospective purchaser is deciding whether to invest in an independent inspection as a condition of the proposed purchase:

- "No property is perfect": The average South African home consists of hundreds of different components and installations, many of which can impact on other parts of the structure. As a result of age, or bad workmanship, defects can be found in most buildings. An experienced and trained home inspector, who is registered with NABISA, will have a sound all-round understanding of the overall South African built environment. This enables the NABISA registered home inspector to identify and evaluate significant defects observed in structures and, where necessary, recommend further investigation by an appropriate specialist. Such specialists may include, among others: Engineers, (structural, roof or geotechnical), electricians, plumbers, builders, waterproofing experts or paint specialists.

- The National Building Regulations and SA National Standards: These regulations and national standards are enforced by local authorities when new buildings are to be constructed. These regulations and standards are regularly updated, but are seldom retroactive and therefore do not necessarily apply to existing structures, which may have been built years before the relevant regulation or national standard came into force. A good home inspector will evaluate compliance applicable at the time the home was built, evaluate the current condition of the structures and often also take a view on the anticipated cost of necessary repairs or replacement of components.