Thursday, April 30, 2009

Ah! Think twice - it might not be another day in paradise!


"Let the buyer beware!"
or "Caveat emptor!" is a phrase one often hears, but just as often buyers don't implement this sound advice, and simply sign whatever they are asked to sign without taking legal advice from an impartial person.

The lack of approved building plans for residential property, or a structure on that property, recently enjoyed the attention of our Supreme Court of Appeal in Bloemfontein.

The court, in the case of Odendaal v Ferraris ([2008] ZASCA 85) held that the absence of a building plan is a latent defect for which the seller may be held liable, depending on the circumstances. If the seller was unaware of the lack of plans and if there was a voetstoots clause in the contract, such a clause will protect the seller.

However, a voetstoots clause won't protect the seller if he/she was aware of the lack of plans, and purposefully failed to disclose this fact in order to mislead the buyer. This is fraud, and in these circumstances the buyer would have a claim against the seller for damages.

Practically it is difficult for a buyer to obtain evidence that a seller was aware of the lack of plans and deliberately embarked on fraudulent non-disclosure. Most buyers do not have insight into the workings of sellers' minds, and sellers seldom generate a handy paper record of their mental intentions and make such evidence available to buyers.

The court also confirmed that a seller is liable for the misrepresentations of an estate agent employed by the seller, even if the seller is unaware of such misrepresentations. One may now expect new clauses to appear in Deeds of Sale stating that the buyer acknowledges that the agent has made no representations whatsoever. If so, the buyer cannot rely on either the seller or the agent to protect him against the lack of building plans or against other latent defects in the property. The buyer needs to do his own homework and recognise that the agent is working for the seller and not for him as buyer. The agent cannot have both parties' interests at heart.

While this court case does establish that the lack of building plans constitutes a latent defect, it does not come to the practical assistance of buyers where there is a voetstoots clause in the contract. The moral of the story is simply this: A buyer who is invited to sign a purchase contract which contains a voetstoots clause should think twice, otherwise, as the old song goes, it might not be another day in paradise for him.

Clive Hill
Financial Services Manager

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