Under South African law, the legal effect of any sale, including the disposal of immovable property, is that the risk of loss, damage, or accidental destruction passes from the seller to the purchaser when the sale is perfected.
Derived from the Latin perfecta, a sale is perfected when the price is fixed, the subject matter is definite, and all suspensive conditions – which suspend the operation of the agreement until the occurrence of an uncertain future event – have been fulfilled. For instance, the sale of an apartment is perfected when the agreement of sale clearly specifies the purchase price payable, includes a clear description of the property, and the requirement to obtain bond approval, if applicable, has been met.
In the conveyancing context, the ‘passing of risk’ refers to the moment that the obligation for remedying loss or damage to the property transfers from the seller to the purchaser. Typically, this occurs when the purchaser is given possession of the property. In practice, risk in and to a property is passed from the seller to the purchaser on the date of the registration of the transfer of the property in the relevant Deeds Office. The practical implication of the passing of risk is that the purchaser becomes liable for all expenses – including rates, electricity, water, and insurance – and for any subsequent damage to the property, such as a burst geyser, broken ceiling fan, or storm damage, on the date of transfer.
Depending on the wording of the agreement of sale, however, risk may pass to the purchaser before the property is formally registered in their name. For example, in instances where the purchaser takes possession and occupation of the property prior to transfer, risk in and to the property will shift to the purchaser from the date specified in the agreement of sale.
While the purchaser will not be liable for damage emanating from the seller’s breach of contract or wrongful conduct, a lack of consensus regarding the passing of risk has potentially onerous financial implications for both parties. It is thus imperative to consult with a property law specialist to draft a clear, water-tight agreement of sale delineating the rights and obligations of both the seller and purchaser to avoid unforeseen complications.
For expert legal advice, contact us at info@stbb.co.za to speak to an experienced conveyancer.
