In property transactions, discovering hidden damp, leaks, or other defects post-signature is commonplace. Often, purchasers may assume the seller is liable for effecting repairs, while sellers frequently believe that once the property has been sold, responsibility shifts entirely to the purchaser. The legal position, however, is more nuanced.
Understanding the distinction between patent and latent defects
In practice, the typical starting point to determine liability for property defects is to distinguish between patent and latent defects. Under South African law, patent defects are visible or reasonably discoverable during an ordinary inspection of the property. For example, obvious damp patches, cracked windows, missing roof tiles, or visible structural issues. Purchasers are generally expected to inspect a property – and identify such defects – before signing a sale agreement, and will usually have limited recourse in respect of easily ascertainable defects.
Latent defects, on the other hand, are hidden defects that are not reasonably discoverable though an ordinary inspection, such as concealed roof leaks, rising damp disguised behind recently painted walls, or defective plumbing that only becomes apparent over time. Given that such defects are not readily apparent, disputes often arise after occupation or registration of transfer.
When does a seller become liable for latent defects?
Sometimes, purchasers assume that if damp, leaks, or other latent defects appear after transfer, the seller is automatically liable for covering the cost of repairs.
Under South African law, most residential property sale agreements incorporate a voetstoots clause, which means the property is sold ‘as is’ – all patent and latent defects included. A valid voetstoots clause generally protects a seller against liability for latent defects that were unknown to them at the time of the sale.
However, that protection is not absolute.
In Odendaal v Ferraris, the Supreme Court of Appeal (‘the SCA’) held that a seller cannot rely on this clause where the purchaser proves, on a balance of probabilities, that the seller knew about a latent defect and fraudulently concealed or deliberately failed to disclose it. As such, the purchaser bears the onus of proving both the seller’s knowledge of the defect and the fraudulent concealment or non-disclosure before the conclusion of the sale. Crucially, mere negligence, carelessness, or ignorance is generally insufficient.
Accordingly, the existence of a leak or damp problem alone does not establish liability. For example, where a seller repeatedly repaired the same roof leak, repainted water-damaged ceilings immediately before marketing the property, and failed to disclose the recurring problem, a court may conclude that they fraudulently concealed a latent defect. Conversely, where a leak first manifests after unusually severe weather and there is no evidence that the seller was aware of an underlying defect, the voetstoots clause will generally protect the seller from civil liability.
Earlier authority, including Van der Merwe v Meades, similarly recognise that a seller who fraudulently conceals a latent defect cannot rely on the protection of the voetstoots clause. More recently, the SCA in Banda v Van der Spuy reaffirmed the importance of honest disclosure and the legal consequences of fraudulent misrepresentation in property transactions.
Timing can influence the outcome
From a practical perspective, the timing of when a defect is discovered can significantly affect the parties’ options.
If damp, leaks, or other defects are identified before the sale agreement is signed, the purchaser can negotiate a reduced purchase price, insist on repairs before signature, or elect not to proceed with the transaction.
Where a defect is discovered after signature but before transfer, the parties may still negotiate a practical commercial solution. Depending on the circumstances, this could include repairs, a price adjustment, or an amendment to the agreement. Sometimes, the agreement itself may also allocate responsibility for damage or deterioration occurring before transfer.
Once transfer has taken place, however, disputes are generally determined with reference to the common law principles governing latent defects, the wording of the sale agreement, and any available evidence regarding the seller’s knowledge and disclosure.
The importance of disclosure
Operationalised several years ago, the Property Practitioners Act (‘the PPA’) has strengthened transparency in property transactions. Section 67 of the PPA, read with its accompanying Regulations, requires a property practitioner to obtain a completed mandatory disclosure form – also known as the ‘Immovable Property Condition Report’ – from the seller before accepting a mandate to market the property.
The form records any known defects in the property and must be made available to prospective purchasers prior to concluding a sale.
An important consumer protection mechanism intended to promote transparency and reduce disputes, the form does not, however, guarantee that a property is free from defects nor does it make a seller liable for defects of which they were genuinely unaware. Further, the existence of a completed disclosure form does not automatically establish liability if a previously unknown latent defect later emerges.
Does the Consumer Protection Act apply?
While the Consumer Protection Act (‘the CPA’) has altered the legal terrain of consumer transactions, its application is more limited than is often assumed. The CPA, which offers statutory protection to purchasers, may apply to property transactions where the seller is acting in the ordinary course of business, such as a property developer or an investor regularly engaged in selling properties. In these instances, the application of the CPA will affect the enforceability of certain contractual exclusions and provide consumers with additional statutory remedies.
However, the CPA does not typically apply to once-off private sales between individuals. In those cases, the common law, sale agreement, and PPA (where the transaction involves an estate agent) will govern the parties’ rights and obligations. Ultimately, whether the CPA applies depends on the specific facts of each transaction, including the identity of the parties and the nature of the sale.
Practical lessons for purchasers and sellers
Prospective purchasers should therefore conduct their own due diligence, including carefully inspecting the property, reviewing the disclosure form, and obtaining specialist inspections where there are concerns about damp, water penetration, structural issues, or other potential defects.
Sellers, on the other hand, should disclose all known latent defects honestly and accurately. Attempting to conceal recurring leaks, damp, or structural problems may expose a seller to litigation long after transfer has taken place and defeat the protection ordinarily afforded by a voetstoots clause.
Navigating liability
Ultimately, liability for property defects depends on the facts and circumstances of each case. The nature of the defect, evidence of the seller’s knowledge, wording of the sale agreement, existence of any warranties or representations, and, where applicable, the application of the CPA, will all influence the outcome.
For both purchasers and sellers, understanding the distinction between patent and latent defects, the legal effect of a voetstoots clause, and the importance of proper disclosure can help avoid costly disputes long after the sale has been concluded.
In need of sound legal guidance? Contact our experienced team of real estate attorneys today.
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