Seller and Landlord advice on compulsory disclosure rules in new Property Practitioner ActThe New Property Practitioners Act provides more protection for consumers including the need to disclose defects in both sales and rentals, warns industry experts.   s

The new Property Practitioner’s Act 2019 is an important piece of legislation in the property sector. With the publication of the regulations in mid-December, the Act and all of its provisions will take full effect on the 1st of February this year.

The Act brings a number of changes to the industry including updating the title of estate agents from “estate agent” to “property practitioner”.

The Act also provides more protection for consumers including the need to disclose defects in both sales and rentals. 

Although it has been in practice for some time, it is now a legal requirement. The document must be signed by all parties and annexed to the respective sale or lease agreement.

According to Tiaan Pretorius, manager for Seeff Centurion, sellers should not try to cover or conceal defects because this can land a seller in hot water since they could be sued by the purchaser. However, should a seller fail to disclose a fault that they were unaware of, they would obviously not have been able to declare it, hence it is unlikely to pose a problem for the seller.

Patent or Latent defects disclosure

There are generally two types of defects, namely patent defects which are those that are visible to the naked eye, and latent defects which usually relate to structural issues and are more difficult to spot. The property practitioner must undertake a thorough inspection and the seller must point out all defects, regardless of whether they are patent or latent.

Patent defects are usually easily identifiable. These would include aspects such as cracks in the walls, sagging gutters, cracked or broken windows, damaged light switches, cracks around the swimming pool, deteriorated woodwork, damaged cupboards, cracking paint work, cracked tiles and damage to carpets, laminate or wooden flooring.

Latent defects include structural issues such as unsteady walls, leaking roofs, faulty geysers and swimming pool pumps, rising damp and so on. These are more difficult to spot, hence our recommendation that the buyer gets an inspection done, says Pretorius.

It is important to choose a reputable home inspector with the relevant expertise to inspect and discover defects in the property. The cost of the inspection is for the buyer’s account, but this is money well-spent, he says further.

An inspection can ensure that there are no surprises before payments are made. Buyers should be mindful that once the contract is signed it becomes more difficult to act, and can be costly if legal action is required.

It will also put the buyer in a position to request repairs or negotiate reparations as part of the conditions of sale.

READ: How much is your property worth? 5 valuation types to know and understand

Sadly, buyers are not protected by the Consumer Protection Act (CPA) in real estate transactions, as these are considered to take place between two consumers (i.e. the seller and the buyer) and not between a supplier and a consumer.

Unless a buyer is purchasing a home from a developer or from somebody whose ordinary course of business is to sell properties, Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa warns that the Consumer Protection Act (CPA) does not come into play.

Instead, property transactions are governed under the voetstoots clause; a legal term that describes the sale of an item as is, regardless of any defects.

“This is why is so important to have a property thoroughly inspected before a buyer submits an offer,” Goslett explains.

READ: Market value vs Replacement cost – and why you need to know the difference

To protect both parties from further arguments down the line, all patent defects should be listed in the sale agreement, along with who is responsible for fixing them. This usually is presented in the form of a disclosure document,” Goslett advises.

Latent defects are trickier

While common law states that the seller is responsible for all latent defects in the property for three years from the date of discovery of the defect, the voetstoots clause protects the seller against all defects that are unknown to him.

To benefit from common law, the buyer will need to prove that the seller was aware of a latent defect and deliberately concealed it from the buyer.

READ: Occupation on transfer or a specified occupation date – which is better?

Depending on the circumstances and the wording of the sale agreement, any new defects that are discovered before the property is transferred into the buyer’s name will likely be for the seller’s account unless the defects are caused by the buyer who is occupying the property ahead of transfer.

Discovering defects before transfer

One of the most important decisions to make, when signing an offer to purchase, is when should the purchaser occupy? The options are either “on registration of transfer” or a specific date, pinpointed in the agreement. Taking early occupation, with the cost of occupational rent, does have the benefits of seeing exactly what you’re buying.

Bryan Biehler of Huizemark Real Estate says an agreed occupation date before transfer, gives everybody clarity and prompts people to plan ahead.

With regard to defects in a second-hand property, and the rise of consumer protection expectations; there are very real benefits in making sure that the compulsory Property Condition Disclosure is taken seriously and is properly completed. 

A straightforward transfer far outweighs the cost and delay in having a dispute over whether the seller is liable to repair the defects or not, says Biehler. 

If defects are discovered before transfer, there is time enough to have them repaired or at least agree to a provision that the cost of repair can be deducted from the selling price and “retained” as a provision by the conveyancer, until liabilities and payment are determined.

“Although real estate professionals are equipped with enough knowledge to provide buyers and sellers with some general advice, it is better to seek professional legal council on this topic if issues do arise,” advises Goslett.

South Africa has the smallest margin when it comes to monthly rental versus mortgage payments and despite slightly higher interest rates and consumer price hikes, the outlook for the property market in 2022 remains healthy. And it still favours buyers expected to become homeowners for the first time.

READ: These trendy SA suburbs offer first-time buyers location, convenience and value for money

Property law changes in 2022 that you should know about

Parliament is expected to consider the Land Court Bill and the Housing Consumer Protection Bill in 2022.

“The Land Court Bill, which will allow for the establishment of a specialist Land Court as well as a Land Court of Appeal, is specifically aimed at accelerating the country’s land reform programme as well as resolving backlogs and disputes around land claims.

“The Bill gives effect to ensure our approach to land reform is based on three elements – increased security of tenure, land restitution and land redistribution,” it said.

The Housing Consumer Protection Bill was previously tabled in May 2021.

“The Bill seeks to ensure adequate protection of housing consumers and effective regulation of the home building industry, introduce contractual provisions to protect new entrants into the home building industry, and address provisions such as a warranty fund surplus.”