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Monday Feb 03, 2014

Check legality of property structures before you buy

Until recently there was some uncertainty as to whether the absence of statutory permissions - for example, the failure to obtain statutory approval for the construction of a carport or outbuilding - constituted a latent defect within the scope of the voetstoots clause, or whether the voetstoots clause protected sellers only against defects of a physical nature.

A latent defect is one that is not visible or discoverable upon an inspection of the property.

In the matter of Odendaal v Ferraris (2009) (4) SA 313 (SCA), the court was called upon to decide this point. The facts, briefly stated, were the following: The buyer of certain immovable property discovered the carport and outbuilding had not been erected in accordance with approved building plans, and therefore did not comply with section 4 of the National Building Regulations and Building Standards Act (Act 103 of 1977).

Consequently, the buyer instructed his bank not to proceed with the transfer and bond registration, which the seller regarded as a repudiation of the sale agreement, entitling the seller to cancel the agreement.

The seller duly cancelled the sale agreement and instituted eviction proceedings against the buyer, who had already taken occupation of the property.

The buyer resisted the eviction proceedings on the ground that the property was latently defective and as a result he was not in breach of contract.

The seller's response was that the voetstoots clause in the sale agreement protected her against a claim by the buyer, based on the lack of the said statutory authorisations.

The court held that the absence of statutory approvalĀ constituted a latent defect, which interfered with the ordinary use of the property. The fact that the carport and the outbuilding also contravened building regulations did not change their characterisation as a latent defect.

According to the court, a voetstoots clause ordinarily covers the absence of statutory authorisations and protects the seller against claims based on such latent defects.

More recently, in the matter of Haviside v Heydricks and Another (2014) (1) SA 235 (KZP), the KwaZulu-Natal High Court was faced with a similar question.

A double garage erected on the property constituted an illegal structure as there were no building plans approved by the municipality for the garage, nor did it meet the required standards in terms of building regulations.

The court confirmed the principle established in Odendaal v Ferraris that the absence of statutory approval constituted a latent defect and that the voetstoots clause ordinarily covered such defects.

It was important to appreciate that a voetstoots clause does not provide absolute protection to a seller seeking to avoid liability for latent defects. It was trite that if a buyer wished to avoid the consequences of a voetstoots sale, the onus was on him to show on a balance of probabilities the following:

  • That the seller was aware of the defect at the time of making the contract.

  • That the seller failed to disclose the existence of the latent defect.

  • That the seller deliberately concealed the defect with the intention to defraud.

    Notably, case law has shown that in the context of a voetstoots sale, buyers found it difficult to prove the above requirements for a successful claim in respect of latent defects. The evidence of a suitably qualified expert was often required to draw an inference that the seller was aware of the latent defect, and deliberately concealed the defect with the intention to defraud the buyer.

    In many instances, buyers had neglected to plead and prove the element of fraud, relying solely on the seller's apparent knowledge and failure to disclose.

    Buyers should take heed of the judgments referred to above and the potential disastrous consequences of buying a property containing illegal structures. Where illegal structures exist, the municipality could apply for a demolition order, which if granted would result in the illegal structures being reduced to rubble, with the attendant reduction in value of the property.

    Prospective buyers could either satisfy themselves before entering into a sale agreement that the improvements on the property were built in accordance with approved plans and according to municipal regulations (often with the help of a qualified expert such as an architect), or insert an appropriate warranty by the seller to this effect.

    Another option was to delete or omit the voetstoots clause in its entirety. Where time does not permit a proper investigation before signing the agreement, a suitably worded suspensive condition could be inserted into the agreement, providing the buyer with a period of time within which to satisfy himself as to the legality of the improvements and to notify the seller in writing of his approval.

    Ideally, the seller should be obliged to furnish the buyer with a copy of the approved plans as soon as possible after signing the sale agreement. If the buyer neglected to ascertain the status of the improvements before transfer, he would either have to accept the property with the prevailing defect or enter into costly (and often protracted) litigation in an attempt to enforce his rights.

    Andrew Seaber
    Senior associate
    Cliffe Dekker Hofmeyr
    Weekend Argus (Saturday Edition)


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