MAIN IMAGE: Robert Krautkramer, Director at Miltons Law
Robert Krautkramer
The new Property Practitioners Act (PPA) which came into effect on 1 February, is only applicable to property practitioners and does not apply to private sellers unless that private seller happens to be a developer selling stock from its own development, says Robert Krautkramer, Director at Miltons law.
According to Krautkramer such developers are then property practitioners and will have to adhere to the requirement relating to a Mandatory Disclosure. Private sellers do not need to adhere to this requirement.
What then does it mean for property practitioners, actually?
“To start with, the sale agreement will not be null and void if such a disclosure is not obtained. In my opinion the magic lies with the wording of Section 67 which says that a property ‘must’ not be taken to market without the mandatory form having been completed and signed by a seller/landlord. The word ‘must’, is indicative. ‘Must’ does not mean you ‘may’ not. It means you ‘may’ but if you do, you could get into trouble. What am I referring to?
“Firstly, there will be a statutory presumption that you did not disclose any defects at all. The Act states that if such a form is not attached to a lease/sale agreement then the agreement ‘must be interpreted as if no defects or deficiencies of the property were disclosed to the purchaser’.
“This appears to suggest that a purchaser could end up trying to sue the property practitioner for damages if a latent defect is discovered after transfer. Whether the courts will someday interpret this section to mean that the law has now created an ‘irrefutable’ statutory presumption, remains to be seen.
“In other words, let us assume the property practitioner had in fact made disclosures orally in the presence of third parties, or by way of WhatsApp or email, does this section now actually mean, that if you don’t capture the defect in a Mandatory Disclosure, you as property practitioner have no right at all to rely on such other methods of disclosure? I doubt that this is the intention, but it remains to be seen how the courts will interpret this, and I would not chance it. All we can say, is that if you as agent are aware of any latent defects, make sure you have captured this on the disclosure form as well.”
Secondly, does this disclosure form mean the end of voetstoots?
This form does not change voetstoots at all. The Purchaser will still have to prove that the seller or agent was in fact aware of the defect, and that it was deliberately withheld or concealed if he/she wants to sue for damages arising from a latent defect. Even if no form is used and the Purchaser wants to sue the property practitioner, he/she will still have to prove that the property practitioner was in fact aware of the latent defect complained of.
The risk of a proper inspection still lies with the purchaser. The purpose of the disclosure is threefold. To protect the property practitioner; to alert the purchaser to the right to have the property inspected independently at his/her own cost, and to allow the seller a chance to disclose any of the defects referred to, that he/she might know of. It serves to achieve nothing more and nothing less. As the form states, it is not a warranty of any kind, so it does not change voetstoots at all.
Annexure X
Thirdly, what if your seller refuses to complete this because he/she is the executor of a deceased estate for example or liquidator of an insolvent estate, or investor owner who has never set foot in the property?
“I would be very hard pressed to believe that the legislator intended to say that if the seller refuses to complete this form, you are barred from selling the property, or, that you must now carry potential liability regardless. If you are faced with such a situation, you should annex the following to the Disclosure Form after drawing a line across the front page, stating, REFER TO ANNEXURE X.
“ANNEXURE X – The seller is not able to complete this form as he/she has no personal knowledge of any defects referred to. The purchaser therefore purchases entirely at risk and is reminded of the right to appoint his/her own building inspector.”
The property practitioner warrants that he/she has no knowledge of any latent defects, and the purchaser warrants that the property practitioner has not made any representations regarding the condition of the property op has made the following representations regarding the condition of the property. The purchaser therefore waives any claims against the property practitioner as he/she may otherwise have had, and as may have otherwise arisen from the seller’s non-completion of this document, as is provided for in Section 67 of the Property Practitioners Act”.
Fourthly, you could be reported to the PPRA and face disciplinary sanction if you do market a property without the form having been completed. The Regulations consider failure to comply with this as a “minor” transgression, but it could see you facing a R15 000 fine. However, if you took the mandate and attached a waiver and clear assumption of risk, as proposed above, it is highly unlikely that the PPRA will sanction you.
“If I am wrong, it means that the legislator intended for you not to accept any mandates at all if a seller refuses to complete such a form, and that such properties must then be sold privately. On the other hand, if you do work for an executor for example, he/she has nothing to fear anyway, by completing the document, because it does not warrant a single thing other than that he/she is not aware of any latent defects. There is therefore no reason at all for any seller to be worried about completing this document, regardless of whether he lived the in the property before, or not.
“And finally, should private sellers be forced to use these forms? I see no reason, given that it makes no difference to voetstoots, and, given that its purpose is to protect property practitioners after all. It does not detract from the common law duty that rests upon a seller, to disclose latent defects that are material and that could not have been detected by a purchaser upon a reasonable inspection. That has not changed at all,” Krautkramer stated.
