Protect yourself against latent defects
MAIN IMAGE: Alan Rubin, Head of ooba Home Loans; Wynand van Vuuren of King Price Insurance
Since the new Property Practitioners Act (PPA) came into operation earlier this year, sellers of a property have an increased responsibility to declare any latent defects in the property to the prospective buyer. This is a process that is overseen by the property practitioner managing the transaction.
The prospect of finding a dream home may distract the buyer from seeking out the ‘nitty gritties’. Some of the details that a potential homeowner might miss could be as small as a loose door handle or as big an issue as discovering damp and structural issues to the home. Property practitioners play an integral part in this process as they need to sensitize their clients on this important aspect of the purchase process.
Alan Rubin, Head of ooba Home Loans, advises homebuyers to clearly understand the risks of purchasing a home with latent defects and protect themselves accordingly. “Once you have been pre-approved for a bond, things can move quickly. It’s so easy to get swept up in the excitement of making an Offer to Purchase (OTP) that you fail to observe pertinent issues around the home.”
“A latent defect is a material defect that was not visible after reasonable inspection. Examples of latent defects can include leaking roofs, faulty geysers, and damp issues where you can’t see the issue on inspection.”
Rubin adds that taking transfer of a home with latent defects is a common occurrence among homebuyers who haven’t thoroughly inspected the home prior to purchase. “Some potential buyers might feel too uncomfortable to conduct a thorough investigation before signing an OTP or haven’t been warned about looking into latent defects prior to purchasing a home.”
“Important to remember,” adds Rubin, “An offer to purchase is legally binding and a home is sold ‘voetstoots’.”
The term ‘voetstoots’ means that any problems with the home’s structure, visible (patent) or not (latent) defects are the buyer’s problem – not the sellers, unless the seller covered them up. “’Voetstoots’ protects the seller, except in cases where the seller hides or chooses not to disclose defects in a disclosure form before the sale – this is viewed as fraud.”
According to Wynand van Vuuren of King Price Insurance it is critical that a buyer consult a professional building inspector before they put in an offer to purchase on a property.
“They’ll not only identify any safety or structural issues but will also help you to determine the right amount of insurance you’ll need if you do buy a home. Many people think a bank’s valuation of a property is the same as a home inspection. It’s not. A bank evaluator looks to see whether there’s sufficient value in the property to secure a home loan. They don’t inspect the property for insurance purposes, structural defects, wear and tear or other maintenance-related issues,” said Van Vuuren.
Rubin says that there is good news for homebuyers under Section 67 of the new Property Practitioner Act 22: “Section 67 of the Act states that an estate agent can only accept the mandate of a sale if the seller or lessor of the property has completed and signed a mandatory disclosure form.”
This form gives the seller the opportunity to disclose any defects or issues with the property that they know about. “Important to remember, this is focused on what the seller knows and not what the facts are. The two can be different.”
The potential homebuyer will have sight of these disclosures before signing the OTP and it will be attached to the agreement.
If you are an unlucky buyer whose seller hid a defect, you do have the option of making a claim against the seller, so long as it is made within three years from when you discover or could have known about the hidden defect.
Aside from the costs of litigation, which can be expensive, you also must prove that the seller deliberately concealed the defect if there is a voetstoots clause. It’s best not to leave it to chance and inspect the property if you have any concerns.
“If a dispute arises around latent defects in your home purchase before or after registration of transfer the matter can, by agreement, be referred for arbitration or determination. If that option is not listed in the sale agreement the parties should try to resolve it between themselves, before applying to the courts for resolution,” warns Rubin.