Buying and selling property is a hugely stressful event. For this reason, people rely strongly, perhaps too strongly, on the people assisting them with the sale when signing the Sale Agreement. All too often, both Seller and Purchaser are guilty of signing Sale Agreements without necessarily reading, or fully understanding, the conditions in that particular agreement and the potential ramifications long after the property has been transferred. One such condition relates to approved building plans.
The National Building Regulations and Building Standards Act (no 103 of 1977) stipulates that no person may erect, alter, add to, or convert any building without the prior approval of the Local Authority. Building without approval can have disastrous consequences and it seems that few people fully appreciate the complexities that can arise.
When a property is sold, the Sale Agreement most often includes a “voetstoots” clause. In plain English, this means that the Purchaser accepts the risk relating to defects existing at the time of the sale, whether they be patent (visible) or latent (not visible). However, in cases where the Seller fraudulently concealed latent defects that he was aware of from the Purchaser, the Seller will remain liable for the defect.
Property that has buildings erected on or renovated without municipal approval, is considered to be property with a latent defect. As discussed above, the voetstoets clause would ordinarily cover latent defects. However, if the Seller knows that there are no plans, for example if he effected the renovations, and deliberately conceals the fact with the intention to defraud the purchaser, the Seller cannot hide behind the voetstoets clause.
At best, the absence of approved plans may cause the municipality to refuse plans for any future renovations by the Purchaser. At worst, the municipality could make a finding that the illegally erected structure must be demolished.
Although it is not a legal requirement that the Seller provide a copy of the house plans, it is highly recommended that the Purchaser ensure that a clause is inserted into the Sale Agreement whereby the Seller warrants that the municipal plans are in order. If it is then found at a later stage, after signature of the Sale Agreement, that there were no or incomplete plans, the Seller will be bound to the Purchaser by the warranty and will have to arrange for the drafting and approval of the plans before registration of transfer.
However, should this latent defect only be discovered subsequent to the transfer taking place and the above warranty was in the Sale Agreement, the Seller and/or agent may be found liable for the cost of rectifying the defect. In order to hold the Seller liable, the matter would most likely become litigious and be decided in the Magistrate’s or High Court. In order to succeed, the Purchaser will need to prove that the Seller was aware of the irregularities. This could be very difficult to do.
In light of the above, the best advice to any prospective Purchaser is to check that the building has been erected in terms of approved plans. Alternatively, place a suspensive condition within the Agreement that places an obligation on the Seller to provide the Purchaser with copies of the approved plans.
This article should not be used or relied upon as professional advice and is for information and marketing purposes. Please consult with one of our attorneys should you need legal assistance relating to this area of law.