Protecting your immovable property / house purchase or sale


Protecting your immovable property / house purchase or sale

I often receive calls from a buyer or seller asking for advice on their sale agreement/deed of sale/offer to purchase for their property, which typically happens after they have already signed the agreement.

I see quite a lot of hard luck stories either from a purchaser’s perspective or a seller’s perspective and quite often the client is deeply unhappy about some aspect of the agreement which they did not understand correctly, or did not know the consequences of, and how it would financially or personally affect them.

For instance, if you are selling a property, and your intention is to use the proceeds from the sale of your current property, to purchase another property, make sure that when you sell your property, that you give yourself the option to purchase an alternative property, as you may find yourself without a home if you have not correctly linked the sale of your current property to the one you are buying.

You thus need to make sure that the offer that you are signing with your buyer reflects that you need to find alternative accommodation or to purchase or rent another property within a certain period of time, failing which the offer will fall through with your buyer.

As a buyer or seller, you need to ensure that the conditions you need are included in the offer and not verbal or in email format.

With the sale of immovable property everything should be reduced to writing and signed by both parties for the sale of property to be binding and valid.  This includes all conditions, undertakings, warranties and stipulations – they must all be included in the written agreement and signed by seller and buyer.

With respect to certain conditions of the agreement, and I will deal with some scenarios, if you as the buyer are buying a “fixer-upper”, you need to ensure or make provision for the fact that you may want to have certain inspections done at the property, to ensure that you are not buying something that is going to drain your financial resources to the extent that you over-capitalise on the purchase of the property.

You as the buyer are quite entitled to put certain conditions in the agreement such as the offer is subject to and conditional upon an inspection from a structural engineer, or roofing expert or that you want to use the services of a company that does home inspections, to thoroughly inspect the property before you make a financial commitment to the property.

Time and time again, I come across situations where clients come to me for advice after the fact when they have bought something that has turned out to cost them far more than they expected.

Thus, I highly recommend that, when buying a property, you put conditions in the agreement to reflect that you wish to have the property inspected, or have conditions that protect you or give you certain options.

It should also be noted that there is a misconception among a lot of buyers that in terms of the Consumer Protection Act, the common law adage of “Voetstoots” has been done away with.

This is certainly not the case, in  respect of the sale of a residential property where you have a private seller and private buyer, even though there may be an intermediary such as an agent, the “Voetstoots” clause is still enforceable under our common law and contract law.

Thus, when a buyer submits his or her offer to the seller and the agreement contains the “Voetstoots” clause, this means you are buying the property “as is” and the seller is protected from certain latent and patent defects.

Briefly, latent defects are defects that you cannot see, such as defects that are covered up by a cupboard or carpet or tiling, whilst patent defects are in the open and easily seen such as damp, holes in the wall, et cetera.

The only time a seller is not protected from latest defects is where the buyer can show that the seller knew about the latent or hidden defect, and failed to disclose such defect/s or covered up same.

This is normally a very tall task in trying to show this and the onus is on the buyer to prove this.

From the buyer’s perspective, when you are buying your dream home, you need to make sure that all the financial aspects of the sale have been correctly reflected in the agreement of sale otherwise you may find yourself in the predicament of having to apply for bridging finance to purchase, or over extending yourself, or potentially being put to terms and being sued for damages.

As the buyer, you furthermore need to make sure that you have done your sums correctly and that you have sufficient financial means to cover all the costs associated with buying the property and that you if you are applying for finance from the bank, that you have a sufficient bond and perhaps a bit extra to cover yourself.

From the buyer’s perspective, you need to know that you have enough finances in addition to the purchase price to cover transfer costs, transfer duty, bond registration fees, if you are applying for a loan, as well as potential levy clearance fees if you are buying a property  that falls into a sectional title scheme or homeowners association.

As the seller, you will be liable for any bond cancellation costs if there is a bond that needs to be cancelled, as well as very importantly, you need to give proper notice to your bank, where such notice is required, to cancel the bond. Proper notice typically means 90 days notice and be aware that if you cancel and pay up the bond within the 90 days, the bank charge may charge you an extra penalty in the form of extra interest on the outstanding balance, in the event that you settled the bond within the said 90 day notice period.

The other cost from the seller’s perspective is the payment of rates clearance in that typically, such as in the City of Cape Town, the seller is required to make payment of rates and service charges for the property for 120 days in advance in order for the municipality to issue a Rates Clearance Certificate for the transfer.

Further, in selling or buying a sectional title property, the seller and buyer may be liable to cover the costs of levies and from the seller’s perspective, potential special levies as well.

I am quite amazed that buyers and sellers are quite willing to deal with their most important asset, being the selling or buyer of an immovable property that typically costs hundreds of thousands if not millions of Rands, but do not seek proper legal or contractual advice before signing the agreement, which agreement can have serious financial, personal and legal consequences.

Therefore, I highly recommend that whenever you are in the process of buying or selling or both, that you obtain the best possible legal advice about how to structure the agreement according to your individual personal and /or financial circumstances. The costs of obtaining such advice is normally a small price to pay and negligible, as opposed to the potential loss and damages that you may suffer which will far outweigh the costs of such advice.

The above is just a very short synopsis of some of the pitfalls and potential dangers of selling and buying property and in further blogs in due course I will provide some more detail on various aspects of selling or buying property.

You are welcome to email me on should you require any further information.

All the best!

Damian Enslin