Advice and Opinion

Dangers of neglecting pre-offer "homework"

Homes in the central Southern Suburbs of the Cape Peninsula have been much in demand for two years or more now. While this is obviously welcome to the many people with an investment in Cape residential property, it can have awkward, unforeseen consequences.

This was said recently by Ian Teague, an attorney with the Cape legal firm, Gunstons Attorneys.

One of the unfortunate consequences of this strong demand for certain homes, said Teague, is that occasionally, for example when the home is open to the public as a show house, a prospective buyer may find that he really does want to own it – but that there are now many more other potential buyers with similar ambitions.

“The buyer then slams in an offer as fast as he possibly can to secure the home – and if this is successful he is delighted,” said Teague.

So far, so good – but speeding up the offer process in this way without careful consideration, said Teague, is often done without the buyer inspecting the property thoroughly and/or making assumptions which are not warranted and/or accepting certain statements without checking them.

In a recent case with which he has been involved, said Teague, the buyer and the seller thought a small section of the property, enclosed by its fence, was very definitely part of it. However, when the title deeds were examined after the parties had concluded a Deed of Sale, this was found not to be the case.

“Enquiries revealed that this portion of the plot had indeed been ‘transferred’ to a neighbour as part of a land swap prior to the current owner buying it, but this had never been registered with the Deeds Office. Accordingly then, the swop was not yet effective.”

The seller, said Teague, had offered to legalise the transfer after the buyer bought the property – but the buyer had by this time grown wary and feared that other misunderstandings could be revealed. Although he had paid over the full fees incidental to the purchase of the home, the buyer wanted the deal cancelled – a move resisted by the seller who may have needed the cash elsewhere.

At the time of writing it was not known whether this case would go to court. If it did, said Teague, the costs could easily be as high as R100,000 for each of the disputants involved, but the lesson it should give is clear – check every detail, taking nothing for granted.

“This is,” said Teague, “not a case in which the seller will be able to invoke the voetstoots clause, though the seller may try to do so – which could result in lengthy and costly litigation.”

In such cases, he added, in future it is possible that the estate agent may find himself being held culpable because, in terms of the Consumer Protection Act, the agent is considered a member of the ‘supply chain’ and is expected to know his product thoroughly and, incidentally, to explain it to the client in a language he can be expected to understand, taking into account his educational background.

If, therefore, the agent has taken on a property mandate but has not checked its plans and inspected it thoroughly for defects, he could be held responsible by the buyer if these are later found to be defective.

As yet, said Teague, very few property disputants have appealed to the Consumer Protection Act. What is more, there is a lack of jurisprudence (case law) to refer to and this complicates the position of any attorney called on to advise in this respect. Nevertheless, said Teague, this situation will probably change in time and the Consumer Protection Act is likely to play a far bigger part in future in property disputes.

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