Author: Melanie Coetzee
MC: Compliance, Legal and Training Solutions
9 March 2021
THE PROPERTY PRACTITIONERS ACT AND DISCLOSURE OF DEFECTS
The Property Practitioners Act was signed into law on 3 October 2019 and even though much speculation exists that the effective date would be set for 1 April 2021, there has been no confirmation in this regard.
Because of the size and scope of the changes in the industry which will come about when the PPA becomes effective, all Property Practitioners are encouraged to familiarise themselves with some of the main aspects which will affect them immediately.
Everyone in property knows that the discovery and disclosure of defects in the property being marketed is a primary aspect when the sale is concluded. Property practitioners have always borne a heavy responsibility to ensure that they get as much information regarding the property’s condition from the sellers as possible and then to ensure that they disclose these defects to prospective buyers in a way which would still encourage an Offer being made. Admittedly, this is not easy as it would appear that buyers in South Africa expect properties in perfect condition and quickly point fingers when faults are discovered.
In addition, the common law principle of voetstoots continue to cause consternation in the property industry and most property practitioners simply do not know how to deal with this provision contained in their agreements when a buyer starts sending emails highlighting defects in pool pumps, electrical switches and plumbing. Throw into the mix the obligations contained within section 40 of the Consumer Protection Act 2008 in which property practitioners are expressly prohibited from marketing properties in which a full discovery and enquiry of defects have not been made and that the lack of enquiry could be treated as fraud on the part of the Property Practitioners. Buyers are consumers of the services delivered by property practitioners after all and usually make decisions to buy or not to buy and on which terms based solely on the information supplied to them by the property practitioner.
Many property practitioners have found themselves in hot water at the Consumer Commission following a buyer’s discovery that he would not be allowed to keep pets in a complex after being reassured that it would not be a problem or where building plans are outstanding when no discussions took place surrounding plans between the property practitioner and the seller.
With the introduction of the Consumer Protection Act, the Estate Agency Affairs Board published a suggested Property Conditions Report for usage by property practitioners and this document continue to offer comfort during negotiations with buyers. One would imagine that this Property Conditions Report would have eliminated a lot of the common defect disputes between sellers and buyers but alas, it has not. The reason: Offers can be taken without a Property Conditions Report being attached and the content of the report in itself can also be watered down to ensure that it refers only to superficial defects.
This is all about to change when the PPA is proclaimed. In an attempt to expand the common law and Consumer Law obligations on the part of sellers to disclose all material defects at the property and to assist property practitioners in the process of collecting all material information for the benefit of the buyer, sections 67, 68 and 69 of the PPA EXPRESSLY obliges property practitioners to:
1. Obtain the fully completed disclosure form as prescribed in the PPA Regulations before accepting a mandate to sell or rent;
2. Provide a copy of such completed disclosure form to all prospective buyers or tenants;
3. Attach a copy of the completed disclosure form to the sales agreement or rental agreement. [SECTION 67 OF THE PPA – see link below]
If the disclosure form is either not completed prior to the mandate and/or a copy supplied to all prospective buyer and tenants and/or it is not attached to the agreement, THEN it will be accepted that NO DEFECTS WERE DISCLOSED TO THE BUYER OR TENANT. This means that the seller or landlord in a property deal will be completed exposed for defect claims and will legislatively have no defence to such claims. Property Practitioners who fail to follow the rules set out in these sections can be held personally held liable for damages on the part of either seller, landlord, buyer or tenant. [MANDATORY DISCLOSURE FORM – REGULATORY – see link below]
This needs to be repeated for full effect:
If the property practitioner puts the property on the market WITHOUT the disclosure form completed and signed by the seller or tenant, even if it is done immediately thereafter, it is assumed that the property is sold as if no defects were disclosed.
If the property practitioner forgets to show interested buyers the disclosure form, it is again assumed that the property is sold as if no defects were disclosed.
Property Practitioners need to therefore get into the habit of using the Regulated disclosure form, getting it signed before the mandate is signed and remember to show all prospective buyers the disclosure form.
The original article can be viewed here: