The Consumer Protection Act
Many people do not realize that the protection provided to home buyers by the Consumer Protection Act (CPA) specifically excludes sellers who do not sell homes “in the normal course of business”. Because most “second-hand” houses in South Africa are sold by private “once-off” sellers, this means that most South African home sales are specifically excluded from the reach of the CPA. The best legal opinion is that estate agents, on the other hand, are responsible under the CPA to provide accurate marketing information to buyers.
Voetsoots clause
Until or unless this consumer law is changed, there is only one effective way for buyers of second-hand homes to protect themselves. That is for the buyer to only agree to accept a voetstoots clause if the seller also agrees to make the sale subject to a satisfactory home inspection within a specified period (say 5 days). In addition, the buyer, who usually pays for the inspection, should be the sole judge as to what is “satisfactory”. This gives the buyer the option to withdraw or re-negotiate if the inspection report reveals defects that unnerve the buyer.
Home inspection report
Of course, the seller could always commission such an inspection report before putting the house up for sale. Either way, with a home inspection report, the buyer knows the true condition of the house he is buying and the buyer, seller, estate agent, and conveyancers are then all party to a fair deal.
Making a sale conditional on a home inspection is extremely important for the buyer because the so-called voetstoots clause (which means that the house is sold “as is”), which is usually included in the agreement, is of great advantage to the seller. A voetstoots clause, which agents and conveyancing attorneys often insist on including in the standard sales agreement places the buyer at unfair risk unless the voetstoots clause is balanced by a home inspection clause.
Otherwise, if the buyer buys the house “as is” and only then discovers that there are serious problems with the house that he did not know about, then the buyer has a big problem.
Because private “once-off” sellers of property are specifically excluded from the protection which the Consumer Protection Act (CPA) offers most consumers, a buyer who finds out later that he has been ripped off by the seller has only one choice, and that’s to go to court. For that, the buyer needs deep pockets, a strong determination, and lots of time. Even if he gets his day in court, the buyer still has to prove that the problems with the house were deliberately concealed from him by the seller. A very difficult task if the seller has a clever advocate.
The intended advantage of the CPA for the small man is that this law provides a no-cost (or low-cost) way for South African consumers to fight to right the wrongs inflicted on them by suppliers – without having to go to court and face huge upfront legal bills.
The fact that the CPA has specifically excluded private once-off home sellers from accountability under this law is really a great injustice to the South African consumer. Private sellers of second-hand homes are by far the largest suppliers of the housing “product” (in value terms) to South African consumers. And yet South Africa’s legislators have inexplicably turned their back on these consumers when drafting consumer protection laws.
Even though it is legal and accepted practice for attorneys and agents to advise sellers to insist on the inclusion of the voetstoots clause in the sales agreement, voetstoots creates a very dangerous situation for buyers - unless the buyer uses a home inspection to obtain objective and comprehensive information as to what the condition of the house actually is. If a home inspection clause is included in the agreement, then voetstoots becomes an acceptable and effective mechanism to protect the seller from having to shoulder responsibility and accountability for latent defects which the seller could not possibly have known about.
Seller’s Property Condition Disclosure
There are also various versions of “Seller’s Property Condition Disclosure” statements in use by estate agents. One such disclosure form was prepared by the Estate Agency Affairs Board (EAAB) and another by a prominent firm of conveyancing attorneys. Neither does much to make the average property transaction any fairer. These disclosure statements often don’t provide the buyer with genuinely comprehensive information on the true condition of the property. Such agreements often simply shift responsibility away from the estate agent and onto the seller.
Estate agents use these disclosure statements to get the seller to disclose, to the best of his belief and knowledge, problems in the house for sale. However, what the seller “believes” and what is actually true are sometimes very different. The average seller (or agent) is not qualified to evaluate the true physical condition of the house and in all probability has likely never climbed into or onto the roof.
Well over 60 percent of houses inspected by HouseCheck have faulty, and often unsafe, hot water geyser installations. Often the roof covering or roof structure is deteriorating. Sometimes the foundations are subsiding, because of poor groundwater management, trees, or unstable soils. The cracks which the seller has filled and painted over often open up again after the buyer moves in. There are numerous causes for damp as there are wall and slab cracks. A trained, objective eye is needed to evaluate all of these problems, which are mostly not understood by the seller, who sometimes is not even aware of the problem or potential problem.
These seller’s disclosures sometimes seem like little more than cynical attempts to help estate agents escape the potential wrath of the Consumer Commissioner (estate agents are liable under the CPA) for the information they supply buyers. And all the while the seller continues to take refuge behind the voetstoots clause.
So this is the shameful situation that very often plays out in the second-hand South African house market: The agent is protected by the seller’s disclosure and the private seller is protected by the voetstoots clause and the buyer is left largely unprotected.
In the United States and Canada, 77 percent of houses are now professionally inspected pre-sale. In South Africa, the figure is less than 1 percent. The South African home buyer is a lonely and unprotected consumer – mostly even unaware of his predicament.
Home inspections pre-sale are really the only solution. Industry professionals, mortgage lenders (banks), and lawmakers need to make this standard practice. It is for all of the above reasons that HouseCheck fights for the rights of the home buying consumer.