Denoon Sampson of the Sandton conveyancing firm, Denoon Sampson Ndlovu Inc, comments on how ineffectual the Property Condition Report is and suggests a better solution.
When a disgruntled purchaser telephoned one of our conveyancers to complain that the Property Condition Report was contradictory and therefore, a completely useless document ; we were not surprised. He was referring to the seller who had stated in writing that he was not aware of any damp, despite the fact that there was a large damp area which was plainly visible on the patio for all to see. In fact, the seller had ticked every one of the many defect categories in the Property Report, indicating that he was not aware of any defects in the property.
But there it was, a blatant contradiction. The seller had indicated in writing that he was not aware of any damp, - but the damp and blistering was plainly visible on the patio for all to see.
The purchaser insisted that the seller repair the damp! But the seller denied liability saying that, firstly the property condition report contained a disclaimer which says: this report does not constitute a guarantee and/or warranty of any kind or nature, by the owner of the property or by the property practitioners...... Therefore, he the seller was not liable to honour any guarantee.
Secondly, the sale agreement contained a clause that the seller would not be liable for any patent and visible defects. Thirdly, the purchaser had a duty to make a thorough inspection of the property: that is what show days are for!
“No ways would he compensate the purchaser!”
Why we were not surprised? Well had just recently come across a similar problem. This time the seller was an 82-year old woman who was selling her property due to the recent death of her husband. As her husband had exclusively managed the family affairs, she was not up to speed on the condition of the property. She therefore completed the property condition report by indicating that she was not aware of any defects in the roof, the plumbing and electrical systems. This was because, as she says, everything was working perfectly well.
It so happened that the purchaser was an electrical engineer who was disappointed to discover that the geyser was defective. The problem was inside the external galvanised geyser casing : as the inner pressure vessel was leaking into the thermal insulation. Although the engineer didn't for one moment expect the elderly widow to personally climb into the roof in order to dismantle the geyser to check the inner pressure vessel, he complained that someone should have known about it. Somebody needed to take responsibility for the problem. How could she say there was no problem in the roof? What would have happened if the geyser had burst and flooded the lounge?
Just browsing on the internet, one will come across many other examples of unsatisfactory Property Condition Reports and complaining purchasers.
These unhappy sagas invariably descend into voetstoots disputes, leaving the purchaser with the extremely difficult task of proving that the seller was aware of the hidden defect and crucially, that the seller intended to defraud the purchaser. In most cases the unhappy purchaser is simply unable to prove the requirements that would entitle him to succeed in a claim for damages for hidden defects.
Judging by all of the complaints that have come to our knowledge, and it would appear that the Property Condition Report in its current format is a pretty ineffectual document. It gives purchasers is a false sense of security for the following reasons.
We hear cases of where the seller completely disregards the seriousness of the document. For example he hurriedly ticks every defect category, stating that he is not aware, without actually applying his mind to the question. There are examples where the seller just tells the agent to complete the document without any proper enquiry in to whether not they are actually any defects in the property or not.
What is the point of asking any elderly seller to state whether or not he or she is aware of any defects in the roof? They would simply say they are not aware of any defects, because in most cases they simply just do not know. Come to think of it, if the purchaser is told by the seller that he is not aware of any defects in the roof, there could nonetheless be very serious defects in the roof, even though the seller genuinely and in good faith, believed that there were none.
This state of affairs has been the source of numerous disputes which have reached the High Court. The most well-known case is that of Van der Merwe vs Meades, where the seller employed a professional engineer to fix the roof in preparation for selling the property. After the engineer had completed the repairs for which he was paid, he told the seller that the roof had been completely restored. She accepted this fact at face value and accordingly was no longer aware of any defects, because she had been assured by a professional engineer that all the problems had been repaired. However it so happened that the engineer had in fact, not actually repaired the roof after all and the roof still remained defective. Because the purchaser could not prove that the seller was aware of any defect, (she thought the engineer had repaired the roof) the purchaser had to bear the cost of having the roof repaired a second time.
In any event, most sellers are not qualified to comment on whether or not a geyser is working properly or not, whether or not the roof structure is in good condition and whether or not the property is encroaching over the boundary line for instance.
Secondly, sellers may be tempted wilfully misrepresent the condition of the property, as they are not independent appraisers. Even if a diligent seller wanted to make a thoroughly honest disclosure, that person may not be able to do so as he may not be sufficiently qualified as an expert to comment on the technicalities in the building.
Thirdly, the report clearly stipulates that it, itself is not a guarantee and is not a warranty while the offer to purchase sale agreement categorically imposes other conditions, such as the seller will not be liable for any latent and/or patent defects. The result is that the sale agreement will always take preference and override the Property Report.
What good then is the Property Report – other than to confuse and mislead the purchaser?
So what are we to advise a purchaser who wishes to obtain absolute certainty in respect of a second-hand house that he wishes to purchase?
We should remember that there are already various independent experts who issue certificates regarding the safety of the property. These are the Electrical Certificate of Compliance, a Gas Certificate of Conformity, a Plumbing Certificate in Cape Town and now an Electric Fence Certificate. It is intended that these certificates are issued by qualified experts, who are thoroughly independent of the seller and upon whom the purchaser may rely on. Generally the purchaser can count on being protected by these reports.
With regards to the condition of the remainder of the house , sellers and purchasers are left with the following rather inconclusive options.
Firstly, Voetstoots - this is the age-old principle which dates back to Roman times. From the seller's point of view, it is perfectly fair and reasonable that the seller should not be made liable for any defects that he is not actually aware of. Most purchasers would agree it is unfair and unrealistic to expect a seller to personally climb into the roof in order to try and decide whether not the roof and/or geyser is defective or not. On the other hand, why should a purchaser's claim for compensation for defects only arise if the purchaser is able to succeed in the very difficult and costly process of proving that the seller acted fraudulently?
Secondly, The Immovable Property Condition Report - a purchaser may believe that he can insist on receiving a report before he submits an offer to purchase; but actually legally, he cannot.
The property condition report came into being as a sop to the new consumer regime at the instance of The Estate Agency Affairs Board. When motivating the introduction of this document on 31 March 2011, the Board stated that “professional estate agents should be required to play an active role in the effective implementation of the new consumer protection regime.
However, in the case of the sale of second-hand houses, it appears that both the seller and an estate agent cannot be compelled to issue any Property Condition Report due to the fact that the estate agents and second hand house owner/sellers are not subject to the provisions of the Consumer Protection Act (CPA).
This is because an intermediary, who represents another for gain would be governed by the CPA, provided that their activities, as an intermediary are not regulated by other national legislation. But, as an estate agent's activities are governed by other national legislation in the form of the Estate Agency Affairs Act 1997 together with the Estate Agents Code, it is quite clear that estate agents as well as Section 27 of the CPA (which is the source of the requirement that an intermediary issues a disclosure in the form of the Immovable Property Condition Report) are excluded from provisions of and by the CPA.
In essence, as estate agents are not covered by the CPA, there is no legal basis to compel anybody to issue a Property Condition Report. In any event, calling for a Property Condition Report would not give the purchaser absolute
certainty : particularly if the document itself says, it is not to be construed as a guarantee and/or warranty. Besides, for the reasons mentioned above, it has on numerous occasions proved to be half baked and unreliable.
The only solution is for the industry to recognise and call for independent property surveyors to provide a detailed analysis and report of every facet of the property before the property is advertised for sale. As the seller is already paying for the numerous obligatory Certificates of Compliance for the benefit of the purchaser, the purchaser should compensate the seller for the cost of commissioning the report, whilst the seller pays for the cost of whatever repairs may be recommended by the survey report.
D H Sampson