Agreements of sale should always be conducted in good faith and therefore it is important for the owner / seller of immovable property to always disclose relevant facts to a prospective buyer and the agent to not only ensure complete transparency, but also to prevent any unnecessary claims for damages due to non-disclosure.
A case in point as follows:
Ismail NO and Another v Erf 87 Dullstroom CC (A357/2015) [2015] ZAGPPHC 835 (11 December 2015)
In this matter the purchaser’s plans to develop a tract of land had to be revisited after it learned of the existence of an unregistered road reserve on the property. A claim for a reduction in the contract price followed and the court, finding that it constituted a material defect, had to weigh up the implications of the fact that the seller knew of the purchaser’s envisaged plans and the defect.
A summary of the facts:
Mr and Mrs Ismail sold their property to Erf 87 Dullstroom CC (Dullstroom CC). The sale agreement described the property sold as measuring 1322 m². However, it appeared later that the property was subject to an unregistered road reserve measuring 397 m² and Dullstroom CC could not utilize the 397 m² area of the road reserve – this was never disclosed in the negotiations or in the agreement of sale.
Dullstroom CC approached the court and claimed a reduction in the purchase price in the sum of R85,000.00, being the difference between the original contract price and the price that it would have been willing to pay for the property had it been aware of a road reserve. It alleged that Mr and Mrs Ismail were aware of its intentions to develop the full extent of the property and that despite their knowledge of the existence of the road reserve, failed to advise it thereof.
Clause 6 of the sale agreement provided that the property was sold “voetstoots and as described in the existing title Deed or Deeds thereof, and shall subject to all conditions and servitudes (if any) attaching thereto or mentioned or referred to in the Title Deed under which the property is presently held or any prior Title Deed. The seller shall not be liable for any re-survey, nor shall the seller benefit by any surplus in extent.”
The Magistrates’ Court found that the sellers were fully aware of the existence of the road reserve on the property, that it constituted a latent defect and that the sellers were entrusted with a duty to advise the purchaser of the presence of the servitude, but failed to do so. This was fraudulent and made with the intention to induce the purchaser to buy the property.
Mr and Mrs Ismail appealed and argued that the Magistrates’ Court erred in disregarding the provisions of the voetstoots clause.
HELD:
- It is trite that a seller cannot invoke and find refuge in the protection afforded by a “voetstoots” clause where the purchaser can establish that the seller was aware of a latent defect in the property sold, either before or when the contract was entered into, and did not disclose this. The same can be said where the seller intentionally and fraudulently concealed the presence of the defect. These are, in short, the exceptions available to negate a “voetstoots” clause in a contract.
- In the present case, the magistrate correctly found that Mr and Mrs Ismail were aware of the defect relating to the existence of the road reserve. They had previously prepared subdivision plans in respect of the property and were advised by the land surveyor of the existence of the road reserve.
- Was this a latent defect? Our courts have described a latent defect as “an abnormal quality or attribute which destroys or substantially impairs the utility … effectiveness of the res vendita for the purpose for which it has been sold or for which it is commonly used. … Such a defect is latent when it is one which is not visible or discoverable upon an inspection of the res vendita.”
- It was common cause that Dullstroom CC purchased the property in order fully to utilize the 1322 m² and had plans drawn up by an architect for such full utilization.
- Dullstroom CC was however compelled to re-draw the initial plans to obviate the 397 m² road reserve shortfall because it was not permitted to erect any buildings on that area.
- The existence of the road reserve thus made it impossible for Dullstroom CC to develop the land as it otherwise normally would have done. This caused Dullstroom CC not only undue hardship, but also financial prejudice and constituted an “abnormal quality” which impaired the utility of the property.
- The defect occasioned by the road reserve therefore constituted a latent defect in the property sold.
- It was clearly also a material misrepresentation, going to the root of the contract and the purchaser’s motivation to enter into the agreement.
- In the circumstances, the reliance placed on the “voetstoots” clause in the contract by Mr and Mrs Ismail as a defence in resisting liability, was not available to them.
In our law it is generally accepted that a party who has been induced to enter into a contract by the misrepresentation of a fact, is entitled to rescind the contract if the misrepresentation was material and was intended to induce him to enter into the contract, and did so induce him. Where the misrepresentation was fraudulent or negligent, the innocent party is correspondingly entitled to damages.
- It is also trite that in contracts of sale there is a duty on the seller to disclose latent defects of which he is aware, and the duty is stronger where, as in the present matter, the seller is aware of future plans of the purchaser. The contract is then voidable at the instance of the aggrieved party because the risk is greater than what was understood at the time of contracting.
In the circumstances, the appeal was unsuccessful and had to be dismissed.
Wietz Viljoen, WVA INC.
This article is for general information purposes and is aimed at advising the public. It should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice
