Tuesday, 16 August 2016

Debunking the Voetstoots Myth

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Voetstoots does not relieve sellers of their duty to disclose latent defects

You may believe that as a seller of a property, the voetstoots clause in an offer to purchase protects you against having to fully disclose all known defects to a buyer.  Likewise, as a buyer, you may believe that once you accept an offer to purchase with the voetstoots clause, you have no recourse if you discover latent defects after the sale has gone through.  Both scenarios are wrong!

“Voetstoots merely states that ‘you purchase the property with the existing problems and I am not going to fix them, so you take it as is’.  But this does not mean that the seller does not have to fully disclose what the problems are in order for the buyer to make an informed decision.  As the seller, you’re still required by the law to fully disclose any defects you should reasonably know about,” explains Lee-Ann Dobrescu, Head of Group Business Development at Hollard.

A lot of sellers believe that the voetstoots clause can be added to an offer to purchase as protection against any action by the purchaser for defects that emerge post the sale of the property. However, since the introduction of the Consumer Protection Act (CPA), the voetstoots clause has become redundant as the CPA requires sellers and purchasers to be more fair and equitable in their contractual interaction.  In effect, the seller must now implicitly warrant that any improvements on the property are reasonably suitable for the purposes for which they are intended, are of good quality, in good working order, free of defects and will be usable and durable for a reasonable period of time under normal operating conditions.  

“The voetstoots clause can no longer be inserted into agreements for property sold to individuals or small corporations in the ordinary course of business, without it specifying the list of defects to the buyer. The purchaser must be informed that the property is offered in a certain condition (for example with a specific defect), and must expressly accept the property in that condition. Defects must be disclosed expressly and a general clause that the purchaser accepts the property “as is” without disclosing the defects is no longer acceptable,” explains Lee-Ann.

 

Debunking the voetstoots myth

A ruling in the Western Cape High Court put the spotlight on the term ‘voetstoots’ and what it means for buyers and sellers.  The ruling was made in 2015 and relates to a case dating back to March 2011, highlighting just how drawn out the legal process can be.  During this time the buyer still had to live with the defects and costs of repairs though.  The case to be decided on included whether serious defects that the buyer had uncovered at the house after the sale went through were indeed defects, or whether these had been concealed, and whether the voetstoots clause protected the seller.  The court found in favour of the buyer, noting that voetstoots does not protect a seller where they have misled or concealed latent defects in a property from the buyer.  Bottom line:  Voetstoots still demands full disclosure of all known defects.

How can you protect yourself?

For buyers there is always the point where their house-hunting excitement is replaced by post-offer anxiety and the question becomes, “What if there is something wrong with the place and I can’t afford to fix it?”  All of this worry and hassle can be easily done away with by taking out a Home Warranty from Hollard.  Hollard’s Home Warranty addresses the issues around defects with a professional property inspection that is coupled to an insurance policy.  You’re protected against the financial ramifications of any hidden defects that may emerge in the property for two years after taking transfer.  It also means you don’t have to go through stressful and costly litigation to recoup your losses if you do find something untoward lurking behind a voetstoots clause.

For the seller, the pressure of the defects disclosure list and hoping that you have remembered everything is quickly resolved, even that niggling problem that you haven’t really fully investigated the extent of. And the cost of the warranty can be covered within the total price of the house – all you have to do is include it in your Offer to Purchase and the premium can be paid from the proceeds of the sale, much like the estate agents commission.

What does it cost?

Premiums are determined on an individual basis, but typically you can expect to pay around R12 000 for a warranty on a R1million home, R17 400 for a R2million home and R27 500 for a R5million home. 

 

How do I get a Home Warranty?

Ask your estate agent, or contact Hollard directly on 0861 HOME 4U (0861 4663 48) or email This email address is being protected from spambots. You need JavaScript enabled to view it..

Peace of mind comes standard with a home warranty

“When it comes to property transactions, a Hollard home warranty is the best solution for making sure the homework is done by experts who know what to look for. This allows risks to be identified and assessed, and for those that are not found there is also the ability to transfer the risk to an insurer.  It’s a product that should be attached to the ‘for sale’ sign of every well-maintained home for peace of mind and the best possible outcomes for all parties concerned,” concludes Lee-Ann.