The Common Law
Patent vs Latent Defects
Before we unpack the implied warranty, we first need to distinguish between a visible (“patent”) defect and a hidden (“latent”) defect, as the implied warranty only covers the latter.
A patent defect is clearly visible on a reasonable thorough inspection of the property, before the sale thereof, for example, broken windows and cracks in the wall. The ultimate duty to inspect the property for a patent defect before the sale rests on the shoulders of the purchaser. Hence it is up to the purchaser to spot patent defects and then decide whether he/she wishes to proceed with purchasing the property or negotiate a reduced price.
A latent defect is a material defect, which is not visible through a reasonable inspection of the property prior to the sale. Examples include a leaking roof or faulty geyser. In Odendaal v Ferraris 2008 (4) All SA 529 (SCA) the Supreme Court of Appeal extended the definition of a latent defect to include “in a broad sense”, any material imperfection preventing or hindering the ordinary or common use of the property thereby including not only physical but also non-physical defects. The Court did, however, stress that each case must be decided on its own merits.
In Haviside v Heydricks and Another 2014 (1) SA 235 (KZP) the Court held that the absence of statutory approval such as building plans is also a latent defect.
The difference between what is a patent and what is a latent defect is still crucial in our property law today.
The Roman Law acknowledged this implied warranty against latent defects. This meant that sellers were automatically held liable for latent defects, whether or not they knew of them at the time of the sale and purchasers had the following remedies:-
- Actio Redhibitoria - reclaim payment of the purchase price when the property sold had a latent defect of which both the seller and purchaser were unaware of, which existed at the time of the sale and viewed objectively, substantially impaired the property’s utility or effectiveness for the purpose for which it was sold or commonly used;
- Actio Quanti Minoris - claim a reduction of the purchase price should the property sold have a latent defect of which both the seller and purchaser were unaware of, at the time of the sale but the defect does not impair the property’s utility or effectiveness and can still be used for the purpose for which it was sold or commonly used; or
- Actio Empti - a claim for damages with or without cancellation of the contract of sale where the purchaser can prove that the property had a latent defect when it was sold and the seller knowingly concealed the latent defect or knowingly represented the absence thereof.
The Voetstoots Clause
In Dutch law, the implied warranty against latent defects was curtailed by the introduction of the voetstoots clause in sale agreements. As all sale contracts are deemed to have the implied warranty, the voetstoots clause makes it possible to contract out of the implied warranty. If a
purchaser accepts this clause in a sale agreement, he/she is accepting the product as is and renounces the right to claim against the seller if a latent defect is later found. The voetstoots clause created a defence for sellers against claims by purchasers based on the Actio Redhibitoria and
Actio Quanti Minoris but not where the claim is based on the Actio Empti.
Therefore, if the seller was aware of a latent defect in the property and deliberately concealed it from the purchaser at the time of sale, the purchaser had recourse against the seller. Note that the onus is on the purchaser to prove that the seller was aware of the defect but deliberately hid it.
Case Law and the Voetstoots Clause
These common law principles are accepted by our Courts and in the Court confirmed that:-
“It is trite that if a buyer hopes to avoid the consequences of a voetstoots sale, he must show not only that the seller knew of the latent defect and did not disclose it, but also that he or she deliberately concealed it with the intention to defraud.”
In Ellis and Another v Cilliers NO and Others 2016 (1) SA 293 (WC), the purchasers successfully relied on the voetstoots provision as they proved that the seller was aware of a range of defects that she failed to disclose to them. The defects included a decaying foundation, support beams and poles and a false ceiling and cement floor, applied over timber flooring, to hide subsidence and to create the illusion that the house was level. The Court held that even if the seller did not, for example, consider the uneven floors to be a defect she still had a “parallel obligation” to disclose unusual and abnormal qualities of the property to the purchasers.
The onus of proof rests on the purchasers to prove that the seller was aware of the latent defect and deliberately failed to disclose it at the time of concluding the sale agreement. In most cases this is quite difficult to prove.
The Impact of Recent Legislation on the Voetstoots Clause
The Consumer Protection Act, 68 of 2008, (the “CPA”)
The CPA has changed the common law in so far as voetstoots provisions are concerned as it provides for a statutory duty of disclosure. Where the CPA applies, it gives purchasers the right to goods that are free from any defects and places the purchaser in a more favourable position, as a voetstoots clause cannot form part of the sale agreement. The CPA affects agreements concluded by sellers, who supplies goods (property) in the ordinary course of business.
The CPA does not apply to a transaction if a purchaser is a juristic person with an asset value or annual turnover exceeding R2,000,000 (two million Rand). Also private sales of property transactions do not fall within the CPA as this would not be in the ordinary course of business of the
seller and a voetstoots clause may form part of these sale agreements.
Property Practitioners Act, 22 of 2019, (the “PPA”)
The PPA is a consumer-focused piece of legislation that has been designed to protect consumers in the immovable property industry. The PPA obliges property practitioners, (previously knows as “estate agents”) to deliver a “disclosure form” to a seller before concluding a mandate, and to a purchaser before making an offer to purchase. The disclosure form must be signed by all parties and attached to the sale. If no disclosure form is signed and attached, the PPA provides that the sale agreement must be interpreted as if no defects or deficiencies of the property were disclosed to the purchaser. A defect is defined to mean, amongst others, any condition, whether latent or patent.
Besides the aforesaid requirements, the PPA does not impact the validity of a voetstoots clause in a sale of property agreement where the latent defect, present at the time of the sale, was not known to the seller and not deliberately concealed from the purchaser.
There is a general duty on sellers to disclose any defect in the property being sold to the purchaser. The PPA underlines this general duty by requiring the property professional, who acts as the agent of the seller, to compile a disclosure form listing all the known defects in the property. Purchasers have the duty of properly inspecting the property before the sale as the disclosure form is not a warranty in favour of the purchaser as the seller may deny that they knew of a latent defect and deliberately concealed the existence thereof from the property professional or the purchasers.