Member's login

Voetstoots, home-sellers and fraudulent concealers

The notorious voetstoots clause has been the subject of much debate. A simple internet search on the principle will spew out reams and reams of results and after reading every case imaginable and every article by someone professing to be an expert on the matter we still find ourselves sitting back and asking, “So do I, or do I not, need to tell the purchaser that the beams in my roof need to be replaced even though there is a voetstoots clause?”

The answer is that if you think it will affect the purchaser’s decision to buy the property or the price the purchaser will agree to pay, you should disclose the latent defect.

A case in point
The case of Banda and another v Van der Spuy and another (2013) JOL 30458 (SCA) dealt with an agreement of sale subject to a voetstoots clause. The judgement provides assistance in determining when the obligation to disclose rests on a seller.

The facts
The house sold had a thatched roof. Prior to the sale, the seller conducted repairs to the roof because it leaked. Despite these repairs, the roof continued to leak after the purchaser has taken transfer.

Expert evidence indicated that the repair efforts were inadequate and that the entire roof needed to be replaced. The central issue was whether the seller knew of this and had concealed it from the purchaser.

In the sale agreement, the seller undertook to transfer the contractor’s roof guarantee to the purchaser, leading the purchaser to believe that he would have recourse if there was any defect in the roof, and convincing him that there was no need to have an inspection of the roof done by an expert.

Unbeknown to the purchaser, the guarantee for the repairs did not exist in writing at the time of signature of the agreement and, once recorded in writing by the contractor, was of such short duration that it was of no value to the purchaser. After transfer, the roof began to leak again and the purchaser sought relief from the courts.

The finding
In Banda, the courts held that the seller was, at the very least, conscious of the inadequate nature of the repairs and, therefore, was obliged to disclose this knowledge to the purchasers. By tendering the misleading guarantee, the seller fraudulently concealed the existence of the defective leaking roof and forfeited the protection of the voetstoots clause.

As a result, the seller was ordered to pay the costs of the repairs. This amounted to just under half a million rand, plus interest.

What is latent defect?
A latent defect is one which is neither obvious nor easily discoverable upon reasonable inspection. The opposite is a patent defect, which will be apparent upon reasonable inspection – for example, a broken window. In the Banda case, the court concluded that the inadequacy of the roof poles of the house to support the weight of the thatched roof constituted a latent defect.

The defect must render the property or goods unfit for the purpose for which it was intended or must prevent or hinder their ordinary or common use.

A warranty against latent defects is incorporated into every contract by operation of the law, and the parties to the contract do not have to expressly agree to the warranty.

The common law warranty, or a warranty provided in terms of the agreement, can be relied upon by the purchaser to claim relief where the goods or land purchased are latently defective, provided that there is no voetstoots clause in the agreement. The effect of a voetstoots clause is to limit the seller’s liability for latent defects subject to certain limitations.

The remedies available under the common law warranty
The remedies available to purchasers, where the common law warranty is relied upon, are:

  • a claim for the return of the purchase price in exchange for the return of the goods, (only if it is a major defect); or
  • a claim for the reduction in the purchase price.

The protection afforded by the voetstoots clause
As already mentioned, the warranty and the remedies available, whether in terms of the contract or the common law, can be excluded by the inclusion of a voetstoots clause in an agreement as long as there is no fraudulent concealment of a known material defect.

The voetstoots clause means that the goods sold, (for example a house), are sold “as is” (with all its flaws).

When is a seller not protected by the voetstoots clause?

The voetstoots clause is not absolute. The protection afforded by it depends on the seller’s honesty.

Fraudulent misrepresentation
Where a seller fraudulently represents that there are no defects or makes representations that induce the seller into purchasing the property and these turn out to be false, this constitutes a fraudulent misrepresentation.

The court, in Banda, found that the transfer of an expired guarantee by the seller constituted a fraudulent misrepresentation aimed at inducing the purchaser to either purchase the property or pay the agreed purchase price.

Fraudulent non-disclosure
Although there is no general duty to disclose a latent defect, where the existence of the defect is withheld with the intention of inducing the other party to enter into the contract, or facts are concealed which, if known, would induce the purchaser to refrain from concluding the contract, the seller’s conduct is fraudulent and the protection of the voetstoots clause will be lost. Similarly, where the seller knows about the latent defect and deliberately conceals it, the seller’s conduct is fraudulent.

The outcome of any case always hinges on its particular facts. The correct approach that should be followed, in the event that a seller is aware of a latent defect, and considers that defect to be material enough to impact on the purchase price or the sale, is disclosure – whether or not there is a voetstoots clause.

Design and Layout by Ogilvy Namibia. Web Development by Intouch Interactive Marketing