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.
