How the Mandatory Disclosure and Voetstoots apply to the Absence of Approved Building Plans

The National Building Regulations and Building Standards Act (no 103 of 1977) stipulate that no person may erect, alter, add to, or convert any building without the prior approval of the Local Authority.

There have been two court decisions on a sale where there were no approved building plans and in both cases, the seller was held not to be liable for obtaining them.

Both decisions were based on Voetstoots.

But still the property must have approved building plans; if the seller is not liable, then the new owner must get the plans updated and approved.

It is a common requirement by the banks that approved building plans must be submitted to them before they will allow the bond to be registered.

The Johannesburg municipality filing system in its archives is chaotic

Historically when the councils merged they did not file and index the existing plans; they were just dumped in the basement without any order or care. Even today, the plans are not properly filed in the right place. They just lie scattered on the floor.

It takes 2 to 3 months to get the plans approved. There is a delay factor as the municipality has not paid a service provider to electronically stamp the approval of the plans; so they have to physically take the plans into the council and queue up to have them physically signed off.

The cost would be on average, including the engineers’ fees, would be about R25,000.00.

So in view of the delay, it is wise to get started at the time the mandate is signed.

How do we determine who must arrange the plans? It depends on what was signed in the Mandatory Disclosure.

I WILL TALK ABOUT :

• Nature of mandatory disclosure;
• Nature of Voetstoots
• Examples of Voetstoots
• Negotiating in the absence of building plans
• Court decisions on the absence of building plans

Mandatory Disclosure – The Nature of ……

• Essentially it is a written statement of AWARENESS by the Seller, as to the condition of the property, which becomes a written Form of Evidence.
  • It is not a Categorical – Factual – List of defects.
  • The form says that the report does not constitute a guarantee nor a warranty as to the correctness of the Disclosure Reg 36.1.1.
  • It provides that the seller can state that he was not “Aware” or he can say “Not Applicable.”
  • It forms an integral part of that agreement – Sec 67(2).
  • Here is a contradiction; Not a warranty but still forms part of the contract of sale. This ambiguity opens the door to disputes.

HOW TO USE IT ? – THE “THREE  MUSTS” :

The three compulsory duties are :

• Section 67(1)(a) – a Property Practitioner MUST not accept a mandate unless the Seller/lessor has provided him with a signed and completed Mandatory Disclosure.
• Section 67(1)(b) – a Property Practitioner MUST provide a copy of the completed Mandatory Disclosure to a prospective purchaser/lessee.
• Section 67(2) – The completed Mandatory Disclosure Form, signed by all RELEVANT parties, MUST be attached to any agreement….”

So it says all “relevant parties” MUST sign. So I now wonder: Which party is not relevant and therefore is not required to sign?

The Regulations provide that; if someone other than the owner, provides information; he must certify that;

• He was authorised by the owner to supply the information;
• He has supplied the correct information;
• And that the information is to the best of that person’s knowledge and belief, true and correct as of the date, the person signs the form.
• There are two parts to a Home Inspection – a report that mentions defects and secondly there should be an agreement as to who should remedy the defects and pay for the repair. It would be inconclusive to just present the purchaser with a list of defects, without concluding who would attend to the repair.
• Purchasers ‘MAY RELY” on information in the “Mandatory Disclosure”, when deciding whether, and on what terms, to purchase. Reg 36.1.3.
• If it is disclosed that the seller is aware of the absence of approved plans; it is intended that there will be a negotiation about who will arrange and pay for the plans.

DOES ANYONE HAVE AN EXAMPLE of A NEGOTIATION OF APPROVED BUILDING PLANS?

• An audience member gave an example of the seller who disclosed that there were no approved plans and he refused to arrange nor pay for them; leaving the purchaser to arrange them himself.
• If an agent fails to obtain a (1) Mandate and fails to provide a copy of the (2) Mandatory Disclosure” to the intending purchaser/tenant; the agent may be held liable by an affected customer. Section 67 (3).
• if a Disclosure Form is not completed, not signed and is not attached, the “sale agreement must be interpreted”; as if no defects or deficiencies in the property, were disclosed to the purchaser -Proviso to Section 67(2)).
  • If defects are discovered nonetheless and the seller stated that he was “not aware of it” or “it is not applicable”; then the purchaser will have to revert to Voetstoots to determine liability.

VOETSTOOTS REMINDER – WHAT IS VOETSTOOTS ?

• When the property is sold in the condition “as is”, the purchaser accepts the property with its defects: both visible and hidden.
• Definition: of a defect – “ is any material imperfection, preventing or hindering the ordinary or common use of the property.”
• Origin: “it means being bumped or pushed with the foot”. One suggestion is that when they pushed a barrel of grain or wine over to the purchaser- as a symbolic mode or gesture of delivery; neither person was aware of the condition of the grain or wine, inside the barrel.
• Just like when you buy mangoes from the fruiterer. You don’t cut them open to look for worms before you pay for them
• A latent defect is a hidden defect which cannot be seen upon a normal inspection.
• The seller is protected against any claims which may be made by the purchaser, provided the seller was not aware of any hidden defects.
• An Example of a seller not being aware of any defects: My mother age 86 cannot be expected to climb into the roof and open up the galvanised geyser and examine the inner pressure vessel for leaks. She cannot be blamed for not being aware.
• Another example of the seller not being aware. A Melville property was purchased with the tenant in occupation. The seller said when she purchased it, she only visited it once at night and did not make a thorough inspection. That was all. Accordingly, she did not know if there were any defects and the tenant never drew her attention to any defects.
• The Seller will be liable for the defects if the purchaser is able to prove the following elements;
  • that the actually was a defect;
• it was hidden;
• the seller was aware of the defect;
• the seller failed to disclose the defect – namely “The seller designedly concealed the defect from the purchaser with evil intention”.
• That the seller intended to deceive or prejudice the purchaser.
• If a defect is discovered and the seller stated that he was not aware of the defect, it is up to the purchaser to prove all the above elements; including of course that the seller actually was aware of the defect when he said he wasn’t aware of it.
• As an example of fraud, the seller told the purchaser that he need not measure up for curtains in the main bedroom because he could have the existing curtains for free. When the purchaser occupied, the promised curtains had been removed, revealing serious dampness in the crumbling plaster.
• How do you get proof – usually the Gardner or neighbour or circumstantial evidence? Commonly, a tenant can give evidence that he reported the defects to the owner; thereby proving that the seller had knowledge.
  • The Gardner disclosed that the owner told him to top up the leaking swimming pool every day.

Example of Voetstoots – Ellis vs Cilliers Oct 2015

• The house on stilts – was not level and the whole house sloped down the hill at an angle; with rotting foundations.
• The middle of the floor was higher than the edges of the floor.
• The seller built a false ceiling and laid down cement screed over the wooden floor, to hide the sloping angle. It was also hidden under a carpet and linoleum surface.
• The seller argued that the levelling screed was not a defect, but it was done for aesthetic reasons only and did not hinder the ordinary common use of the property.
• Held: “A defect is any material imperfection, preventing or hindering the ordinary or common use of the property, and it is a defect in the sale.”
• Held: The seller was aware of the levelling treatment.
• Held: Where the seller recklessly tells a half-truth or knows the facts, but does not reveal them, because he has not bothered to consider their significance – this might amount to fraud.”
• Held the Defendant had to compensate the buyer R600,000.00 in damages.

WITH REGARDS TO BUILDING PLANS

• The two High Court decisions namely Haviside (2013) and Odendall (2009), both confirmed that a failure to comply with statutory legislation (namely the obligation of obtaining approved building plans), is a latent defect, where the seller was not aware of his failure to comply with the legislation.
  • The facts: Mrs Haviside purchased the property for her mother to occupy it. She only visited it at Christmas time. She did not ask if there were any building plans. The mother and brother later arranged the sale of the property, without the involvement of the owner. When the new purchaser wanted to build on top of the garage, it was established that there were no plans for the garage and that the foundations were insecure.
  • The seller (Mrs Haviside) was declared protected by the voetstoots clause because she had no knowledge that there were no building plans for the property when she first purchased the property and then also – when she sold it.

Odendaal vs  Ferraris

• A house was sold without approved building plans. The council rejected 3 attempts to get approval for the plans, including a requirement that a sewer manhole, that was in the laundry, be relocated. The fact that the manhole was covered, did not conclusively mean that the seller intended to defraud the buyer. The fact that the buyer did not ask to inspect some parts of the property and that his allegations were, in the main, vague, unspecific and devoid of sufficient evidential support, led to a conclusion that the buyer had failed to prove fraud on the part of the seller and therefore the seller was found not guilty.
• Conclusion :
  • Failure to comply with the building plan legislation is a latent defect.
  • The court held that: the purchaser could not prove that the seller knew of the latent defect and did not disclose it.
  • The court held that the purchaser could not prove that the seller deliberately concealed a failure to comply with statutory legislation and that there was an intention to defraud the purchaser.
  • There has to be categorical proof that the seller committed fraud: mere signs of a coverup are not enough.
  • The court held that the purpose of voetstoots is to exempt the seller from liability for defects of which she or he was unaware.
  • Both judgements held that the purchasers were unsuccessful in proving all the elements required for voetstoots.

CONCLUSION

• Provided the seller is honest in completing the Mandatory Disclosure; where we expect him to disclose what he was aware of and that there are no approved building plans; this should prompt a negotiation as to who will pay for the plans. This form goes a long way to eliminate disputes on defects.
  • It is only if the seller is dishonest in saying he was not aware; when in actual fact, it is proved that he was aware, does the purchaser have an opportunity to prove, by voetstoots, that the seller intended to prejudice him and to hold the seller liable for getting the plans approved.

DUTY OF CARE

The Property Practitioners Act – Section 69(2) provides that the property practitioner owes a buyer and a seller, a duty of care.

• This is at odds with the traditional belief that a conveyancer and an agent act exclusively on behalf of the Seller.
• It seems as though the law is changing because court decisions as well as this legislation provide that the purchaser must also be protected.
• This trend was started by Basson v Remini and Another 1992 (2) SA322 N where the following was said:In evidence, Mr Shelwell admitted, quite correctly in my view, that by accepting the appointment as a conveyancer in respect of the transaction, the conveyancer became the agent (the representative) of both parties.
• Then there was Pocock’s case where the conveyancers were acting for a developer and were collecting offers to purchase from numerous buyers without having the developer accept and countersign the various offers to purchase. The buyers purchased the property with a view to on-signed selling it and expected to have a confirmed contract of purchase signed. The conveyancers never told the buyers that the developer had not accepted the offer to purchase and the buyer on-sold the property without realising that they didn’t own the property that they had sold.
• As they were committed to selling the property, which they didn’t own, they sued the conveyancer for damages.
• The conveyancer said that they were only acting for the Seller and had no duty to attend to the legal interests of the buyer. This defence was rejected by the court.
• The buyer had even paid the balance of the purchase price and the transfer costs.
• Held: The buyer had a valid claim against the Conveyancer based on Conveyancer’s legal duty to ensure that the purchaser’s interests were protected during the transfer process.
• The Conveyancer had accepted an instruction that, by virtue of his expertise as a conveyancer, would affect the interests of third parties.
• The Conveyancer received money in trust, rendered a pro forma account and debited fees in respect of professional services (in particular, “vir die opstel van die koopkontrak, en vir toesien tot ondertekening en uitvoering daarvan”).
• Held: In these circumstances, a legal duty exists in accordance with the professional standards that the community would expect, from persons in the position of the conveyancer.
• The negligent failure of the Conveyancer to protect the interests of the Plaintiffs was unlawful and rendered him liable for the damages suffered by the purchaser as a result of his conduct.
• The Conveyancer was ordered to pay the Plaintiffs the sum of R126 400.00 together with interest and costs.
• It is clear that a conveyancer has a duty to reasonably protect the interests of both the purchaser and the seller and cannot ‘hide behind” the fact that he was instructed by only the seller.

Conclusion

• Voetstoots is not dead and gone and relying on a signed mandatory disclosure should reduce the number of property disputes.

The Mandatory Disclosure Form is good for Property Practitioners, as it focuses the condition of the property on the seller and not the agent. Therefore the seller is held accountable instead of the agent.