Take this scenario:
A purchaser signs an agreement of sale, the property is transferred into their name, and shortly thereafter heavy rain reveals a leaking roof. Who must repair it – the seller or the new owner?
To answer this, one must understand the distinction between latent and patent defects.
Latent vs Patent Defects
Latent defects are hidden problems that are not visible upon reasonable inspection. They impair the use and enjoyment of the property. Common examples include leaking roofs, damp, or structural weaknesses in foundations.
Patent defects, on the other hand, are visible or discoverable through ordinary inspection. Because these are apparent before the sale, the parties can negotiate who will repair them or whether the purchase price should be adjusted.
Latent defects often lead to disputes because they only become apparent after transfer.
Liability for Latent Defects: The Common Law Position
A seller may be held liable in the following circumstances:
1. Express Warranty
If the seller gives a written warranty that the property is free of defects, and a defect later emerges, the seller is liable.
Example: The seller confirms in the agreement that the roof does not leak. After transfer, it leaks. This constitutes a breach of contract, and the seller is responsible.
2. Misrepresentation
If the seller knows about a defect but fails to disclose it, or deliberately misrepresents the property’s condition, they may be liable. In such a case, the purchaser may either:
- set aside the sale, or
- keep the property and claim a reduction in the purchase price.
3. Unknown Latent Defects
Even if the seller was genuinely unaware of the defect, they may still be liable if the defect existed at the time of sale, unless protected by a valid voetstoots clause.
The Voetstoots Clause – How Much Protection Does it Offer?
A voetstoots clause means the property is sold “as is.” Traditionally, this protects the seller against liability for unknown latent defects.
However, it does not protect a seller who knew of the defect and failed to disclose it. Misrepresentation – even by silence – defeats the voetstoots clause.
Impact of the Consumer Protection Act (CPA)
The CPA, effective from 1 April 2011, places a duty on sellers (in transactions where the CPA applies, typically where the seller is acting in the ordinary course of business) to disclose all material defects. Once the seller fully discloses the property’s condition and the purchaser knowingly accepts it, the implied warranty of quality falls away.
In effect, the CPA has significantly reduced the protective scope of the voetstoots clause. Sellers are therefore strongly encouraged to disclose all known defects to avoid later liability.
Whether you are a Buyer or a Seller, have the Offer to Purchase checked by your attorney before you sign or accept the contract.
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