Consumer Protection for Home Buyers

Buyers of second hand houses in South Africa face massive potential risks and, despite the Consumer Protection Act (CPA), home buyers remain one of the least protected classes of consumers.

Because the law does not provide practical protection for buyers of second hand homes from private sellers, the only option is for South African home buyers to protect themselves.   Buyers should refuse to sign sale agreements containing a “voetstoots clause”  unless the agreement is also made conditional on a “satisfactory”   pre-sale home inspection report.   The buyer should be the sole judge as to whether the condition of the house, as described in the inspection  report is “satisfactory”.   This gives the buyer “walk-away” or “re-negotiate” options.

John Graham, CEO of home inspection company HouseCheck, points out that a combination of both a voetstoots clause and an inspection report is the best and fairest way to protect both seller and buyer. 

The voetstoots clause, which means that the purchaser is buying “as is”,  provides  legal protection for the private seller if the property is later found to be defective in any material way. On the other hand, a home inspection report provides the buyer with detailed information on the actual “as is” condition of the property.

Graham says that one of the central elements of the Consumer Protection Act (CPA) is the right of consumers to be fully informed regarding the goods that they are purchasing.  In the context of a property purchase this means that a property buyer has the right to know everything relevant about a property in order to be able to make an informed purchasing decision.

However, because the CPA specifically excludes private sellers from accountability under this consumer law, property buyers remain at risk because private sellers are not obligated by the CPA to make full disclosure.

Estate agents however, do have accountability under the CPA as regards the marketing information which they provide regarding any property which they are selling.  This is why estate agents now try and shift accountability back to the seller by asking the seller to sign a property condition disclosure form. The reasoning is that the agent cannot be expected to know about hard-to-detect defects if the seller, who usually lives in the house, has not disclosed these defects to the agent.

A second layer of protection for the private seller and the estate agent then usually kicks in:  This is the “voetstoots” clause which is routinely inserted by estate agents into the sale agreement.

Voetstoots is a common law provision which means that the buyer agrees to buy the property “as is”.   Voetstoots protects the seller from being sued by the buyer regarding any defect which the buyer could reasonably have observed prior to the sale (patent defects) and also from any defect which the seller could reasonably not have known about prior to the sale (latent defects).

If a voetstoots clause has been included in the agreement of sale and if the estate agent has provided the buyer with a property condition form signed by the seller then, the only time an aggrieved buyer could successfully sue a seller, would be if the buyer could prove that the seller had known about a defect but had deliberately concealed this information from the buyer.

Such a concealed defect could be a structural crack which the seller had filled in and repainted in order to hide this problem from the buyer.  Or it could be a serious roof problem which only manifested itself during the rainy season.

There are two problems which the South African home buyer faces if he buys from a private seller and later discovers that the house has serious defects that he did not know about:

•    Firstly the buyer must be able to prove to the court that the private seller actually knew about the defect and deliberately concealed this information from the buyer.  Not so easy if the seller employs a clever lawyer.
•    Secondly, because private sellers are not responsible under the CPA, an aggrieved buyer is forced to spend a lot of money in order to sue the seller in court.  Most buyers  simply do not have the money or the determination to go the expensive legal route and so, in practice, most buyers just have to “suck it up” and live with the consequences of a defective house. 

Of course, if the CPA was ever changed to include private sellers of property, then buyers (no matter whether they were rich or poor) would be able to have their complaints against private sellers handled free of charge by the Consumer Protection Commission.

At present and until the CPA is changed, the only way out of  the risk created for the home buyer by an ineffective  (limited) CPA is for the buyer to insert a clause making the offer conditional on the buyer accepting the defects documented in  a professional home inspection report.

In most cases the buyer will need to pay for this report - but this is a small price to pay (often only around 0.1 per cent of the price of the property) in order to empower the buyer to make a fully informed decision regarding the purchase of a particular house.

Some estate agents (usually appointed by the seller) resist the concept of a home inspection – fearing that it may “kill their sale”.

In the face of such bullying, buyers should be clear that they have the option to remove or insert any clause they like into the offer agreement.  If the seller, or the agent is reluctant, or refuses, to agree to a home inspection, then the buyer should seriously ask himself what information regarding the property is being hidden.  The buyer should consider walking away from the deal.

In this “buyer’s market” if the buyer stands firm, seller who genuinely have nothing to hide will quickly agree to the transparency provided by a pre-sale home inspection.  An honest seller should have no difficulty in making the agreement subject to a home inspection report – especially if the seller is not being asked to pay for the inspection.

Pre-sale home inspections are currently the only way to provide reasonable protection for buyers of privately owned property  - in the absence of the consumer protection which should be provided to home buyers under the CPA.

Article supplied by: John Graham - House Check

House Check: www.housecheck.co.za / email: This email address is being protected from spambots. You need JavaScript enabled to view it. / facebook