Understanding condition reports and the voetstoots clause in property transactions

Property is the largest investment most people will ever make and there are reams of legal and financial documents peppered with terminology throughout the lengthy process which all need to be understood and navigated, not least the condition report and how it pertains to the voetstoots clause.

“The last thing you need after finally signing on the dotted line and moving into your very own home is to experience buyer’s remorse and, likewise, as a seller, once the transaction is complete, you don’t want to have to deal with a regretful buyer accusing you of concealing defects and the potential legal repercussions,” says Arnold Maritz, Co-Principal for Lew Geffen Sotheby’s International Realty in Cape Town’s Southern Suburbs and False Bay.

“The condition report is now a legal requirement and, as it protects both buyer and seller and can have a significant impact on the transaction, it shouldn’t be dismissed as just another document to read through.”

Maritz explains: “The condition report is a detailed assessment of the property's physical state, outlining any existing defects or issues and it serves as a crucial tool for both parties, providing transparency and setting clear expectations.

“The report usually includes factors such as the condition of the roof, swimming pool, foundations and structure, and electrical and plumbing systems, all of which can cause costly headaches down the line and buyers can use the condition report to make informed decisions, while sellers can ensure they disclose all relevant information about the property's condition.”

There are two types of defects:

• A latent defect which is a fault that would not readily be revealed by a reasonable inspection of the property being sold; and
• A patent defect is a flaw that is not hidden and ought to be easily identified upon reasonable inspection.

“As much as it’s a seller’s duty to disclose defects, it’s also a purchaser’s duty to acquaint himself with the general condition of the property when purchasing it, as the buyer cannot later claim that he did not see patent defects such as damaged window frames or cracked tiling,” says Maritz.

The voetstoots clause, on the other hand, is a legal provision that absolves the seller from liability for any concealed defects in the property that are difficult to discern and this clause is commonly included in South African property sales agreements, so it's important for both parties to understand its implications.

This clause essentially means that the buyer purchases the property in its current condition, with all its defects, whether visible or hidden. Once the sale is completed, the seller is generally not liable for any issues that arise, unless they were aware of these problems and deliberately concealed them which is why an accompanying condition report is so important.

Maritz explains the legal implications of the voetstoots clause: “For buyers, it underscores the importance of conducting thorough inspections and seeking professional advice before finalising the purchase and for sellers, it provides a degree of protection against future claims related to the property's condition.

“However, there are exceptions to the protection offered by the clause. According to South African law, if a seller is aware of a defect and intentionally hides it, the buyer may have legal recourse even after the sale is finalised. This principle is rooted in the concept of ‘fraudulent misrepresentation’ and to prove this, the buyer must demonstrate that the seller knew about the defect and deliberately concealed it to induce the sale.”

Maritz says that given the potential risks associated with the voetstoots clause, buyers should take proactive steps to protect themselves:

• Review the condition report carefully before submitting an offer to purchase: Not only will this help you to decide whether or not you want to buy the property, it may also contain information relevant to what you would be willing to pay for the property.
• Check the date on the report: Sellers often complete the condition report when they first put their home on the market and, if a home has been on the market for a year or more, it may no longer be valid as an issue could easily have arisen within that time.  If the report isn’t current, ask the seller to complete a new one. 
• Ask questions: Don't hesitate to ask the seller about the property's history and any known issues or for more information about disclosed issues if you still feel unsure.
• Be wary of “repaired” defects:  A seller might disclose defects that they characterise as “repaired” and this may well be the case, however, it’s prudent to follow up with the seller to ascertain what exactly was done to fix the prior defects, when it was repaired and by whom. 
• Ensure you understand the limitations of the condition report: By its very nature, the report is limited by the honesty of the seller and, although you may have legal recourse if the seller misrepresents the condition of the property, it can be very costly and time-consuming and is best avoided altogether. The condition report is therefore not a substitute for a thorough inspection of the property.

Maritz concludes: “For buyers, due diligence and professional advice are essential to avoid costly surprises, and for sellers, transparency and honesty can facilitate a smoother, dispute-free sale.

“At the end of the day, by being well-informed and taking appropriate precautions, both parties can ensure a fair and satisfactory transaction, making the journey to homeownership a positive experience.”

To help buyers and sellers understand the purpose of a home inspection, we put together a guide of everything you need to know and how it benefits both parties. Read the full guide here