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Avoid common pitfalls when buying or selling property

Let’s Open Doors

Caveat emp­tor  is an Ital­ian phrase, loose­ly trans­lat­ed, the buy­er beware  the prin­ci­ple that the sell­er of a prod­uct can­not held respon­si­ble for its qual­i­ty unless it is guar­an­teed in a war­ran­ty.

It is a well-known phrase from con­tract law that often applies in prop­er­ty trans­ac­tions.

Buy­ers find them­selves in a posi­tion where they know less about a prop­er­ty than the sell­er and the onus has been on them to inform them­selves of the true state of the prop­er­ty they are about to pur­chase.

While the Con­sumer Pro­tec­tion Act has gone some way towards pro­tect­ing buy­ers, and the new pro­posed Prop­er­ty Prac­ti­tion­ers Bill goes fur­ther, buy­ers still have to beware.

Here are some tips to help buy­ers. Sell­ers would do well to cov­er the same ground before they list their prop­er­ty as it could save them a great deal of mon­ey and even the sale of their prop­er­ty down the line.

Cur­rent­ly to avoid lia­bil­i­ty for dam­ages, the sell­er and their agent are required to inform the buy­er of all defects or poten­tial defects, even if the prop­er­ty is being sold voet­stoots (in cur­rent con­di­tion).

The new Bill will make it manda­to­ry for sell­ers to attach a dis­clo­sure form to the agree­ment of sale (or lease). Some real estate pro­fes­sion­als such as Just Prop­er­ty already do this.

“When a prop­er­ty is list­ed with us, sell­ers are asked to com­plete a Seller’s Dec­la­ra­tion (an annex­ure to our man­date), which lists any and all defects the sell­er is aware of,” says Paul Stevens, CEO of Just Prop­er­ty.

Buy­ers should always insist on a copy of such a doc­u­ment before sign­ing an OTP, advis­es Stevens.

The sell­er is required to pro­vide an elec­tri­cal com­pli­ance cer­tifi­cate, elec­tri­cal fence cer­tifi­cate, entomologist’s cer­tifi­cate and, if rel­e­vant, a gas com­pli­ance cer­tifi­cate.

In Cape Town, a cer­tifi­cate of plumb­ing com­pli­ance is also required. Cer­tain banks (such as FNB) require a com­pli­ance cer­tifi­cate for prop­er­ties with asbestos.

Stevens notes that “trans­fer of the prop­er­ty can­not pro­ceed with­out these and will be delayed until such cer­tifi­cates are issued”.

A rep­utable agent will advise sell­ers of these require­ments and put them in touch with suit­ably a qual­i­fied ento­mol­o­gist, plumber, elec­tri­cian etc.

But even the most scrupu­lous­ly hon­est sell­er and their agent may not be suit­ably qual­i­fied to pick up all defects. As a result, con­sumer watch dogs are encour­ag­ing buy­ers to ensure all cer­tifi­cates sup­plied by sell­ers are legit­i­mate, and to under­take exten­sive inspec­tions of homes they plan to buy.

The pro­posed bill also looks to rec­om­mend and reg­u­late home inspec­tions by qual­i­fied inspec­tors.

To ensure your com­pli­ance cer­tifi­cates are legit­i­mate, include the fol­low­ing in your offer to pur­chase:

  • in addi­tion to “wood-destroy­ing insects” insert the words “and organ­isms” when refer­ring to the ento­mol­o­gist clear­ance cer­tifi­cate,
  • add the word “ver­i­fied” to the sec­tion on elec­tri­cal cer­tifi­cates
  • add the pro­vi­so that the prop­er­ty pass­es a home inspec­tion before to trans­fer and that if any defects are found that these be repaired to your sat­is­fac­tion before to trans­fer),
  • add the con­di­tion that “the home pass­es a due dili­gence inves­ti­ga­tion”.

What do these mean?

Includ­ing “organ­isms” in the require­ments for entomologist’s cer­tifi­cate expands that report to include an inves­ti­ga­tion for fun­gi that can infest and destroy tim­ber, as well as bor­er etc.

The ver­i­fied elec­tri­cal cer­ti­fi­ca­tion clause means that the local provin­cial elec­tri­cal inspec­tion author­i­ty will be asked to re-check the entire instal­la­tion.

If any faults are found, the author­i­ty will require the elec­tri­cian who issued the cer­tifi­cate of com­pli­ance to sort out the faults at the contractor’s expense.

Any costs to rem­e­dy the instal­la­tion would be for the sell­er who is respon­si­ble for pro­vid­ing the cer­tifi­cate.

The home inspec­tion is payable by the pur­chas­er, who should also choose which pro­fes­sion­al home inspec­tion com­pa­ny to use. Accord­ing to House Check John Gra­ham, such an inspec­tion would look for defects such as:

  1. Poor drainage — does storm water flow away from the house prop­er­ly, does the roof needs new gut­ters and down­pipes, is there a dan­ger of water pond­ing seep­ing under the foun­da­tions.
  2. Faulty elec­tri­cal, plumb­ing and gas instal­la­tions. Wiring, DB boards, hot water gey­sers, plumb­ing pipes, gas lines and san­i­tary ware are all checked.
  3. Leak­ing roof, whether from poor flash­ing, blocked gut­ters or aging roof cov­er­ings.
  4. Defec­tive or non-exis­tent insu­la­tion.
  5. Poor main­te­nance, eg DIY plumb­ing and elec­tri­cal fix­es.
  6. Struc­tur­al dam­age due to set­tling or weak mov­ing foun­da­tion that means roof struc­tures, door­ways, walls and sup­port beams become unsta­ble.
  7. Water seep­age through win­dows and doors. Re-caulk­ing win­dows and doors, adding weath­er-strip­ping or oth­er more exten­sive repairs may be nec­es­sary.
  8. Rot­ten win­dow and door frames, tim­ber floors and roof­ing tim­bers could be an indi­ca­tion of bor­er bee­tles, ter­mites and wood-destroy­ing fun­gi.
  9. Poor ven­ti­la­tion can lead to struc­tur­al dam­age and health haz­ards.
  10. Haz­ardous mate­ri­als such as lead-based paint, asbestos mate­ri­als and unhealthy lev­els of poten­tial­ly tox­ic moulds.

Home buy­ers informed of home defects in these inspec­tions will then decide on how to pro­ceed with the home buy­ing process – they may request that repairs be com­plet­ed or that the major repair costs be cov­ered by the sell­er.

A due dili­gence inves­ti­ga­tion would include title deed con­di­tions, servi­tudes and con­fir­ma­tion that the struc­tures on the prop­er­ty have been approved by the local author­i­ty.

“Good prac­tice is to add a clause in your Offer To Pur­chase, under Spe­cial Con­di­tions, that states a copy of approved munic­i­pal plans must be pro­vid­ed by the sell­er pri­or to reg­is­tra­tion of the prop­er­ty,” advis­es Stevens.

As much as this is good advice for buy­ers, Stevens empha­sizes that it is just as impor­tant that sell­ers do the same home­work, even before list­ing their prop­er­ty. It can save a great deal of heartache, stress and expense down the road.

Putting mat­ters right can be expen­sive.

There are cas­es of sell­ers hav­ing to pay out 10s of 1000s of rands to rec­ti­fy elec­tri­cal faults and plumb­ing improve­ments to reach com­pli­ance. This goes to show how impor­tant it is to keep up with the main­te­nance needs of your home.

“Peo­ple fear what they don’t under­stand, which makes the buy­ing of prop­er­ty a pret­ty scary ordeal for most first time or novice buy­ers,” says Car­la Vis­agie also of Just Prop­er­ty.

“It doesn’t have to be. Just Prop­er­ty has recent­ly devel­oped a new online tool labelled ‘Your Prop­er­ty Jour­ney’ to help demys­ti­fy the buy­ing process and offer buy­ers insights into how to bet­ter pre­pare them­selves for home­own­er­ship. It’s avail­able to the pub­lic and acces­si­ble via the Just Prop­er­ty web­site from 1 Octo­ber. We’ve also includ­ed a new online pre-qual­i­fi­ca­tion tool (pow­ered by My Bond Fit­ness that will give buy­ers instant results regard­ing their buy­ing pow­er, all free of charge!”

Vis­agie says that Just Prop­er­ty is “always striv­ing towards new and inno­v­a­tive ways to add val­ue to our clients’ expe­ri­ence.

“Prop­er­ty takes one on an inter­est­ing jour­ney and we’d like our clients to know we’ll be there with pro­fes­sion­al help and sound advice every step of the way,” says Vis­agie.

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