Sellers Must Disclose Defects or Face the Consequences It is unlikely that any property is sold without a problem of some sort, but failure to disclose them is in nobody’s interests. Failure to disclose a defect can turn the sale or purchase of a residential property into an unpleasant experience and in some cases result in a protracted legal dispute that was avoidable. In most Offers to Purchase there is a clause called the voetstoets clause which many sellers believe will protect them against all that is wrong with a property when they sell it. This is not the case; defects are far more complicated an issue than that. If you sold your house right now I am sure that you can think of a few things that need to be attended to. It may well be something that is obvious to the eye, like a cracked window pane or a spot of damp, but it may also be something you are aware of only because you live there, such as low water pressure. It can be a small annoyance or a major problem but the bottom line is, it is best to declare it before the sale and avoid unnecessary drama later. You as the owner and occupier have an intimate knowledge of the property and apart from the legal requirements you also have an ethical obligation to disclose to the person buying the property what it is that you know that could reasonably affect their decision making. While a reasonable buyer expects a few minor issues I have often discovered in my career that very charming reasonable people can turn into monsters after the offer is accepted. As an agent with 30 years sales experience I cannot think of any issue that more frequently ruins the sale process more than the issue of defects and non-disclosure which is very often not deliberate. Inevitably the agent gets drawn into what can become an unpleasant disagreement that was avoidable. My recommendation to every seller is that they prepare a Defects Disclosure List as soon as they decide they are going to market the property. Give this file or list to the agent with your instruction that these items are to be disclosed prior to taking an offer and get the agent to sign a copy of the Defects Disclosure List for you to keep in your records so that there is no later disagreement that this list was provided. This Defects Disclosure List should be a simple schedule that is itemised room by room and where there is nothing to add put the words “nothing to record” next to that room. After each room then detail the various ‘non room’ spaces in the property such as roof, pool, garage, patio, garden, fence etc. It is quite likely that you will have many sections with the words “nothing to record” next to them, no problem it shows the buyer that you are making every effort to be thorough. Where there are items listed add a comment next to each one that indicates what if anything you are going to do about the defect or item. You basically have three options here and you could indicate each as A B or C next to them with a reference to this at the bottom of the page; (A) to be repaired or replaced by seller before transfer at seller’s expense (B) to be repaired or replaced by buyer at buyer’s cost and discretion (C) No further action to be taken by seller. A and B are obvious but let me explain further the purpose of category C. There are many problems or defects that one just learns to live with because it makes little financial sense to actually do anything about them. For example you may have a house built on clay and every year in the dry season the clay contracts and in the winter it swells and this results in minor cracks. It hardly makes sense to rebuild the house to solve the problem. This leads me to three more important points about a Disclosure List; property reports, quotes and invoices. Where you itemise any problem it is preferable not to give a written personal opinion about it but just remain factual. A recorded opinion could be confused with a professional opinion such as advice from an architect or a plumber for example so it is best not to add opinion however, if you have any professional opinion concerning a defect it should be in writing and this should be attached it to the Defects Disclosure List. This could for example be an Engineer’s Report. The other useful document is a quote for a repair. If you have a problem the buyer will assume the worst in terms of the cost. It will be in your interest even if you are not going to fix it, to get a quote that hopefully reflects it is not a costly repair. Recent repairs can be a tricky topic. If you had something recently fixed or get work done during the marketing or prior to transfer, it is in your interests to make sure this is also disclosed and to attach the receipt to the Defects Disclosure List with the contact details of the person that did the work. If you know you are selling, get the person who effects the repair to note on the invoice before you pay them that they guarantee the work for a period of time and that the guarantee will be in favour of the owner and subsequent owner of the property. Full disclosure such as I have detailed above together with such additional material such as manuals for appliances being sold with the property or alarm system etc. all provide greater confidence to the buyer. A house file or at least a Defects Disclosure List builds confidence with a buyer and it will protect you as a seller. If you have any queries please do not hesitate to contact the writer on [email protected]
Posted on: Mon, 25 Aug 2014 10:05:20 +0000
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