WHAT IS A SUSPENSIVE CONDITION?
A suspensive condition or “condition precedent” suspends (puts on hold) the operation of the contract for a period of time, subject to the occurrence of a future event, and only if and when the condition has been fulfilled, will an enforceable contract exist. An example is the ‘Mortgage Bond’ clause whereby the contract is subject to the purchaser raising a loan from a bank for a specific amount before or on a certain date against security of a first mortgage bond to be passed over the property.
Some suspensive conditions are inserted for the sole benefit of one party, and can be waived by that party, meaning that he gives up the benefit of that condition, although it remains a suspensive condition until it is waived. For example, the condition may stipulate that the contract is subject to the purchaser selling his own house within a certain time period. If the purchaser decides, after signing the contract, that he can buy the new property without having to sell his existing house, he can waive the condition, providing that he notifies the seller within the specified time period.
If the conditions are not fulfilled or waived within the specified time period, the contract falls away completely, and the seller is free to sell the property to someone else, but pending the fulfilment of the condition/s, neither party can withdraw from the contract and the seller may not sell the property to anyone else. However, the seller could include an “escape’ clause, which could allow him to do so under certain circumstances.
WHAT IS A RESOLUTIVE CONDITION?
In the case where a resolutive condition is stipulated in a contract, the contract is immediately binding after the parties thereto have signed it, and will remain binding subject to the future event stipulated in the condition being fulfilled. An example is where it is stipulated that the contract will terminate if a national road is built next to the property sold, within a certain period. The event referred to in the condition must be accurately described and a time period must be specified for fulfilment (or non-fulfilment) of the condition.
Resolutive conditions are rare in the property industry as very few, if any, contracts come into existence and resolves when a specific act or omission occurs, therefore we will take cognisance of such type of condition but for purposes of this discussion will not ponder on it any further.
SUSPENSIVE CONDITIONS AND THE EXTENTION THEREOF
Deeds of sale are in many instances subject to suspensive conditions such as a mortgage bond to be obtained or an existing property of a purchaser that needs to be sold.
The character of a suspensive condition in an agreement of sale is that such condition suspends the effectiveness of the agreement until such time as the suspensive condition is complied with timeously, properly and in accordance with the wording in the contract. It is of the utmost importance that when parties note that the time limits provided for in the agreement for the fulfilment of the suspensive condition is running out, they should extend such time by way of the required addendum PRIOR to the lapsing of the suspensive condition.
The further effect of not extending a time period in advance and prior to its lapsing is that the agreement will simply not come into effect due to the non-fulfilment of the suspensive condition within the period prescribed. What many people do not understand, is that in such event you do not even have to place a party in breach of contract as no contract had come into effect due to such non-compliance.
In the case of Fair Oaks Investment vs Olivier it was confirmed that an agreement of which the period provided for the fulfilment of the suspensive condition had lapsed, cannot be revived or amended by means of an addendum as the fact remains that the non-fulfilment of the suspensive condition within the provided time rendered the contract void from the beginning and should it be the parties’ intention to reinstate the agreement a reinstatement agreement with the character of a BRAND NEW agreement should be entered into between the parties, bearing in mind that any attempt to revive the old agreement will not have any legal effect.
An addendum with regards to an existing agreement will always serve a purpose in amending the existing agreement, however it is a pre-requisite that such addendum has to relate to an agreement which is still valid at the time and date of the addendum and will serve no purpose regarding a deed of sale which had already lapsed due to the non-fulfilment of the suspensive conditions contained therein.
In the case of Neethling vs Klopper and Others, as far back as 1967, the Court of Appeal had found that an agreement that had been cancelled (as opposed to the agreement lapsing in the aforementioned case) could be revived when both parties waived their rights created by the cancellation of the agreement.
In the light of the aforementioned it is important that buyers and sellers keep track of the time limits provided for the fulfilment of suspensive conditions in agreements that they enter into and that any amendments to extend such time limits should be done in writing by way of a proper addendum prior to such time limits expiring. Should the purchaser or seller choose to ignore these time limits, it will have the effect that the contract will lapse and be of no effect due to the non-fulfilment of the required suspensive conditions within the provided time.
Although these suspensive conditions are normally conditions imposed for the benefit of the purchaser (the need to obtain a mortgage loan and the need to sell an existing property) and which conditions the purchaser can waive at his peril, the waiving of the suspensive condition equally has to be done prior to the lapsing of the time limit in which it had to be fulfilled.
In your specific agreement the classic examples of suspensive conditions are contained in CLAUSE 2, CLAUSE 3.4 AND ANNEXURE D
LACK OF FULFILMENT OF SUSPENSIVE CONDITIONS AND ITS LEGAL EFFECT
• Murphy and Another vs Durie
Mr Durie sold a property in Somerset West to Mr Murphy in terms of a Deed of Sale containing the following condition.
“This sale is subject to the purchaser obtaining in principle a mortgage bond from a Building Society or Financial Institution to finance this transaction. The purchaser undertakes to sign all papers to permit passage of the said mortgage bond for an amount of not less than R700,000-00. Confirmation of such mortgage bond having been granted is to be given to (the seller’s agent) by no later than 9 December 2003.”
On the purchaser’s version the suspensive condition was fulfilled but on the seller’s version it was not and the seller’s view was that the transaction lapsed. The purchaser then obtained an interdict preventing the seller from transferring the property to someone else and demanded transfer to him to take place.
Although the seller was telephonically informed that the required mortgage bond was granted on the 9th of December 2003 the letter confirming the approval of the bond was only received and dated the 10th of December 2003.
The ruling of the Court was that the suspensive condition was not fulfilled timeously and therefore there was no binding contract.
• Eloff vs Dekker
Mrs Eloff and her daughter together bought a property in Gordon’s Bay. The sale agreement contained a suspensive condition requiring them to obtain a mortgage bond on a specified date. The bond was approved but for a lesser amount than stipulated in the agreement. Accordingly on the due date, Mrs Eloff and her daughter cancelled the agreement due to the non-fulfilment of the suspensive condition and requested for the deposit to be returned.
The seller argued that the suspenisve condition was inserted into the agreement of sale for the exclusive benefit of the purchasers and argued that the purchasers waived this benefit and tacitly accepted this bond for the lesser amount.
The Court held that a bond clause in an agreement of sale for immovable property is usually inserted in an agreement for the exclusive benefit of the purchaser and such clause can be waived unilaterally by the purchaser. A waiver of the condition however should take place before the due date for fulfilment of the condition. As Mrs Eloff and her daughter would have been co-creditors under the mortgage bond there was a burden of proof on the seller to prove that both of them accepted the lesser bond and thus partially waived the suspensive condition.
According to the Court the seller could not on unreasonable doubt prove this and further determined that the suspensive condition was not duly fulfilled and that there was no agreement in place and the deposit had to be returned.
• Ashington & Another vs Body Corporate of Dryden Hall & Another
Non fulfilment of suspensive conditions were confirmed as rendering an agreement a nullity where there are multiple suspensive conditions set out separately in an agreement, non-fulfilment of only one of them will have the same effect.
Although a suspensive requirement for a mortgage bond to be obtained or another immovable property to be sold, are the most common suspensive conditions that we encounter in the property industry, there could be other suspensive conditions required by the purchaser such as :
- That the property has to be viewed by another party within a prescribed period and be approved off by such party in writing before the transaction becomes effective;
- The property has to be inspected by a House Inspector with a positive report with regards to such inspection within a prescribed period;
- Approval has to be provided for a certain action of rezoning that needs to be approved within a prescribed period etc.
LATENT AND PATENT DEFECTS
Under SA law there are two types of faults that pertain to property, namely latent and patent defects. The difference between these is fairly obvious. A latent defect is a fault that would not readily be revealed by a reasonable inspection whereas patent defects are defects that are not hidden and should easily be discovered by a reasonable inspection.
Although many property buyers believe that they are protected by the Consumer Protection Act (CPA), in actual fact this legislation only comes into play if sellers either regularly sell property or continually market themselves as sellers of property. While the CPA does apply to estate agents, the buyer would only have a claim against the agent under CPA if he could prove that the agent was aware of the fault and intentionally withheld the information.
So where does this leave the buyer? In most cases, at the mercy of the courts. Under the Prescription Act, a purchaser has a period of three years from the date of becoming aware of the defect to hold the seller liable. On the other hand, if the CPA applies, the purchaser is granted a minimum of six months.
The CPA grants a purchaser the right to receive goods that “are of good quality, in good working order and free of any defects” and that “will be useable and durable for a reasonable period of time, having regard to the use to which they would normally be put and to all the surrounding circumstances of their supply”.
Where the goods fail to meet these standards within six months of purchase, the CPA grants the purchaser the right to return the goods to the supplier and demand either a repair or replacement, or the return of the purchase price. While this generally appears to apply for a period of six months, it may be longer in certain circumstances. For instance, the CPA explicitly states that goods must “be useable and durable for a reasonable period of time”. Hence, it may be in certain circumstances, especially with an immovable property, that a reasonable amount of time will be substantially in excess of six months. Similarly, where the seller’s false, misleading or deceptive representations induced the purchaser to conclude the sale, the period may again be longer.
In cases where the CPA does not apply, the voetstoots (as is) clause protects the seller to a certain degree, unless the seller is aware of a defect and fails to disclose it, in which case the seller’s behaviour could constitute fraudulent misrepresentation. Although many sellers believe that this clause absolves them of all responsibility as the property is sold as is, the courts have often found otherwise.
Due to the fact that the CPA does not apply to most property sales, most sellers will receive substantial protection against claims based on defects due to the existence of a voetstoots clause. As pointed out earlier, this means that where the seller was unaware of the defect, the seller is not liable to the purchaser, which is where your home inspector comes in.
Under common law, once a buyer is aware of a problem and it is evident that the fault existed in the property at the time of purchase he may recover any damages he has suffered, including the cost of having to repair the defect himself.
Although, legally speaking, it is not necessary to record known defects in the sales agreement, it does help for the purposes of proving what defects were expressly disclosed to the purchaser. If the defects are recorded, it will create a strong evidentiary basis for the seller to argue that the purchaser was aware of the defects and is thus not entitled to damages based on concealment.
It is also wise to record any defects that the seller will have repaired before the buyer takes occupation in the agreement. Essentially, this protects the buyer from a seller who, once the sale has been concluded, tries to rely on the voetstoots clause or later denies having made the guarantee to remedy the defect.
VOETSTOOTS – APPLICABLE AS EVER!
Early in 2017 an article was published by a director of a prominent law firm stating that there is “a legal shift away from the protective blanket of voetstoots for second-hand property sellers with illegal or unapproved structures”.
In the aforementioned article two cases were quoted as proof of this tendency being the case of Banda vs Van Der Spuy and Naidoo vs Moodley. The writer is of the opinion that these cases as precedence to substantiate her initial quote might be misleading as there were circumstances in these cases that need to be taken into account.
From the effective date of the Consumer Protection Act 68 of 2008 many people were of the opinion that consumer rights will mean the end of the “Voetstoots defense” for a seller.
“The property is sold subject to all conditions and servitudes mentioned or referred to in the Title Deed thereof and to all such other conditions and servitudes which may exist in regard thereto in the condition and the extent such as it now lies. If the property has been erroneously described herein, such error shall not be binding on the seller but shall conform to the description as set out in the Title Deed and the parties agree to the rectification thereof to conform their intention”
“VOETSTOOTS” AND THE LAW
“Voetstoots” originated as a Dutch word with a direct translation “to be pushed with the voet” or with a more indirect translation “to be sold in its current state or as it currently is”. The aforementioned remedy is grossly underestimated and available to a Seller who parts with items or goods arranging from movable to immovable assets.
When immovable property is sold “Voetstoots” it amounts to a sale in terms of which the Seller alleges that he has disclosed all latent and patent defects present at that stage in the property, of which he was aware or should reasonably have been aware. The net effect of this clause is, should a defect present itself relating to the property, which the seller was not aware of or reasonably ought to have been aware, he will be successful in relying on the defense of “Voetstoots”.
Should a Purchaser disagree with a Seller relying on the “Voetstoots” defense, he will have the burden of proof to convince the Court beyond reasonable doubt that the Seller was aware or should reasonably ought to have been aware of the defect and that he maliciously concealed the defect in an attempt to defraud the Purchaser. (Van der Merwe vs. Meades 1991 2 SA 1 (A)).
Practical experience shows that the aforementioned burden of proof bestowed upon the Purchaser is enormous and in very few circumstances possible and therefor an incredible powerful remedy available to the Seller.
“Voetstoots” and the Consumer Protection Act 68 of 2008 (CPA)
Since the commencement of the CPA on the 1st of April 2008 many people were of the opinion that consumer rights will mean the end of the “voetstoots” defense for a Seller.
For the CPA to apply to a specific transaction, the relevant parties involved will have to be a supplier and a consumer as defined in the CPA:
“Supplier” – A person who sells or markets good or services in the ordinary course of his business for consideration.
“Consumer” – A person who receives goods or services from a supplier who sells such goods or services in the ordinary course of his business.
Unless the definition in the CPA is amended in future, the Seller of a second hand private dwelling nor the Purchaser of such a dwelling suits the aforementioned definition as it currently stands, as it is not in the Seller’s ordinary course of business to sell his residential dwelling nor is it the Purchaser’s intent to receive the residential dwelling in this context.
The logical conclusion that the consumer remedies applicable under the CPA are not available to the Purchaser of a second hand residential dwelling as the CPA does not apply in this regard. A further conclusion would be that if the CPA being the Statutory Law does not apply, the Common Law of “Voetstoots” will still prevail and therefor “voetstoots” as a remedy is still very much applicable in the Sale and Purchase of Private dwellings.
Should the Seller of immovable property however be a developer who’s ordinary course of business is to build and sell residential dwellings, it will automatically place the Seller and the Purchaser in the definitions as well as the applicability of the CPA and in this instance the Seller will not be able to rely on “voetstoots” as the remedies in terms of the CPA will be available to the Purchaser.
SECTION 55 OF THE CPA IN THE EVENT WHERE THE ACT APPLIES
“Every consumer has a right to receive goods that:
55(a) – Are reasonably suitable for the purposes for which they are generally intended.
55(b) – Are of good quality, in good working order and free of any defects.
55(c) – Will be usable and durable for a reasonable period of time…
The aforementioned Sections 55(a) to (b) does however not apply if the consumer has been expressly informed that the goods were offered in a specific condition and the consumer has expressly agreed to accept the goods in that condition.
In the light of the aforementioned section of the CPA and some practitioner’s views that the CPA applies in all instances of acquisition of sale of immovable property, the standard defect list attached to most Offers to Purchase by Estate Agents has been introduced which can only be in an attempt to protect the Seller against any possible defects that he has disclosed on such list.
The aforementioned list however cannot serve the aforementioned purpose in the event of sale and acquisition of second hand immovable properties as the Act simply does not apply in these instances but seems to have become practice in any event and definitely does not do any harm. This list however will protect a developer selling a property in a certain condition of which the defects have been disclosed on such a list as the CPA will be applicable in the last mentioned instance.
Banda vs Van Der Spuy
Mr. van der Spuy sold a thatched roof property to Mr. Banda and after date of registration Mr. Banda instituted an actio quanti minoris (action for lessening of the purchase price) against Mr. van der Spuy due to serious leaks and structural problems to the thatched roof.
It was determined by way of inspection that the wooden poles of the roof could not support the weight of the thatch roof causing openings to appear between the flashing and the thatch.
It was further determined that the pitch of the roof was structurally defective in that it was 30 degrees instead of 45 degrees. Mr. van der Spuy conceded to the fact that he had addressed this problem by way of contractors attending to the leaks but never received a guarantee for the work done.
Irrespective of the aforementioned Mr. van der Spuy did not reveal the aforementioned to Mr. Banda at any stage during the conclusion of the contract and the Court found that Mr. van der Spuy had knowledge of the latent defects and in the light of the fact that the repairs to the roof were never guaranteed, he further had an obligation to reveal this defect or possible re-occurrence of the defect to Mr. Banda and he could not rely on the voetstoots clause.
Should a seller know about a defect and attempt to conceal it from the purchaser in a fraudulent manner, or should the seller in the opinion of the Court reasonably ought to have known of such defect, there will be a responsibility upon the seller to disclose the defect during signing of the agreement, by default of which the purchaser will be entitled to keep the seller liable and the seller will not be able to hide behind the voetstoots clause.
The burden of proof however, remains with the purchaser.
Naidoo vs Moodley
In the aforementioned instance the applicant appealed against an Order granted by the Magistrate of Kwadukuza. The seller sold a property out of a late estate to the purchaser when they wanted to apply for a clearance certificate from the Kwadukuza Municipality, it became apparent that no occupational certificate was issued after construction of the property and therefore a clearance certificate could not be issued.
The Municipality further required certain structural alterations to be made to the property before such occupational certificate could be issued and only after the aforementioned has successfully been concluded a clearance certificate could be obtained. As the sellers argued that the do not have the necessary finances to effect such structural changes, they have opted to resile from the agreement of sale.
For many reasons of which voetstoots amongst other the Magistrate granted absolution from the instance at the end of the plaintiff/purchaser’s case who seeked to keep the sellers bound to the terms and conditions of the agreement and force them to make the necessary structural changes in order to obtain the occupancy and clearance certificate.
The plaintiffs were not satisfied with this outcome and appealed against the decision to the Kwazulu Natal High Court who made an Order that the appeal be upheld, and the Order of absolution from the instance made by the Magistrate be set aside and that the matter be referred back to Court a quo to determine the remaining issues between the parties.
The aforementioned decision respectfully does not abandon voetstoots as a remedy but merely came to the conclusion that the matter should not have been absolved but rather properly heard and adjudicated.
In the case of Van Nieuwkerk vs McCrae the judge expressed himself as follows :
“In my view when a residential property within the area of jurisdiction of a local authority is sold with a building on it the purchaser is entitled to assume that the building has been erected in compliance with all statutory requirements and that it can be used to its full extent. In my view this assumption is so obvious and self-evident that it is not necessary for it to be specifically set out in an agreement of sale and is implied as a matter of law in any agreement of sale relating to property.”
Although there are a tendency towards financial institutions to demand building plans as a pre-requisite for the approval of mortgage loans, this respectfully does not render the voetstoots clause absolute but rather hampers registration of the transaction due to non-compliance with the financial institutions conditions of loan. There is however case law in terms of which parties have successfully relied on the voetstoots clause in the absence of approved building plans where they could proof that they did not know or reasonably ought to have known about such absence.
Odendaal vs Ferraris
Mrs. Odendaal sold a property to Mr. Ferraris which transfer took place. Mr. Ferraris approached the Local Municipality to obtain copies of the approved building plans only to find that the Out-buildings were not present on the building plans. He confronted Mrs. Odendaal in this regard who raised the defence of “voetstoots” against Mr. Ferraris’ claim.
The Court referred to the Case and test set out in Van der Merwe vs. Meades requiring a Purchaser who intends to counteract the defence of “voetstoots” to prove that the Seller was aware of the defect or should reasonable have been aware thereof and fraudulently concealed the defect.
In the light of the fact that Mrs. Odendaal purchased the property five years before her predecessor in title, under the impression that all statutory requirements and consents including building plans were in order. The Court supported Mrs. Odendaal’s defence and found that she was not aware of the absence of approved building plans for the Out-building was a reasonable expectation present that she should have known and therefor she could successful defence in this instance.
The contrary is also true, that should a party have known about a defect, or reasonably ought to have known, he will not be entitled to rely on the voetstoots defence such as :
Haviside vs. Heydricks
Mr. and Mrs. Heydricks purchased a property in Port Shepstone from Mrs. Haviside and wanted to build a flat on top of the existing double garage and out-buildings. Heydricks approached the Local Municipality to obtain building plans.
Upon inspection it was established that the existing double garage was not on any building plan. When the Seller was confronted by this she raised the defence of “voetstoots” and further stated that she did not deem it necessary to obtain permission or to enquire whether her family who constructed the garage in her absence had submitted plans.
The Court found that there was a duty on Mrs. Haviside to enquire whether plan have been approved for the double garage by default of which she had to inform Mr. and Mrs. Heydricks that it was an illegal structure.
In the light of the fact that The Court found that somebody in her position reasonable ought to have known of the requirement of approved building plans to erect such a structure she could not rely on the “voetstoots” clause as a defence.
Until such time as any statutory law abandons the common law remedy of voetstoots it will still remain a powerful remedy to the benefit of the seller and the burden of proof to prove that the seller knew about a defect or reasonably ought to have known will still vest with the purchaser which burden is as we know very difficult but not impossible to comply with.
VOETSTOOTS VS RISK OF DAMAGE TO THE PROPERTY
Bearing the aforementioned in mind with regards to voetstoots and the fact that the seller enjoys the protection of the voetstoots clause until such time as the purchaser can prove that the seller knew of the alleged defect and maliciously concealed or omitted to disclose such defect, the question arises how this effects the risk of damage with regards to the property from date of signature of the agreement until date of transfer as contained in CLAUSE 8.1 of your agreement.
The last mentioned clause clearly states that risk of damage to the property … will only pass to the purchaser on date of registration and many purchasers are of the opinion that should any damage occur to the property from date of signature of the agreement until date of transfer, that the seller will automatically in terms of this clause be liable to repair such damage, which is in actual fact not correct.
Isando Foods (Pty) Ltd vs Fedgen Insurance Limited
Stated the following :
“When a property is sold the risk that the property might bed damaged passed to the purchaser once the sale is perfected even though delivery has not yet taken place, but that does not mean that all risk passes to the purchaser irrespective of how it is caused. The risk that passes upon sale is the risk of damage through no fault of the seller. In other words it is only the risk of damage by vis major or casus fortuitous or damage caused by third parties through no fault of the seller that passed to the purchaser”
In the light of the aforementioned as well as the voetstoots clause, it is therefore apparent that damage to the property that occur after the contract has become perfecta, and prior to registration, will be the responsibility of the purchaser as only damages caused due to the action or negligence by the seller will remain his responsibility under clause 8.1 and the seller will enjoy the defence and protection under the voetstoots clause with regards to latent and patent defects as long as the purchaser cannot prove that the seller knew or reasonably ought to have known of such a defect and maliciously concealed or omitted to disclose such defect.