The new Property Practitioners Act (PPA), will definitely assist buyers make informed decisions.
In terms of this new law, owners will be compelled to make a written disclosure to every potential buyer regarding all of the significant defects to the property of which the owner is aware. Moreover, the agent, usually employed by the owner (seller) will be legally responsible for:
- Handing every potential buyer a copy of the owner’s signed disclosure.
- Attaching the disclosure, signed by all parties, as an integral part of any agreement of sale.
- Informing buyers that, in addition to the owner’s disclosure, a professional inspection may be required to determine significant defects or areas of non-compliance of which the owner may have been unaware.
The PPA will come into force once the minister’s regulations regarding the PPA have been finalised and published in the Government Gazette. The period of public comment on the regulations expired on 20 November 2020.
The draft PPA Regulations include the prescribed format for the mandatory owner’s disclosure – known as the Immovable Property Condition Report (IPCR).
The IPCR requires the owner to disclose in writing the owner’s knowledge of defects or non-compliance regarding:
- The roof
- Electrical systems
- Plumbing systems
- Swimming pool (if any)
- Heating and air conditioning systems
- The drains (and other sanitary disposal systems)
- Cracks and damp in the property, including the foundations and basements.
- Structural defects anywhere in the property
- Any boundary line disputes, encroachments or encumbrances
- Whether any alterations or refurbishments have affected the structural integrity of the property
- Unapproved additions or improvements to the property
- Whether any structure on the property has been named a historic structure or a heritage site.
If the owner admits knowledge of defects or non-compliance in connection with any of the above, then the owner is obliged to provide the prospective buyer with a full explanation in writing as part of the owner’s mandatory condition disclosure.
The draft PPA regulations state that, while the owner’s disclosure does not constitute a guarantee, the owner agrees that the buyer may “rely on such information when deciding whether, and on what terms, to purchase the property”.
The prospective buyer must also be informed in writing, as part of the disclosure process, that the mandatory owner’s disclosure must “not be regarded as a substitute for any inspections or warranties that prospective purchasers may wish to obtain prior to concluding an agreement of sale in respect of the property”.
The prospective buyer must also acknowledge in writing that “he/she has been informed that professional expertise and/or technical skill and knowledge may be required to detect defects in, and non-compliance aspects concerning, the property”.
In practice, because the average property owner or estate agent does not have the “professional expertise and technical skill and knowledge to detect all defects and areas of non-compliance the implementation of the PPA can be expected to greatly increase the demand for professional property inspections as an integral part of property transactions.
This is to be welcomed. The PPA, through the full disclosure required by this new law will definitely greatly empower buyers to make informed decisions. The owner’s condition disclosure, together with unbiased independent and professional property inspections will naturally tend to “build bridges of trust between buyers, owners and their agents”.
Such transparency and consumer protection has been sorely lacking within property transactions.
The Property Practitioners Act is targeted to be promulgated on 1 April 2021 according to the Department of Human Settlements.
By John Graham, founder of HouseCheck