Discovering defects before taking property transfer

Discovering defects before taking property transfer
30 Oct 2019

What happens when a buyer takes occupation of a property prior to transfer and then discovers defects that he didn’t know about? He then claims that the seller did not disclose these defects prior to the sale and demands a reduction in the purchase price. The seller denies this and refuses to agree to a reduction in price.

May the buyer instruct the Bond attorneys to suspend the bond, and thereby terminate the deal?

Know your sale agreement

Unless the agreement provides that certain things will be done prior to transfer or it provides that the property will be in a certain condition, then the buyer may not intentionally hold up the transfer for this reason.

Buyers often make the mistake by thinking that if the bank withdraws the bond, then it automatically cancels the agreement. What they need to understand is that the bond condition had already been met, which concluded the deal at that time. A subsequent withdrawal of the bond under these circumstances would not undo the sale.

What recourse does the buyer have?

If the seller refuses to agree or negotiate, the buyer has two choices only:

  1. To proceed with the transfer and then sue the seller for a reduction in price / damages to address the defects; or
  2. To claim that there was a material misrepresentation to persuade him into buying, then cancel the sale and return the property (if he has taken occupation). The purchaser can then try to recover any damages he may have suffered by way of litigation.

By instructing the bank to suspend the bond registration with the intention of pressurising the seller to meet his demands, the buyer runs the risk that his actions may give a clear and unequivocal indication that he no longer wants to proceed with the deal, and this may justify immediate cancellation by the seller.

Always speak to an expert before taking action

This issue is however debatable as there is no case law on this, and we therefore suggest that such instances are approached with caution. For assistance with any property-related matters, please consult our experienced Conveyancing and Property Law attorneys.

See also:

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)
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