The post THE EXPOSURE OF A PRIVATE EQUITY FUNDS BY VIRTUE OF ITS SHAREHOLDING appeared first on Gumede and Warburton Attorneys.
]]>Private equity funds are collective investment schemes registered under Section 12J of the Income Tax Act 58 of 1962. These funds provide opportunities for individuals to invest in specific sectors through venture capital companies, which are non-trading special purpose vehicles (SPVs) created exclusively for investment purposes.
A major concern is the potential risk exposure that private equity funds face concerning agreements concluded by the companies in which they have invested.
Companies, as separate legal entities, exist independently from their shareholders, as outlined in Section 19(1)(b) of the Companies Act 71 of 2008. This separation grants shareholders limited liability. However, this limited liability is not absolute. Courts can, under certain circumstances, disregard a company’s separate legal personality, a process known as “piercing the corporate veil.”
Both common law and legislation provide the courts with the power to pierce the corporate veil, with legislative provisions offering a less onerous path and wider judicial discretion. Section 20(9) of the Companies Act allows an interested party to apply to pierce the corporate veil when a company’s actions constitute an unconscionable abuse of its juristic personality.
In the case of Ex Parte: Gore NO and Others [2013] All SA 437 (WCC), the Court sought to disregard the separate legal personalities of the King Group due to allegations that business was conducted solely through the holding company, with no distinguishable corporate identity among the various subsidiary and related companies. The Court ruled in favour of the Applicant, concluding that the King Group was a sham, and thus ordering that the group be treated as a single entity.
In Knoop N.O and Others v Birkenstock Properties (Pty) Ltd and Others (7095/2008) [2009] ZAFSCH 67, the Court stated that the corporate veil might be pierced where there is evidence of fraud or dishonesty in the establishment or conduct of the company’s affairs. The case highlighted that transactions must be part of a “device, stratagem, cloak or a sham” to justify piercing the veil. This position was recently reaffirmed in Centaur Mining South Africa (Pty) Ltd v Cloete Murray N.O. and Others (1334/2022) [2024] ZACC 34, emphasizing that misuse of a company to perpetuate fraud or improper purposes warrants disregarding its separate legal personality.
To successfully pierce the corporate veil, an applicant must primarily prove that the private equity fund exercised control over the invested company, established it as a sham, or misused it to perpetuate fraud or dishonesty.
Private equity funds, often part of a group of companies, may be argued to qualify as holding companies. The Companies Act defines a “group of companies” as a holding company and all its subsidiaries. A holding company controls a subsidiary through the majority of voting rights or the ability to appoint directors who control the board.
For venture capital companies to be approved under Section 12J, the Commissioner must be satisfied that their sole objective is managing investments in qualifying companies. Additionally, these private equity companies must be licensed as Financial Services Providers (FSPs) under Section 8(5) of the Financial Advisory and Intermediary Services Act 57 of 2002.
Given the strict requirements for registering as a Section 12J company, it is arguable that a private equity fund, even if deemed a holding company, may not exercise direct or indirect control over its investments. The fund’s legislative object is merely the management of investments, making it a financial vehicle rather than a controlling entity.
Due to stringent legislative requirements, it is unlikely that compliant private equity funds could be held liable for the debts of the companies they invest in. Naturally, shareholders risk losing their investments but are generally protected from further liabilities. It is advisable for private equity funds to ensure their mandates comply with legislative requirements and clearly outline the shareholders’ positions regarding control over invested companies. Any decision imposing liability on private equity funds could set an undesirable precedent, potentially undermining their role in economic development.
If you have any questions or concerns, please feel free to contact us:
info@gumedeandwarburton.com | Andrew Warburton: samantha@gumedeandwarburton.com | Michele Neveling: michele.n@gumedeandwarburton.com
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]]>The post WHAT TO KNOW ABOUT MANDATORY DISCLOSURE FORMS appeared first on Gumede and Warburton Attorneys.
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The Act aims at protecting and promoting the interest of consumers and the general public. The form requires the seller / lessor to disclose the defects in the property, such as those that are reasonably and easily identifiable upon inspection of the property, those that may be discovered at a later stage as well as those which were deliberately concealed. In addition, the Act aims to make sure that the property practitioner assists the contracting parties in ensuring that all the defects are declared.
The Act states that if there is no disclosure form attached to the agreement, then the agreement “must be interpreted as if no defects or deficiencies of the property were disclosed to the purchaser”.
(1) A property practitioner must—
(a) not accept a mandate unless the seller or lessor of the property has provided him or her with a fully completed and signed mandatory disclosure in the prescribed form; and
(b) provide a copy of the completed mandatory disclosure form to a prospective purchaser or lessee who intends to make an offer for the purchase or lease of a property.
(2) The completed mandatory disclosure form signed by all relevant parties must be attached to any agreement for the sale or lease of a property, and forms an integral part of that agreement, but if such a disclosure form was not completed, signed or attached, the agreement must be interpreted as if no defects or deficiencies of the property were disclosed to the purchaser.
(3) A property practitioner who fails to comply with subsection (1) may be held liable by an affected consumer.
(4) Nothing in this section prevents the Authority from taking action against a property practitioner or imposing an appropriate sanction.
(5) Nothing in this section prevents a consumer, for his or her own account, from undertaking a property inspection to confirm the state of the property before finalising the transaction.
The contents of a property disclosure form can vary depending on the property condition and history.
If you would like a copy of the Mandatory Disclosure Form or if you have any questions or concerns, please feel free to contact us:
031 035 1055 | info@gumedeandwarburton.com | Cherise Venketiah
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]]>The post KEY THINGS TO TAKE INTO CONSIDERATION WHEN SELLING A BUSINESS appeared first on Gumede and Warburton Attorneys.
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Deciding what is included in the sale is an important discussion to have with potential buyers. This aspect often becomes a focal point of legal disputes, so it is essential to meticulously list all components in the sale agreement to prevent misunderstandings.
This includes:
Securing an accurate fair market value for your business is crucial to prevent undervaluation or overpricing. This process involves a comprehensive examination of your business, including profits, losses, and key customer lists. Financial advisors play a vital role in ensuring a thorough and formal valuation.
As previously stated, your financial advisor plays a crucial role in the sale of your business, however, there are several other experts that need to be included in your panel. Including a commercial attorney, an accountant, and potentially any expert relevant to your specific industry.
Beyond determining the business valuation range, it’s essential to structure the deal appropriately. Your advisors play an important role in this phase and will ensure that protective documents are drafted to ensure a smooth transaction.
It is important to have all your financial records in order before selling your business. You need to ensure that you include a comprehensive financial record detailing revenue, costs, payroll, and operating expenses. Ideally, your business needs to have maintained a consistent net profit for 3-5 years for an optimal valuation, as a solid valuation generally relies on consistent net profit and cash flow.
Buyers often seek businesses with sound corporate governance to mitigate future risks. Engage a qualified advisor to assess and refine systems and processes, aligning with stakeholders’ and investors’ interests.
Once an offer has been accepted, the next step is “due diligence. This crucial process involves furnishing the prospective buyer with pertinent business documents to substantiate the proposed valuation. Include key contracts, license agreements, annual accounts, financial projects, and internal policies. Streamline the process by organising all documents and having legal advisors review them beforehand to prevent delays and pitfalls during the transaction.
An attorney plays a crucial role in ensuring commercial protection by navigating complex transactions, ensuring regulatory compliance, and drafting essential documents. Their involvement safeguards your interests, fostering a smoother negotiation and closing process.
Clearly outline employee transfer terms in the Sale Agreement . In most cases, the employees will continue their employment under the new business owner. If employees are being retained, the new owner must adhere to the Labour Relations Act as well as the Basic Conditions of Employment and uphold employee entitlement, such as sick leave, annual leave, and other working arrangements. If employees are not retained, follow proper termination procedures, and settle all outstanding entitlements before completing the sale.
In conclusion, selling your business requires meticulous planning and adherence to these key considerations. Seeking professional assistance significantly contributes to a successful sale. With careful planning and expert guidance, you can navigate the process with confidence and achieve optimal outcomes.
For more information, please feel free to contact us info@gumedeandwarburton.com | 031 035 1055
Labour Relations Act 66 of 1995: https://www.gov.za/documents/labour-relations-act
Basic Conditions of Employment Act 75 of 1997: https://www.gov.za/documents/basic-conditions-employment-act#:~:text=The%20Basic%20Conditions%20of%20Employment,basic%20conditions%20of%20employment%3B%20and
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]]>The post UNDERSTANDING THE REGISTRATION PROCESS IN THE DEEDS OFFICE appeared first on Gumede and Warburton Attorneys.
]]>There are 11 Deeds Offices distributed throughout the country, namely in: –
The Deeds Office is a creature of statue and is responsible for the examination, registration and record-keeping of all property transactions. The Deeds office usually takes between 7- 10 working days to finalise a matter from date of lodgement to date of registration, provided there are no queries raised by any of the examiners.
The conveyancing attorney would extensively explain to clients their roles involved in the conveyancing transaction; however, they often do not go into detail regarding the Deeds Office processes and procedures.
The conveyancing attorney prepares the required transfer documents which are then lodged at the counter of the Deeds Office. The lodgement clerks are responsible for linking the transfer, bond and bond cancellation (should there be a registration or cancellation of a bond). After the batch is linked and handed in for lodgement, the data clerk at the Deeds Office scans the deeds via a barcode into the DOTS (Deeds Office Tracking System) which allows the conveyancing attorney to follow the transaction whilst at the Deeds Office.
The data clerk does a deeds search on the seller, purchaser and property being transferred/bonded and places those in the lodgement covers for the examiners to check. Any interdicts are here noted against the persons or entities involved in the transaction, as well as the property.
The deeds are now ready to be sorted and distributed for examination.
The deeds are allocated to junior examiners, who perform the preliminary checks. Once completed, the deeds are returned to the distribution section.
The deeds are next distributed amongst senior examiners for further examination. The examiners consider the queries raised by the junior examiners and re-examine the deeds. They indicate whether the deeds are to be passed or rejected. Deeds are rejected if there are defects or errors in any of the deeds, this includes the transfer, bond or bond cancellation documents. The entire batch of documents must be drafted accurately, an error in any of the documents will result in the rejection of the whole batch. The deeds are returned to the distribution section before moving to the next level of examination.
The final level of examination is monitored by an assistant Registrar of Deeds, ultimately deciding whether the deeds are to be passed or rejected. If the deeds are rejected, they are sent to the deliveries section and later collected by the conveyancing attorney. The conveyancing attorney will then address the queries raised by the Deeds Office and arrange for the re-lodgement of the deeds. If there is a note on a deed that does not warrant a rejection or that the examiner is in error in a particular respect, he would remove the note and pass the deed, upon which such deeds go to prep (preparation).
The deeds that are found to be in order and passed will move to the next step in the registration process, being the prep stage. There may be deeds that still have notes, but these will be minor queries which do not warrant the rejection of the entire batch.
The conveyancing attorneys will, at this stage, make the final arrangements necessary to register the matter. These arrangements include obtaining the bank’s approval (also known as “a proceed”), should a bond be registered or cancelled, as well as ensuring that all the finances and contractual conditions are in order.
The conveyancing attorneys are granted four working days to hold the matter over to rectify any problems or queries raised and by the fifth working day the matter must either be registered or withdrawn from the Deeds Office. All the conveyancing attorneys linked in the same batch are required to give their confirmation to proceed in order for registration to take place failing which, the matter will be rejected. Just before registration, the data section performs final checks to ensure that no new interdicts have been noted against the persons, entities or property since lodgement. If everything is in order, the deeds are sent for execution by the conveyancer in the presence of the Registrar of Deeds and registration takes place.
The Deeds are then ‘’handed in’’ from the prep stage to be executed. The Deeds are executed in front of the Registrar of Deeds who will also sign the deeds and affix his stamp of office onto the documents. The property is thereafter formally registered in name of the purchaser(s). All parties are notified, and the funds are released accordingly.
Once registered, the Deeds Office attends to various other administrative tasks to ensure that the deeds are in order and recorded accurately:
Lastly, the conveyancing attorney arranges for delivery of the original deeds to the client. In the event of a mortgage bond being registered, both the mortgage bond and title deed are sent to the bank for safekeeping. Once the mortgage bond is cancelled, the registered owner will be entitled to keep the original title deed.
The Deeds Office is a vital part of property transfers and ensuring accurate data is contained in the Deeds Registry is important for all parties concerned. They ensure that all property is managed accurately and examined correctly. The Deeds Office are very strict when processing and examining documents. Only original documents are accepted by the Deeds Office and therefore conveyancing attorneys must be competent to ensure their drafting skills are always accurate.
https://www.deeds.gov.za/property-transfer-process.php
For more information, please feel free to contact us: info@gumedeandwarburton.com | conveyancing@gumedeandwarburton.com
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]]>The post COMMON CHALLENGES IN THE CONVEYANCING PROCESS appeared first on Gumede and Warburton Attorneys.
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One of the primary challenges in conveyancing relates to lost title deeds and / or discrepancies. Title deeds are legal documents that prove ownership of a property. Issues such as missing title deeds, conflicting information on deeds, or interdicts over the property can significantly delay the conveyancing process. Resolving these issues often requires thorough investigation and legal processes to be followed.
Another common challenge is dealing with outstanding municipal debts associated with the property. Buyers may encounter difficulties if the seller of the property has unpaid rates or utility bills. Or the Seller does not have enough funds to pay the rates and utilities in advance as required by the municipality. Conveyancers must ensure that all municipal debts are settled before the transfer of ownership takes place.
Property encumbrances, such as servitudes, restrictive conditions, or existing mortgage bonds, can complicate the conveyancing process. Servitudes, for example, grant certain rights or restrictions over a property to third parties. Restrictive conditions require consent from external third parties to transfer the property. Depending on who the third party is, this may be a cumbersome process. Resolving encumbrances requires careful examination of property records and may involve negotiations with affected parties to secure consent for the transfer.
Delays in obtaining the necessary documentation can also pose significant challenges. This includes delays in obtaining FICA documents from clients, clearance certificates from the municipality, compliance certificates (such as electrical or entomology certificates), or obtaining necessary approvals from relevant third parties referred to in the previous paragraph. Any delay in documentation can prolong the conveyancing process and frustrate both buyers and sellers.
Financial constraints, in the form of either party having to apply for finance to cover costs related to the transfer. Financing delays in relation to the purchase price may be experienced if the sale is subject to the sale of a prior property and / or transfer costs to be paid from the proceeds of the prior sale. Many Sellers are not aware that the municipality require the payment of all rates and utilities 3 (three) months upfront. This amount can be too high for the Seller to pay, in which case the Seller would have to apply for bridging finance which might cause delays depending on which financial institution is instructed.
In an increasingly digital world, conveyancing transactions are vulnerable to fraud and scams. Cybercriminals may attempt to intercept communication between parties, impersonate legitimate parties, or misdirect funds during the transaction process. Conveyancers must implement robust security measures and exercise diligence to safeguard against fraudulent activities.
Compliance with legal and regulatory requirements is paramount in the conveyancing process. Failure to adhere to legislative requirements, such as the Deeds Registries Act, Alienation of Land Act, Sectional Titles Act, Protection of Personal Information Act, the Consumer Protection Act, or the Financial Intelligence Centre Act (FICA), can result in legal complications and potential voiding of transactions. Conveyancers must stay abreast of evolving regulatory frameworks to ensure compliance.
If you have any questions or concerns, please feel free to contact us info@gumedeandwarburton.com | Cherise Venketiah
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]]>The post THE SIGNIFICANCE OF THE DATE OF SALE ON AN OFFER TO PURCHASE IN SOUTH AFRICAN LAW appeared first on Gumede and Warburton Attorneys.
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South African property law is governed by various statutes, common law principles, and contractual agreements. The date of sale specified in an Offer to Purchase constitutes a contractual term and is crucial as it marks the commencement of various legal obligations and rights for both the buyer and the seller.
The date of sale acts as the starting point for the contractual relationship between the parties involved. Once the Offer to Purchase is signed and dated, it signifies the acceptance of the terms outlined therein. From this moment, both parties are bound by the conditions stipulated in the agreement, subject to any suspensive conditions that may be included.
In South African law, the date of sale does not coincide with the transfer of ownership of the property from the seller to the buyer. However, while the transfer process itself may take some time to complete, the date of sale is indicated on all transfer documents and serves as the pre-cursor for transfer of ownership to occur.
Various legal timelines in property transactions are calculated with reference to the date of sale. For instance, the fulfilment of suspensive conditions, such as obtaining bond approval or compliance certificates, typically must occur within a specified timeframe from the date of sale. Additionally, the calculation of interest, penalties, and other financial considerations may be based on this date.
The date of sale also has implications for tax purposes. In South Africa, the date of sale is often used to determine the timing of tax liabilities, including transfer duties, capital gains tax, and Value Added Tax (VAT). Understanding and accurately documenting the date of sale is essential for ensuring compliance with relevant tax legislation and avoiding potential penalties or disputes.
Given its legal significance, it is crucial for the date of sale to be clearly and accurately stated in the Offer to Purchase. Ambiguity or discrepancies regarding this date can lead to misunderstandings, delays, and even legal disputes. Parties should ensure that the date is agreed upon and clearly recorded to prevent any future complications.
Please feel free to contact us if you have any questions or concerns info@gumedeandwarburton.com | Cherise Venketiah
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]]>The post HOW A RECENT COURT DECISION COULD AFFECT YOUR ANTENUPTIAL AGREEMENT appeared first on Gumede and Warburton Attorneys.
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To understand why this decision is so important, we must look at how marriage property rules have worked in South Africa. Traditionally, marriages were divided into two types: ones where all assets and funds are shared equally (in community of property) and ones where each person keeps their own assets and funds (out of community of property). The rules changed in 1984 with the Matrimonial Property Act, which let couples decide if they wanted to share their assets or not. The Divorce Act also came into play, giving judges the power to decide who gets what when a marriage ends, especially for marriages before 1984.
Now, thanks to this recent court decision, more people have the right to ask for a fair share when they get divorced. Before, only couples married before 1984 could ask a judge to decide who gets what. But now, even if you got married after 1984 without sharing your assets, you still might be able to ask for a fair share if you get divorced. This is all about making things fair for both parties, even if you didn’t plan for it in your antenuptial agreement.
If you already have an antenuptial agreement or are thinking about getting one, you might be wondering how this affects you. Well, even if you agreed in your antenuptial that you wouldn’t share your assets and funds, this court decision could change things. Now, both parties in the marriage might be able to ask for a fair share of assets, even if the antenuptial says otherwise. But remember, just because you ask for a fair share doesn’t mean you’ll automatically get it. The judge will still have the final say.
So, what does all this mean for you? It means that if you are married or planning on getting married in South Africa, it’s important to understand how the law might affect your assets if you ever get divorced. This court decision is a step towards making things fair for everyone, but there could still be more changes in the future. Keep an eye on the legal landscape, and make sure you understand your rights and options when it comes to your antenuptial agreement.
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]]>The post THE IMPACT OF RATES CLEARANCE DELAYS ON THE CONVEYANCING PROCESS appeared first on Gumede and Warburton Attorneys.
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The Rates Clearance Certificate is a vital document in property transfers, and its acquisition involves a detailed process. Conveyancing law firms typically follow these steps:
Delays in rates clearance can occur at different stages:
In conclusion, a seamless property transfer process relies on the timely fulfilment of commitments from the various institutions involved. The Rates Clearance Certificate, a critical component, faces challenges at different stages, emphasising the interconnectedness of consents and approvals in the overall transfer process. Conveyancing law firms navigate these complexities, prioritising approvals with longer processing times to ensure a smoother transaction.
For more information please feel free to contact us info@gumedeandwarburton.com | Cherise Venketiah
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]]>The post THE ADVANTAGES OF APPOINTING AN ATTORNEY FOR DEBT COLLECTION appeared first on Gumede and Warburton Attorneys.
]]>Dealing with debt collection can be a daunting and time-consuming task for individuals and businesses alike in South Africa. Trying to recover debts can lead to frustration, stress, and strained relationships. However, seeking professional assistance from an attorney can significantly alleviate these burdens and offer numerous benefits in the process. Below, we explore the advantages of letting an attorney handle your debt collection.
One of the most significant advantages of engaging an attorney for debt collection is their extensive legal expertise and knowledge. Debt collection laws can appear simplistic, but a qualified attorney specialised in debt recovery is well-versed in the nuances of the legal framework and intricacies, ensuring that all actions taken comply with the relevant laws and yield maximum results.
Experienced attorneys have a higher success rate in recovering outstanding debts compared to individuals attempting to collect the debts themselves. They know the most effective strategies to navigate negotiations, send formal demand letters, and take appropriate legal action when necessary. Their proficiency in handling debtors improves their chances of receiving full or partial payments promptly.
Debtors may attempt to take advantage of the situation, making false claims or engaging in harassment to evade payment. When an attorney handles debt collection, they act as a protective buffer between the creditor and the debtor.
Trying to collect debts personally can often strain relationships and harm the professional image of the creditor. By hiring an attorney, the debtor is more likely to perceive the situation as a serious matter. An attorney maintains a level of professionalism throughout the process, preserving the relationship with the debtor and increasing the likelihood of a successful resolution.
Debt collection can consume significant time and resources, particularly for businesses that have many outstanding debts to manage. By outsourcing debt collection to an attorney, businesses can focus on their core operations while the attorney handles the time-consuming process of debt recovery. This efficiency often leads to quicker resolutions and a more streamlined debt collection process.
An attorney possesses a diverse set of legal tools to handle various debt collection scenarios. Whether the debtor is an individual, a small business, or a large corporation, attorneys can tailor their approach accordingly. They may recommend alternative dispute resolution methods, negotiate payment plans, or initiate legal proceedings as appropriate for each unique case.
The emotional toll of trying to recover debts can be overwhelming, especially when it involves friends, family, or long-term business associates. Appointing an attorney for debt collection alleviates this burden, allowing creditors to maintain peace of mind while a professional handles the matter on their behalf.
Entrusting an attorney with debt collection brings a multitude of benefits for creditors. From expert legal knowledge and improved recovery rates to safeguarding rights and maintaining professionalism, attorneys offer a level of efficiency and effectiveness that significantly outweighs the costs of their services. As such, seeking professional assistance from an attorney is a prudent step for anyone seeking to recover outstanding debts.
Please feel free to contact us if you have any questions or concerns info@gumedeandwarburton.com | Sibo Khumalo
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]]>The post UNDERSTANDING VOETSTOOTS: UNVEILING LATENT AND PATENT DEFECTS WHEN SELLING A PROPERTY appeared first on Gumede and Warburton Attorneys.
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The voetstoots clause in property sale agreements protects sellers from being liable for hidden defects in the property at the time of sale. It means the buyer takes on the risk and cost of any repairs for defects discovered after the sale is completed.
However, this doesn’t mean sellers can blatantly conceal defects or act fraudulently. If the seller is aware of a defect and deliberately fails to disclose it, they may still be held liable under certain circumstances.
Latent defects are defects that are not readily apparent upon a reasonable inspection of the property. These defects may only become evident after the property has been purchased and the buyer has had a chance to live in or use the property. Common examples of latent defects include structural issues, faulty plumbing, or electrical problems that are not immediately noticeable.
In the context of voetstoots, the responsibility of uncovering latent defects rests primarily with the buyer. The buyer is therefore encouraged to conduct thorough due diligence, including property inspections and assessments, to minimize the risk of purchasing a property with significant undisclosed issues.
In contrast to latent defects, patent defects are defects that are easily noticeable upon reasonable inspection of the property. These defects are usually evident to anyone examining the property, such as a crack in a wall. A seller cannot escape liability for patent defects by relying solely on the voetstoots clause, especially if the defects were intentionally concealed or misrepresented.
While the voetstoots clause can absolve sellers of responsibility for latent defects, it’s important to note that South African law encourages transparency and honesty in property transactions. Sellers are obligated to make full and accurate disclosures regarding the condition of the property, even if a voetstoots clause is included in the agreement. This means that sellers should provide potential buyers with information about both latent and patent defects that they are aware of.
Failure to disclose material defects can result in legal consequences for the seller, including the potential for the buyer to cancel the sale agreement or claim damages.
The concept of voetstoots in property transactions offers a certain level of protection to sellers by allowing them to sell their property without taking responsibility for latent defects. However, this protection is not absolute, and sellers must still adhere to legal and ethical standards of transparency and disclosure. Buyers, on the other hand, should approach property transactions with due diligence, conducting thorough inspections and seeking professional advice to minimise the risk of purchasing a property with hidden defects.
In the dynamic world of property transactions, the balance between voetstoots and disclosure ensures that both buyers and sellers have a fair playing field, fostering trust and confidence in the real estate market.
Contact Gumede and Warburton Attorneys for more information info@gumedeandwarburton.com | Cherise Venketiah
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