Asked by Bugsycat on 25-09-2014 09:02:37
Question posted in the Property Law category relating to Western Cape
Question posted in the Property Law category relating to Western Cape
Good day I recently sold my house up in Klerksdorp for 1 million to a gentlemen that is a civil engineer. The sale took over 5 months as he kept lying about bringing money in from overseas. However that is not relevant. Before buying the house he throughly inspected it numerous times even taking soil samples. He then drew up a list with all the faults, we reduced the purchase price based on this. Exactly 2 weeks before transfer happened there was the big earhquake up there (5 August) transfer happened on 25 August. Directly after the quake he wanted to go see the house which I agreed to. He said there was a bit of damage, I proceeded to lodge a claim with my insurance. He did not request a hold in the transfer at any point. The assessor came out a week later and did the inspection, then a contractor was appointed by the assessor and the buyer accompanied him on his tour to state the repairs needed. This quote was submitted to the insurance assessor who called me saying it was too high. I requested to see the quote to make sure that the buyer was not claiming any pre existing faults. The assessor told me I may not see the quote. So we all agreed to appoint a 2nd contractor. This contractor was supposed to go out the following week. He then cancelled due to being ill, we were now already onto the 6th of September. The buyer then proceeded to get a quote himself as requested. This was submitted to the insurance along with a request for a engineer as he felt that some subsidence had occurred since the fault. I agreed and the insurance is sending one out on the 26th September. Currently the buyer got his own engineer (knowing the bank is sending one) and has proceeded to draw up a monsterous list of numerous cracks and subsidence, he is guestimating damage at around 600K. He now wishes to sue me for the total damages. I have 2 questions please 1. What are my rights in this situation? 2. As the insurance had not settled on the original claim would they now have to include the subsidence into the claim? Kind regards Christine
Message from the Lawyer
Posted by Att. Patrick on 25-09-2014 10:04:48
Hi there Christine and thank you for your question,
First, I'm sorry to hear that the earthquake affected you and your property, and that things have been delayed like they have been.
Since transfer occurred on 25 August, the buyer is already the new owner of the property.
In terms of the sale agreement, you agreed to sell and transfer to him your property (which was in a certain state) for a certain purchase price. If the transfer goes through and the property is not in that agreed upon state, then he can sue you for a reduction in purchase price. This is indeed what he seems to be doing --> suing you for R600k which he says is the amount that he will have to spend in order to fix the property.
Unfortunately for him, I don't think that he has calculated the damages correctly.
The damages that he is strictly entitled to is: The value of the property immediately before the earthquake (i.e. the purchase price) less the value of the property as it stands at the moment. This is essentially the "reduction in purchase price".
You will see that I have not mentioned here the costs that would need to be incurred to repair the property! That is because the cost of repairs does not necessarily equate to the reduction in purchase price. It could though.
If you pretend that you sold the house for R1m, and now after the earthquake it is worth (i.e. what somebody would still be willing to spend on it now to buy it in its present condition) R700k, then the reduction is purchase price is only R300k -- even though it may cost somebody R600k to fix it! In this instance the buyer could only sue you for the R300k.
You should amend the original claim immediately to include the list of damage that the purchaser has drawn up, which would include the subsidence of the property. That is very important.
My advice would be that you should also try to value the property as it stands at the moment -- because you may need to use this figure in the future.
I think what is happening is that the buyer wants to push the value of repairs up to R600k, knowing that he could fix it cheaper, and then he can pocket the difference.
My advice is that you make an appointment to speak to the conveyancer who transferred the property on your behalf, and ask him/her to assist in writing a letter to the buyer to put him straight.
Legally though, the buyer is entitled to sue you for whatever he wants - and you are legally entitled to defend his claim for whatever reason you want. If he is to sue you, you should seek the formal advice of an attorney in your area. You should also contact your insurance company, because they may be able to assist you in defending the claim. The insurance company may need to be added to the claim against you as a third party, or as a co-defendant!
A lot is going to come down to the engineer's report (who is visiting tomorrow) and the insurance company's attitude towards the damage sustained by the property.
If there is a part of the answer which you need more advice on, or clarity please continue in this same thread instead of opening a new question.
Att. Patrick
Please remember this is a dialog if you have follow up questions please use the REPLY button and ask. If I did not answer the question you thought you were asking, please respond with the specific question you wanted answered. I hope you found my answer helpful, and you have finished asking your questions, please click on the GREEN ACCEPT button in order to mark the question as closed.
First, I'm sorry to hear that the earthquake affected you and your property, and that things have been delayed like they have been.
Since transfer occurred on 25 August, the buyer is already the new owner of the property.
In terms of the sale agreement, you agreed to sell and transfer to him your property (which was in a certain state) for a certain purchase price. If the transfer goes through and the property is not in that agreed upon state, then he can sue you for a reduction in purchase price. This is indeed what he seems to be doing --> suing you for R600k which he says is the amount that he will have to spend in order to fix the property.
Unfortunately for him, I don't think that he has calculated the damages correctly.
The damages that he is strictly entitled to is: The value of the property immediately before the earthquake (i.e. the purchase price) less the value of the property as it stands at the moment. This is essentially the "reduction in purchase price".
You will see that I have not mentioned here the costs that would need to be incurred to repair the property! That is because the cost of repairs does not necessarily equate to the reduction in purchase price. It could though.
If you pretend that you sold the house for R1m, and now after the earthquake it is worth (i.e. what somebody would still be willing to spend on it now to buy it in its present condition) R700k, then the reduction is purchase price is only R300k -- even though it may cost somebody R600k to fix it! In this instance the buyer could only sue you for the R300k.
You should amend the original claim immediately to include the list of damage that the purchaser has drawn up, which would include the subsidence of the property. That is very important.
My advice would be that you should also try to value the property as it stands at the moment -- because you may need to use this figure in the future.
I think what is happening is that the buyer wants to push the value of repairs up to R600k, knowing that he could fix it cheaper, and then he can pocket the difference.
My advice is that you make an appointment to speak to the conveyancer who transferred the property on your behalf, and ask him/her to assist in writing a letter to the buyer to put him straight.
Legally though, the buyer is entitled to sue you for whatever he wants - and you are legally entitled to defend his claim for whatever reason you want. If he is to sue you, you should seek the formal advice of an attorney in your area. You should also contact your insurance company, because they may be able to assist you in defending the claim. The insurance company may need to be added to the claim against you as a third party, or as a co-defendant!
A lot is going to come down to the engineer's report (who is visiting tomorrow) and the insurance company's attitude towards the damage sustained by the property.
If there is a part of the answer which you need more advice on, or clarity please continue in this same thread instead of opening a new question.
Att. Patrick
Please remember this is a dialog if you have follow up questions please use the REPLY button and ask. If I did not answer the question you thought you were asking, please respond with the specific question you wanted answered. I hope you found my answer helpful, and you have finished asking your questions, please click on the GREEN ACCEPT button in order to mark the question as closed.
Message from the client
Thanks so much
A few other questions, my policy does cover earthquake and subsidence.
While waiting for the insurance to send a second contractor the subsidence seems to have occurred this was also after transfer. He was quite happy to accept that the damage was only as per the quotes and no further damage had occurred.
Should the engineer request that certain repairs are made and quantify it to the insurance would the seller still have recourse against me that the repairs arent being done to his exacting standards or with his contractor?
In a situation where the bank engineer decides that there must have been a structural flaw prior to the quake which resulted in this damage, what happens then?
Kind regards
Christine
A few other questions, my policy does cover earthquake and subsidence.
While waiting for the insurance to send a second contractor the subsidence seems to have occurred this was also after transfer. He was quite happy to accept that the damage was only as per the quotes and no further damage had occurred.
Should the engineer request that certain repairs are made and quantify it to the insurance would the seller still have recourse against me that the repairs arent being done to his exacting standards or with his contractor?
In a situation where the bank engineer decides that there must have been a structural flaw prior to the quake which resulted in this damage, what happens then?
Kind regards
Christine
Message from the Lawyer
Posted by Att. Patrick on 25-09-2014 11:30:01
Hi again,
"While waiting for the insurance to send a second contractor the subsidence seems to have occurred this was also after transfer. He was quite happy to accept that the damage was only as per the quotes and no further damage had occurred." --> If this was the case, then this would form part of your defence to any claim that he wants to sue you for. i.e. "but you agreed to accept transfer"
"Should the engineer request that certain repairs are made and quantify it to the insurance would the seller still have recourse against me that the repairs arent being done to his exacting standards or with his contractor?" --> No. The repairs will need to be done to the normal standards, essentially the contractors standards. If the insurance company is happy with the work that the contractor does, that's the end of the story. If the buyer (current owner) wants something else done, that's his business.
What would most probably happen is that your insurance company would pay the contractor directly for effecting the repairs to the property.
"In a situation where the bank engineer decides that there must have been a structural flaw prior to the quake which resulted in this damage, what happens then?" --> I think that you are getting ahead of yourself. Houses in South Africa are not designed to withstand earthquakes. The engineer will need to take into account our local circumastances, and what was reasonable in our country re: earthquakes. You must remember that the house was sold voetstoots, which means "as is". Also, you said that the buyer did various inspections of the house. If there is any risk, it is therefore on his shoulders.
If there is a part of the answer which you need more advice on, or clarity please continue in this same thread instead of opening a new question.
Att. Patrick
Please remember this is a dialog if you have follow up questions please use the REPLY button and ask. If I did not answer the question you thought you were asking, please respond with the specific question you wanted answered. I hope you found my answer helpful, and you have finished asking your questions, please click on the GREEN ACCEPT button in order to mark the question as closed.
"While waiting for the insurance to send a second contractor the subsidence seems to have occurred this was also after transfer. He was quite happy to accept that the damage was only as per the quotes and no further damage had occurred." --> If this was the case, then this would form part of your defence to any claim that he wants to sue you for. i.e. "but you agreed to accept transfer"
"Should the engineer request that certain repairs are made and quantify it to the insurance would the seller still have recourse against me that the repairs arent being done to his exacting standards or with his contractor?" --> No. The repairs will need to be done to the normal standards, essentially the contractors standards. If the insurance company is happy with the work that the contractor does, that's the end of the story. If the buyer (current owner) wants something else done, that's his business.
What would most probably happen is that your insurance company would pay the contractor directly for effecting the repairs to the property.
"In a situation where the bank engineer decides that there must have been a structural flaw prior to the quake which resulted in this damage, what happens then?" --> I think that you are getting ahead of yourself. Houses in South Africa are not designed to withstand earthquakes. The engineer will need to take into account our local circumastances, and what was reasonable in our country re: earthquakes. You must remember that the house was sold voetstoots, which means "as is". Also, you said that the buyer did various inspections of the house. If there is any risk, it is therefore on his shoulders.
If there is a part of the answer which you need more advice on, or clarity please continue in this same thread instead of opening a new question.
Att. Patrick
Please remember this is a dialog if you have follow up questions please use the REPLY button and ask. If I did not answer the question you thought you were asking, please respond with the specific question you wanted answered. I hope you found my answer helpful, and you have finished asking your questions, please click on the GREEN ACCEPT button in order to mark the question as closed.
Message from the client
Thanks so much Patrick, you have been so helpful
The buyer is a real bully and threatens me daily, he has always been a bit of chancer, I wanted to cancel the sale in June as he had not fulfilled any of the OTP conditions, then the same day the deposit was made, this was followed by another 2 months of lies why he could'nt bring the money in from overseas, such as the reserve bank was giving him issues. The house would have been transferred ages before the quake had he been a normal buyer
Ok sob story aside, he has now said he has sought legal advice and the voetstoets clause wouldnt apply, Now can you possibly advise me in which world would that be.
Firstly he inspected the living hell out of the place and drove everyone batty, he then drew up a list of what he didnt like, I offered a reduced purchase price. Directly after the earthquake he was on the phone with me in seconds and wanted to go see the property. My father that still lives in the area took him. He confirmed there was a bit of damage. He was then present with both the contractors in drawing up the damages (was only around 50K) Before the 2nd contractor he never once asked me to first repair the house and put the sale on hold till such time that it was in the condition prior to the quake. Then of course subsidence happened. So my last question is are there any conditions he can claim voetstoets under?
Thank you again. This is all so very stressful for me, as I made a very small profit on the sale as it was sold undervalue so that I could get my mother into an old age home
Kind regards
Christine
The buyer is a real bully and threatens me daily, he has always been a bit of chancer, I wanted to cancel the sale in June as he had not fulfilled any of the OTP conditions, then the same day the deposit was made, this was followed by another 2 months of lies why he could'nt bring the money in from overseas, such as the reserve bank was giving him issues. The house would have been transferred ages before the quake had he been a normal buyer
Ok sob story aside, he has now said he has sought legal advice and the voetstoets clause wouldnt apply, Now can you possibly advise me in which world would that be.
Firstly he inspected the living hell out of the place and drove everyone batty, he then drew up a list of what he didnt like, I offered a reduced purchase price. Directly after the earthquake he was on the phone with me in seconds and wanted to go see the property. My father that still lives in the area took him. He confirmed there was a bit of damage. He was then present with both the contractors in drawing up the damages (was only around 50K) Before the 2nd contractor he never once asked me to first repair the house and put the sale on hold till such time that it was in the condition prior to the quake. Then of course subsidence happened. So my last question is are there any conditions he can claim voetstoets under?
Thank you again. This is all so very stressful for me, as I made a very small profit on the sale as it was sold undervalue so that I could get my mother into an old age home
Kind regards
Christine
Message from the Lawyer
Posted by Att. Patrick on 25-09-2014 14:25:29
Hi again,
I can't think of any situation where the voetstoots clause wouldn't apply. The only real situation is where you have acted fraudulently and/or you've misrepresented something about the house that you should have told him. As far as I can see, you've been very open and honest with him about the house, even wanting to delay the sale so that you can assess the property. He even did further inspections of the property, and then STILL wanted to proceed with the transfer! He is a chancer, and he is trying to make some money out of you so that he can renovate the property or something like that.
Tell him to get lost, and explain to him the above.
Also, read up a little here on vootstoots clauses:
http://www.housecheck.co.za/sa-home-buyers-take-huge-risks-with-voetstoots/
http://www.housecheck.co.za/downside-of-the-voetstoots-clause/
http://louisereynekeprop.co.za/news/the-voetstoots-clause-and-the-effect-of-undisclosed-defects/
Att. Patrick
Please remember this is a dialog if you have follow up questions please use the REPLY button and ask. If I did not answer the question you thought you were asking, please respond with the specific question you wanted answered. I hope you found my answer helpful, and you have finished asking your questions, please click on the GREEN ACCEPT button in order to mark the question as closed.
I can't think of any situation where the voetstoots clause wouldn't apply. The only real situation is where you have acted fraudulently and/or you've misrepresented something about the house that you should have told him. As far as I can see, you've been very open and honest with him about the house, even wanting to delay the sale so that you can assess the property. He even did further inspections of the property, and then STILL wanted to proceed with the transfer! He is a chancer, and he is trying to make some money out of you so that he can renovate the property or something like that.
Tell him to get lost, and explain to him the above.
Also, read up a little here on vootstoots clauses:
http://www.housecheck.co.za/sa-home-buyers-take-huge-risks-with-voetstoots/
http://www.housecheck.co.za/downside-of-the-voetstoots-clause/
http://louisereynekeprop.co.za/news/the-voetstoots-clause-and-the-effect-of-undisclosed-defects/
Att. Patrick
Please remember this is a dialog if you have follow up questions please use the REPLY button and ask. If I did not answer the question you thought you were asking, please respond with the specific question you wanted answered. I hope you found my answer helpful, and you have finished asking your questions, please click on the GREEN ACCEPT button in order to mark the question as closed.
Message from the client
Hi
I just got a call from my dad saying the engineer was at the house earlier with him and the buyer. Seems he played nice and even showed photos of the old cracks and that ones that needed repairing were new. He also told the engineer that he is an engineer blah blah and that there were only cosmetic flaws up until the day of the quake.
Would the engineer now submit his report to the assessor and what process would follow then?
You have been so helpful :) I am in your debt
Kind regards
Christine
I just got a call from my dad saying the engineer was at the house earlier with him and the buyer. Seems he played nice and even showed photos of the old cracks and that ones that needed repairing were new. He also told the engineer that he is an engineer blah blah and that there were only cosmetic flaws up until the day of the quake.
Would the engineer now submit his report to the assessor and what process would follow then?
You have been so helpful :) I am in your debt
Kind regards
Christine
Message from the Lawyer
Posted by Att. Patrick on 26-09-2014 09:08:27
Hi there again,
Yes, the engineer will submit his report to the assessor; the assessor will then submit his report to the insurance company; and the insurance company will then report to you regarding the claim. They will then either make a payout to you, or will pay for the repairs to be performed.
Att. Patrick
Please remember this is a dialog if you have follow up questions please use the REPLY button and ask. If I did not answer the question you thought you were asking, please respond with the specific question you wanted answered. I hope you found my answer helpful, and you have finished asking your questions, please click on the GREEN ACCEPT button in order to mark the question as closed.
Yes, the engineer will submit his report to the assessor; the assessor will then submit his report to the insurance company; and the insurance company will then report to you regarding the claim. They will then either make a payout to you, or will pay for the repairs to be performed.
Att. Patrick
Please remember this is a dialog if you have follow up questions please use the REPLY button and ask. If I did not answer the question you thought you were asking, please respond with the specific question you wanted answered. I hope you found my answer helpful, and you have finished asking your questions, please click on the GREEN ACCEPT button in order to mark the question as closed.
Message from the client
Good day Patrick
The insurance rejected the claim with an engineers report, in this report they said that most of the damage was pre existing due to various reasons.
As the insurance clearly specified cosmetic vs structural could I proceed to get a laywers letter stating that I will pay for the cosmetic repairs but no structural as voetstoets applies, could I also then take the claim to the Ombudsman as I do think some of the items they listed are ridiculous such as extensive alterations etc, when we drew the plans the house has not been added to since it was built. Could I say to new owner that I will lodge a claim with the Ombudsman against the insurer, however unless they find that the bank is responsible for structural I will remain with the decision that its voetstoets?
Kindest regards
The insurance rejected the claim with an engineers report, in this report they said that most of the damage was pre existing due to various reasons.
As the insurance clearly specified cosmetic vs structural could I proceed to get a laywers letter stating that I will pay for the cosmetic repairs but no structural as voetstoets applies, could I also then take the claim to the Ombudsman as I do think some of the items they listed are ridiculous such as extensive alterations etc, when we drew the plans the house has not been added to since it was built. Could I say to new owner that I will lodge a claim with the Ombudsman against the insurer, however unless they find that the bank is responsible for structural I will remain with the decision that its voetstoets?
Kindest regards
Message from the Lawyer
Posted by Att. Patrick on 07-10-2014 14:46:41
Hi there,
"As the insurance clearly specified cosmetic vs structural could I proceed to get a laywers letter stating that I will pay for the cosmetic repairs but no structural as voetstoets applies" --> yes, you could most certainly do that.
I still think that you would be responsible for fixing up the R50k of damages that you mentioned above, which happened prior to transfer.
Remember, on date of transfer you need to transfer him a house in the same condition that it was in when he inspected the property.
If, after transfer takes place, there is subsistence. That is his problem as he is the owner of the house. That is where voetstoets applies. He takes it "as is".
"Could I say to new owner that I will lodge a claim with the Ombudsman against the insurer, however unless they find that the bank is responsible for structural I will remain with the decision that its voetstoets?" --> yes. Help the buyer as much as you can, but you'll need to draw a line at some point in time!
Att. Patrick
Please remember this is a dialog if you have follow up questions please use the REPLY button and ask. If I did not answer the question you thought you were asking, please respond with the specific question you wanted answered. I hope you found my answer helpful, and you have finished asking your questions, please click on the GREEN ACCEPT button in order to mark the question as closed.
"As the insurance clearly specified cosmetic vs structural could I proceed to get a laywers letter stating that I will pay for the cosmetic repairs but no structural as voetstoets applies" --> yes, you could most certainly do that.
I still think that you would be responsible for fixing up the R50k of damages that you mentioned above, which happened prior to transfer.
Remember, on date of transfer you need to transfer him a house in the same condition that it was in when he inspected the property.
If, after transfer takes place, there is subsistence. That is his problem as he is the owner of the house. That is where voetstoets applies. He takes it "as is".
"Could I say to new owner that I will lodge a claim with the Ombudsman against the insurer, however unless they find that the bank is responsible for structural I will remain with the decision that its voetstoets?" --> yes. Help the buyer as much as you can, but you'll need to draw a line at some point in time!
Att. Patrick
Please remember this is a dialog if you have follow up questions please use the REPLY button and ask. If I did not answer the question you thought you were asking, please respond with the specific question you wanted answered. I hope you found my answer helpful, and you have finished asking your questions, please click on the GREEN ACCEPT button in order to mark the question as closed.
Message from the client
Thank you so much Patrick
I will proceed to get a lawyer to draft the above.
So it is legally alright for me to pay the cosmetic damages (cracks that bank says were earthquake related) but not the structural (subsidence) as the bank says that is not earthquake related but due to normal earth movement and basically an old place (over 50 years) and then I can say to him if he can gather enough information for me to make a case with the Ombudsman with the insurance before the time period has elapsed to do so (90 days I think) then I will lodge such a claim and if I win and they pay out I will proceed to pay him?
One last (I promise thing), on the 16th of September he had his contractor out and this person quoted him on repairs, these repairs came to 90K (more than the bank) however he basically quantified cosmetic damage on that did'nt he? He was the one that submitted the quote to the insurance (as he had their address). Promise this is the last one
Thanks so much
Kind regards
I will proceed to get a lawyer to draft the above.
So it is legally alright for me to pay the cosmetic damages (cracks that bank says were earthquake related) but not the structural (subsidence) as the bank says that is not earthquake related but due to normal earth movement and basically an old place (over 50 years) and then I can say to him if he can gather enough information for me to make a case with the Ombudsman with the insurance before the time period has elapsed to do so (90 days I think) then I will lodge such a claim and if I win and they pay out I will proceed to pay him?
One last (I promise thing), on the 16th of September he had his contractor out and this person quoted him on repairs, these repairs came to 90K (more than the bank) however he basically quantified cosmetic damage on that did'nt he? He was the one that submitted the quote to the insurance (as he had their address). Promise this is the last one
Thanks so much
Kind regards
Message from the Lawyer
Posted by Att. Patrick on 09-10-2014 08:42:30
The short answer is yes.
I don't know what you're asking in the second part.
I don't know what you're asking in the second part.
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