Asked by Fishdom on 03-10-2014 07:46:20
Question posted in the Property Law category relating to Gauteng

Good Morning

I have a property related question

I signed an OTP to purchase a house in Orkney for my daughter in April. We had a delay in getting the funds through but the sale was finalised on the 23rd of August. I inspected the house on a few occassions and listed the patents cosmetic cracks etc. On the 5th of August that area had a rather large earthquake.
As we assumed the sale was going through during the month of August the house had been vacated, I managed to inspect the house after the quake and there were a few new cracks, the owner put a claim in with the insurance. I was present with the contractor who came out first on the 20th and we went through the damage. By the 28th I had heard nothing back, I contacted the insured and contact was made with the assessor who then responded the claim was too high.
I then offered to get a quote of my own and they said they would send another contractor as well.
By this time subsidence had occurred and many new cracks had started, some quite large.
On the 16th of September I submitted my quote and requested an engineer, however it seems at this stage the previous contractor from the bank had suggested one too.
The engineer came out the following week, as I work in the building business it was easy to inspect with him
A few days later the insured contacted me saying that the bank had rejected the claim stating the following as per the engineers report
- Pre existing
- Building was badly built (inferior) and due to this the damage from the quake looked more excessive

What are my rights now, honestly the owner and I never would have dreamed this was the case

Regards
Nick

Posted by Att. Patrick on 03-10-2014 08:40:52

Hi there Nick and thank you for your question,

Since transfer occurred on 25 August, you are now the new registered owner of the property.

Essentially, in terms of the sale agreement you agreed to purchase the property from the seller for a certain price, and it was agreed that the property would be sold voetstoots and in the condition that it was in. The problem is that the condition changed as a result of the earthquake shortly before the transfer was registered at the Deeds Office.

You therefore have a claim against the seller for a reduction in the purchase price, which would be calculated to be "the price that you purchased the house for" less "the value of the house as it presently stands".

In practice, most people assume that this would be the same thing as the costs that you would need to incur in order to put the house back into the same position as it previously was, but this is unfortunately not always the case.

If you pretend that you purchased 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 you R600k to fix it!  In this instance you would have a claim against the seller for the R300k ... not the R600k.

The seller would obviously claim against his/her insurance, and hopefully the insurance company will pay out the same R300k, which the seller would then give to you to settle your claim.

The problem (for the seller) comes about when the insurer refuses to settle the claim and puts up some bogus excuse about "pre existing cracks" or "inferior building" or whatever. But that is for the seller (the insured person at the time of the earthquake) to fight with their insurance company about!

If you were to sue the seller, she would most probably join her insurance company as the second defendant. You would then be suing both the seller and his/her insurance company for the damages.

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

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Thank you



But what if she claims voetstoets protects her as the damage was structural according to the insurance? The report clearly states that none of the damage is earthquake related, they have even divided it up into cosmetic and structural.

Could she not say that i saw the house after the earthquake and accepted to proceed with the sale therefore voetstoets applies. The subsidence happened after transfer
What I am trying to say is, for a few weeks after the quake there were just some cosmetic cracks, then subsidence happened and bigger cracks appeared with more damage.

Posted by Att. Patrick on 03-10-2014 10:32:39

Hi again,

Well, in that instance you might have a problem with the bulk of your claim against her.

"Could she not say that i saw the house after the earthquake and accepted to proceed with the sale therefore voetstoets applies." --> Yes, she could very well argue this. If you inspected the property after the earthquake, had reports drawn up, inspected again, and still elected to proceed with the transfer only for their to be subsistence that occurred at a later point in time -- I think that you have a problem.

But, I would still argue that you would have a claim against her to fix the cosmetic cracks, etc that occured as a result of the earthquake.

(I'm not talking about the pre-existing cosmetic cracks that were in the house before the earthquake...)

Do you not have an insurance policy over the property that would cover any subsistence that occurred after the transfer of the property? As I understand it, you say that the subsidence happened after transfer.  The seller's insurance company would then most probably refuse to settle her claim for subsistence, as she was no longer the owner of the propert when the subsidence happened.

I think that it would be fair to say that neither party thought that there might be subsistence in the property after transfer occurred. Is that right?

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.

I could honestly say that neither of us saw it coming which is why I didnt feel the need for an engineer at that point. Apparently I can't take out insurance while a house is under claim? Just for interest sake I have a contractor I like to use, he is however expensive. I foresee her not agreeing to his quote. If she gets her own contractor in to repair but its not done according to my standards. What I am trying to say is on the engineers report he says some things are not built to SABS standards (would say many years ago they didnt have such strict standards) could I insist on having it done by today's standards?
Here is what the engineers report says, I have just copied and pasted. Could you possibly give me some insight into my position if she relies on the bank engineers report

Here are the comments made:
A quote (R XXXXX) from XXXX Construction has been submitted in respect of the
cracking repairs. The quote is for cosmetic repairs and does not address structural repairs.
In respect of structural repairs required, the following is recommended:
1. Underpinning of foundations required (extensive settlement damage has occurred)
2. Provide construction joints to allow movement of the walls of the house
3. Open cracks and repair with steel staples spaced at 150mm centres, plaster with
high strength plaster mix and paint walls
4. Relocate outlets of discharge pipes away from the foundations of the house
We found no evidence of any cracking damage having been caused by an earthquake:
There is no uniform spread of cracks throughout the house and the foundations of the
house appear undamaged.

Having reviewed the claim and associated loss circumstances, we wish to comment on
the claim as follows:
1. The house has been extensively added-on and extended; the quality of
construction work associated with such extensions / alterations / additions is poor
(defective), resulting in the manifestation of cracks (photo 7 is a good example)
2. Due to the inferior quality of, and defective construction, the alleged damage
caused by the earthquake appears more significant
3. In our opinion, had the house been constructed using quality / approved materials
and good building practice (and compliance with SANS codes), little or no
damage would have occurred in consequence of the earthquake
4. The proximity of trees to walls result in the encroachment of roots into and under
wall foundations, contributing to the cracking damage

Posted by Att. Patrick on 03-10-2014 14:40:28

Hi there,

Could I insist on having it done by today's standards? --> not really, the reason being is that you are only entitled to the house being put back into the condition that it was prior to the earthquake. If there were structural issues / problems with the house, then you can't claim that from the seller. You bought the house having inspected it, and you must now deal with the consequences.

Don't forget that you decided to proceed with the purchase of the property even after the earthquake, and also that the subsistence in the property happened while you were the owner of the property...

Based on the report that you detailed above, you've got a bit of a problem. It is quite clear and says that the cracking to the house was really as a result of the quality of the  construction work associated with such extensions / alterations / additions, and not the earthquake.

In this instance, the vootstoets clause would provide the seller with protection. i.e. you bought the house "as is", warts, defects and all. It is your problem now, unless you can prove that the seller knew about these specific defects and fraudulently failed to disclose that to you.

"Apparently I can't take out insurance while a house is under claim?" --> I don't think that this is correct at all. But it doesn't matter, because you haven't had insurance any way, so it wouldn't apply. Surely you should get insurance now for the property. What if it burns down?

It sounds to me as if you should agree to mediate the damage. If you could both agree to appoint a mediator from the building industry who has a legal background, or an attorney who has experience in the building industry and in insurance, then he could assist in finding resolution for you!?

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.

Thanks Patrick, thats pretty much what I thought. Does it not matter that I was under the impression that the insurance would fix it?
I highly doubt the seller expected there to be structural damage
She has requested we get quotes so long. If she offers to pay half of the damage would that be a good deal?

Posted by Att. Patrick on 03-10-2014 17:36:29

Does it not matter that I was under the impression that the insurance would fix it? --> Unfortunately no.

If she offers to pay half of the damage would that be a good deal? --> Yes.

Good luck!