A reader has asked the YourProperty expert where a seller of a fixed property should draw the ethical line in terms of his or her duty to a potential purchaser.
He would like to know how principles such as good faith, honesty and other ethical principles should be applied when a seller deals with a potential purchaser and just how far such a duty extends.
The reader suggests that each party will always act in his or her own best interests and that any such duties impose a burden on the seller to put the interests of the purchaser before his or her own.
See the reader’s question here.
Generally speaking, the sale of a property is a transaction that requires a certain measure of self-interest to be applied, says Sean Radue of Radue Attorneys in Port Elizabeth.
“The seller wants to get the best purchase price for the property, while the purchaser wants the best deal possible.”
To this end, Radue says contracts often include clauses relating to good faith, generally stating that the parties should act in good faith in their dealings with each other.
“Another aspect is that of misrepresentation, where a seller knowingly creates a false impression or allows the purchaser to make a decision based on a misinterpretation of the facts.”
This could be regarded as inducing the purchaser to enter into a contract that he or she would not have proceeded with, had the purchaser known the truth, he says.
“Or the purchaser may have continued with the purchase but may have done so under different or more favourable terms.”
Radue says the duty also extends to an agent representing the seller. A seller who instructs the agent to mislead can be equally responsible for the misrepresentation.
He says the issue of latent and patent defects also has bearing here.
“The seller has a duty to point out certain aspects of which he or she is aware and which may not be immediately obvious to the purchaser.”
There is a concomitant duty on the purchaser to conduct a thorough inspection of the property prior to purchase, says Radue.
“During the negotiation phase of any contract, the duty to record the terms in a way that reflects the agreed understanding between the parties is vitally important.
He says this is particularly true of a property sale as it is often the biggest and most expensive long-term asset a person will purchase.
“Aspects should not be left to chance; if an item is to be sold as part of the property, it should be recorded as such without it being left to interpretation after the sale or occupation.”
Without a written record, this could create a potential dispute as to whether or not it was included, says Radue.
“An agreement will often record that the written and signed version is the only applicable version of the agreement and that aspects not recorded therein do not apply.”
He says in the excitement of the sale process and relying on the good nature of people, parties will sometimes not address aspects they discussed during the “friendly” negotiation phase leading to much discontent later on.