Schalk van der Merwe – Rawson Properties in Somerset West
A reader has asked the YourProperty panel for some advice on handling a fairly tricky situation involving the purchase of a fixed property.
The reader explains that she went to view a property that she intended to purchase as both an investment property and as a place for her children to use when studying.
The house was tenanted at the time but the tenant’s lease was due to expire shortly, so vacant occupation at the time of transfer appeared not to be a problem.
The reader then dealt with the seller’s agent and completed an offer to purchase. Unbeknownst to her, either during the negotiations or shortly after the presentation and possibly acceptance of the offer, the seller extended the tenant’s lease for a further six-month period.
Schalk van der Merwe from Rawson Properties in Somerset West, Cape Town, says the offer to purchase is a little contradictory as it provides for both vacant occupation and it being subject to lease in the same clause.
“The initials alongside the clause could arguably be in agreement with either provision.”
The intention of the reader was, however, quite clear – vacant occupation was a requirement at the date of transfer, says Van der Merwe.
“Our reader is of the opinion that the agent was aware of the extension of the lease but didn’t want to risk losing the deal and thus his commission.”
Van der Merwe says it is quite possible that the agent, knowing full well that the seller had already extended or intended to extend the lease, misrepresented that a vacant property could be made available to the purchaser at the time of transfer.
“The concept of ‘huur gaat voor koop’ applies here and provides for the occupation rights of a tenant to take precedence over the rights of the purchaser.”
Thus, in this instance, the tenant would have been entitled to remain in occupation until his or her lease expired, says Van der Merwe.
“The danger with this approach is that the purchaser, having taken transfer of the property, may be saddled with a reluctant tenant who refuses to vacate the property and the purchaser then has the added trouble of evicting the tenant.”
Van der Merwe says consensus is a requirement for a valid contract to come into existence and a misrepresentation on the part of one of the parties could negatively influence this requirement.
According to Grant Hill of Miller Bosman Le Roux Attorneys in Somerset West, misrepresentation is generally of an innocent, fraudulent or negligent nature, and the distinction is important to establish fault on the part of the misrepresenting party.
“We should also consider whether, if not for the misrepresentation, the reader would still have concluded the contract for the purchase of the property.”
Hill says it seems that, in this instance, the answer would be yes.
“The reader has indicated that she feels the acquisition is a fair deal and that, despite the issues, she would most likely want to continue with the purchase.”
She may have suffered some damages because the tenant’s rental is lower than either her bond instalment or the amount of rental she would have received had she rented out the property but this does not appear to be too material to her, says Hill.
“Another question raised is whether the transfer could be delayed. The contract makes provision for the transfer taking place as soon as possible after the conclusion of the sale.”
Hill says another clause often found is that transfer should take place as close to a certain date as possible.
“The parties could possibly agree to delay the transfer but the seller may not be keen to do so as this will also delay him or her receiving the proceeds of the sale.”
Although the reader does not seem intent on pursuing either the cancellation of the deal or any other remedy, she does still feel “wronged” to a certain extent, says Hill.
“She would at least have wanted to have the choice of concluding the agreement or not had she known of the situation regarding the tenant.”
Therefore, says Hill, she may consider making a complaint against the agent concerned with the Estate Agency Affairs Board.
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