The judgment in Nieuwkerk v McCrae 2007 (5) SA 1 (W) is of major importance for buyers and sellers of immovable property. The practical effect of the judgment is that when a residential property within the area of a local authority is sold with a building on it, it is an implied term of the sale agreement that the building has been erected in compliance with all statutory requirements and that it an be used to its full extent. More specifically, there is an implied term that the improvements on the property have been erected in accordance with an approved building plan. It was also held that a voetstoots clause does not protect a seller who sells a property in respect of which building plans have not been approved.
A number of questions arise. Firstly, does this mean that a seller who is unaware of the absence of an approved building plan would commit breach of contract if he sells the property and it is later discovered that the previous owner had made alterations without an approved building plan? In terms of the Court’s reasoning, the purchaser’s remedy is based on breach of contract, not misrepresentation. Accordingly, the seller’s state of mind is irrelevant; the question is simply whether or not the alterations were effected in terms of an approved plan. If not, the seller commits breach of contract.
This gives rise to another question, namely whether the seller can exclude possible liability by a clause to the effect that he provides no warranty in respect of the existence of approved building plans and that the onus is on the purchaser to satisfy himself on this point. It is submitted that such a clause would not protect a seller who is aware
of the absence of an approved building plan, but there is no reason why the innocent seller should not be protected in this way. Such a clause would obviously be prejudicial to a purchaser who signs the sale agreement without reading it carefully, and then subsequently discovers that certain improvements on the property have been effected without an approved building plan. As a general rule, that would be the buyer’s problem unless it can be established that the
seller had induced the buyer to sign without reading the contract, aware of the latter’s ignorance of the exclusion clause.
In the past, many properties in South Africa have been sold without approved building plans in respect of all of the improvements effected on the property. It is an everyday occurrence that sale agreements are signed by buyers without reading the terms. The risks of doing so, for both sellers and buyers, are clear.