- Duty to Disclose
Code:
4.1 An Property Practitioner shall –
4.1.1 convey to a purchaser or lessee, or a prospective purchaser or lessee, of immovable property, in respect of which a mandate has been given to him to sell, let, buy, or hire, all facts concerning such property as are, or should reasonably be, within his personal knowledge and which are or could be material to a prospective purchaser or lessee thereof;
4.1.2 if he conducts his business in terms of a franchise, disclose clearly and unambiguously in all his correspondence, circulars, advertisements, and other written documentation that he operates in terms of a franchise and state thereon his name and the name of the franchisor;
4.1.3 if he conducts his business under a trade name or style other than his name, clearly disclose his full name in all correspondence, circulars, and other written documentation;
4.1.4 not perform or attempt to perform any mandate in respect of a particular property if a current prior mandate, which conflicts with the aforesaid mandate, has been accepted by him, unless he has disclosed to the person who has given the later mandate the existence of such prior mandate, and the fact that he will not be the Property Practitioner’s client in respect of that property.
4.2 No Property Practitioner shall purchase directly or indirectly for himself, or acquire any interest in, or conclude a lease in respect of, any immovable property in respect of which he has a mandate, without the full knowledge and consent of the person who conferred the mandate, or sell or let his own immovable property or any immovable property in which he has any direct or indirect interest, to any prospective purchaser or lessee who has retained his services, without that purchaser or lessee having full knowledge of his ownership of, or interest in, such immovable property.
Discussion:
4.1.1
A prospective purchaser or lessee introduced to the property by a Property Practitioner expects that the Property Practitioner will convey to him all material facts concerning the property. Of particular importance would be defects on the property, such as leaking roofs, dampness, beetle infestation, etc., and other factors which may influence the value of the property or its use to the purchaser, including developments planned on adjacent properties, the proclamation of main roads in the vicinity, etc.
Clause 4.1.1 obliges the Property Practitioner to disclose all material facts:
(i) of which he is personally aware (such facts disclosed to him by the seller personally), or
(ii) of which he should reasonably, in the circumstances, have been aware.
When can it be said that a Property Practitioner should “reasonably in the circumstances” have been aware of certain facts? No hard and fast rules can be laid down in this regard. Each case will depend on the circumstances surrounding the particular property and the transaction in question. Important considerations are the following:
A Property Practitioner cannot be expected to know everything about a property. He is not expected to be a construction expert or to be acquainted with all the technicalities relating to property development and township establishment. The crucial question is: what knowledge can reasonably be expected of a Property Practitioner in particular circumstances?
Regulations framed under the Property Practitioners Act draw a clear distinction between full-status and candidate Property Practitioners. While a candidate Property Practitioner must act under the active supervision and control of a principal, a full-status Property Practitioner need not do so. To establish whether a Property Practitioner has breached this clause, the objective test applied will not necessarily be whether a purchaser dealt with a full-status **Property Practitioner** (whether a principal or an employee), and a candidate **Property Practitioner** acting under the active supervision and control of a principal **Property Practitioner** are regarded, in respect of their levels of experience, as possessing equal knowledge and skills. If, however, a prospective purchaser is aware that a candidate **Property Practitioner** is acting independently of his principal’s supervision, he cannot be heard to complain if he chooses to accept the representation or advice of such a candidate Property Practitioner. Members of the public, therefore, need to be aware of this situation, and the Property Practitioners Regulatory Authority will accordingly highlight it in publications.
Clause 4.1.1 does not require a Property Practitioner to actively uncover latent defects. For example, a Property Practitioner is not obliged to climb into the roof of a house, dig up foundations, or have walls examined for dampness for no apparent reason. On the other hand, it is reasonable to expect a Property Practitioner to undertake a visual inspection of a property and to be put on guard by a reasonably apparent defect. A Property Practitioner cannot, therefore, ignore reasonably obvious defects.
The clause does not specifically place an obligation on the **Property Practitioner** to inspect the building plans or title deeds before marketing a property. It is clearly reasonable for a Property Practitioner to assume that buildings on a property have been erected per approved building plans. However, if upon inspection of a property, it is reasonably apparent that certain additions are structurally so unsound or badly constructed that they could not have been approved by a local authority, then the Property Practitioner should be on guard and either make full enquiries or disclose his concern to the prospective purchaser.
The ease and degree of difficulty that the **Property Practitioner** will encounter in obtaining information about a property must be considered. If, for example, certain facts can only be obtained after making expensive and complicated enquiries, it cannot reasonably be expected of the **Property Practitioner** to obtain or possess such information. The lack of enquiry should, however, still be disclosed.
A Property Practitioner may generally rely on representations and statements made to him by the seller of the property, but this does not necessarily absolve him from making further enquiries.
For example, if a Property Practitioner is told by a seller of a house that the roof does not leak, he may accept this to be true unless there are clear indications to the contrary. This means that the **Property Practitioner** must still undertake a visual inspection of the property. If a leak problem is not apparent (e.g., the ceiling is not stained), he need not make further inquiries. He can then convey to a prospective purchaser that the seller has told him the roof is leak-free and that he has no reason to believe otherwise.
4.1.2 – 4.1.3
The purpose of these clauses is to ensure that members of the public doing business with a Property Practitioner know precisely with whom they are dealing.
4.1.4
See the explanation under the definition of “client” above.
Code:
4.2 No Property Practitioner shall purchase directly or indirectly for himself, or acquire any interest in, or conclude a lease in respect of, any immovable property in respect of which he has a mandate, without the full knowledge and consent of the person who conferred the mandate, or sell or let his own immovable property or any immovable property in which he has any direct or indirect interest, to any prospective purchaser or lessee who has retained his services, without that purchaser or lessee having full knowledge of his ownership of, or interest in, such immovable property.
Discussion:
This clause embodies the common law principle that a Property Practitioner should at all times guard against a conflict of interest. Obviously, if a Property Practitioner wishes to buy a property in respect of which he has the mandate to sell, there will be a conflict of interest between him and his client. The Property Practitioner would want to buy the property at the lowest price possible, while in acting for the seller, he must try to obtain the highest price.
The same considerations apply where the Property Practitioner sells his own property to a purchaser who has given him the mandate to find a property. Clause 4.2 does not prohibit the conclusion of such transactions, but requires a Property Practitioner to disclose his interest in the property to the seller or purchaser (as the case may be).