It is, says Sean McCauley, important that both the seller and the buyer of a property establish exactly when the buyer is liable for all the risks on that property once the deal is set in motion.
'A great many assumptions are made in relation to this matter and very often they are invalid,' he says.
The two crucial dates on which most agreements hinge, says McCauley, are
1. the date the property is actually transferred at the Deeds Office, i.e. the date legal ownership passes from the seller to the buyer; and
2. the date it is occupied by the buyer.
A good sale agreement, said McCauley, will always specify which date is stipulated for the ownership risks to pass to the buyer. However, in the absence of specified dates in the sale agreement, common law precedents will prevail.
'South Africas common law is based on precedents set in the law courts and it accepts that the risk passes to the buyer the day the last suspensive condition is met. This implies that if the deal is in cash, the buyer will take responsibility as soon as the seller has accepted and signed the sale agreement. Where the deal is subject to mortgage bond finance, responsibility passes to the buyer as soon as he accepts a bond grant'
This, says McCauley, can lead to problems because in most cases both the buyer and seller might be unaware that in common law, the risk would pass to the buyer so soon in the transaction.
In Rawson Properties agreements, he said, the purchaser is held liable for all the risks associated with ownership from the date of possession, unless something else is specifically stated to the contrary in the contract.
'At Rawsons,' says McCauley, 'we find it essential to warn buyers to be especially diligent about knowing exactly what date they take responsibility for the building and, and also to advise buyers to take out their own all risks insurance policy to commence upon the date they take possession of the property.
'At all costs, the situation must be avoided where one person is in the house but another has the total responsibility for it in the event of a fire, vandalism or flood and there is no insurance in place.
'On the rare occasions this happens, it can financially ruin the person held responsible because, as we all know, ignorance of the law is not an acceptable excuse.
'My advice to all buyers is therefore twofold: find out exactly when risk passes to yourself and take out adequate insurance to cover these risks.
'My advice to sellers is to keep paying your insurance right up to the transfer date as insurance is relatively inexpensive and it is always better to be safe rather than sorry'
For further information contact Sean McCauley on 011 463 1092 or email sean@rawsonproperties.com.
