The South African institute of Auctioneers (SAIA) has warned that accurate accounts of properties for sale by owners, estate agents or auctioneers in South Africa are essential to avoid costly litigation and the cancellation of a sale.
While the nature of auctions are based on the common law principle of voetstoots, meaning a property is sold “as is” what is advertised and promoted about a property matters as these need to represent the true facts. Misrepresentations during the sales process can expose careless or dishonest auctioneers to serious legal liability.
SAIA Chairman, Joff van Reenen, says South African common law recognises the concept of voetstoots. While widely relied upon in contracts of sale voetstoots does not excuse dishonesty or concealment. This is evidenced in recent court cases that held “where a seller, agent or auctioneer knowingly makes a false representation or fails to disclose material facts, the protection of voetstoots falls away. A buyer is therefore entitled to rely on factual statements made about a property especially where those statements induce the decision to purchase or to bid.”
Sellers need to remember that misrepresentations at any stage can carry legal consequences long after the hammer has fallen. For auctioneers in particular casual claims or seller-supplied information that is given without checking the facts can become the basis of litigation.
“This includes reckless statements that may turn out to be false as well as the omission of information that may be misleading. Telling bidders that a property includes certain features such as water rights, zoning entitlements or other features when it does not is sufficient to trigger liability. So too is overstating the condition of a building or failing to correct an obvious misunderstanding created during marketing or the auction process.
“The Consumer Protection Act also needs to be considered. It explicitly prohibits sellers from making false or deceptive representations about immovable property. As far as auctioneers it states that an auctioneer who misrepresents the character, quality or features of a property may be found to have engaged in prohibited conduct regardless of whether the misstatement originated with the seller. This shows that it is the duty of the auctioneer to verify the facts about a property before blindly selling it,” says Van Reenen.
He adds that as the professional body representing auctioneers in South Africa, SAIA upholds strict regulations to reinforce this position. It prohibits auctioneers from knowingly or negligently misrepresenting a lot offered for sale. This places a positive duty on auctioneers to ensure that descriptions and verbal announcements are accurate. Passing on unverified claims or relying blindly on seller assurances is no defence when a purchaser can show that the representation was false.
The legal consequences can be severe. A purchaser who has been induced to buy a property through misrepresentation may seek rescission of the sale even after transfer has taken place. In such cases the transaction is unwound with the property returned and the purchase price repaid. Alternatively, the purchaser may elect to retain the property and claim damages for the loss suffered including the cost of rectifying defects, the diminution in value or losses flowing directly from the misrepresented feature.
Under the CPA buyers have additional remedies. They may pursue civil claims for losses caused by prohibited conduct and in certain circumstances regulatory action can follow. The financial exposure is often compounded by legal costs and reputational harm as well as the expulsion from SAIA membership where an auctioneer is registered with the Institute.
“The courts have made it clear that auctions do not exist outside the reach of consumer protection and common-law principles. Sellers and by nature of agreement the auctioneers who represent their properties must know that every representation of a property must be capable of objective verification. Known defects and limitations must be disclosed and the safest auction is one where accuracy is prioritized over marketing,” Van Reenen concludes.
