The parties have signed the sale agreement, the conveyancers are busy with the transfer, and the buyer has taken occupation before transfer. Then the trouble starts – the buyer finds damp in the walls, the geyser bursts and the retaining wall collapses. Who is liable for the repairs? Determining the passing of risk from seller to purchaser is an important part of property transfer.
The person who holds the risk to the property is usually the person who is liable for all expenses and damage to the property, and who is entitled to the income and benefits in the property. In the context of a sale of immovable property, risk determines who must correct a defect or damage to something that happens after signature of the sale agreement.
Defects which existed at the time the sale agreement was signed are usually governed by the voetstoots clause. The purchaser is stuck with all visible (or patent) defects and those defects which were not visible at the time of signature of the sale agreement and of which the seller was unaware.
Sale agreements usually state the passing of risk from seller to purchaser. In most cases, risk in and to the property is transferred from the seller to the purchaser on date of registration of transfer. In certain instances, such as when the purchaser takes early occupation of the property, the risk in and to the property may be transferred to the purchaser from date of occupation.
Purchasers need to be aware of when the risk in and to a property is transferred to them as this will affect their obligation to pay for insurance, rates, water and electricity to the property depending on the terms specified in the sale agreement. Risk also relates to things that may go wrong while the purchaser has risk but is not yet the registered owner of the property, such as a geyser bursting: the seller may not be liable for such defects if the risk had already passed to the purchaser.
Therefore, parties need to be aware of when risk passes so that the obligation to repair defects or damages to the property does not become an expensive dispute between the parties.