What's so risky about a risk clause in a property sale agreement?
03 November 2020
Conveyancers are confronted fairly often with disgruntled purchasers when they take occupation of their new property after date of transfer.... This is most often due to, for example: minor repair work such as shower doors not closing or in some instances, major repair work if for instance the geyser bursts and floods their new home.That's why, when entering into a sale agreement, as a Purchaser you must be aware what you are signing, the meaning of the clauses contained within that agreement and most importantly how those conditions will apply to you from date of signature to date of transfer.The Purchaser will want to hold the Seller liable to pay for the cost of these repairs. It is at this point (after date of transfer) that the Conveyancer will refer the Purchaser to the sale agreement, and more specifically the “risk” clause. The risk clause is standard in most Sale agreements and sometimes can be as minimal as a one-liner, such as “All risk and benefit of ownership shall pass to the Purchaser on date of transfer”. It may be minimal but, it packs a punch if you ignore it and are then forced to confront the reality of this clause.The risk clause entails, that once the property has been transferred into the name of the Purchaser, the risk also passes to the Purchaser on that date. This places the risk associated with ownership of the property and the burden of any repair work as specified in our examples above, on the Purchaser.If the scenario was different and possible repairs were brought to the attention of the Seller before transfer, the Seller would be obliged to then attend thereto. This would either be in terms of a clause in the agreement wherein the Seller warrants that the property will be maintained in the same condition (save for any repair work agreed to), usually from date of signature to date of occupation or in terms of agreement between the parties for any specified repairs.It is of utmost importance, that before you sign the agreement of sale, you inspect the property thoroughly and if you are unsure of dissatisfied with anything, you bring it to the attention of the Seller. The best way to do this and thereby safeguard your interests is to record it as a special condition within the sale agreement. It is then clear what each party's duties are and ensures a smooth transfer process for all parties involved.