Property questions answered: Can we cancel offer as there's an events venue next door?

BY JACO RADEMEYER - MAY 5, 2016

Question:

My partner and I made an offer to purchase on a house. The offer was accepted and is already with the conveyancer. Before making the offer, I enquired from the agent what the status of the next door house (a very large property) was.

I asked whether it was a guest house or something similar. He replied it was just a big house. Now, after my own investigation, we found that it is in fact an events venue, serving drinks to the public and hosting parties that start at 10pm and they even have flea markets.

This in the middle of a residential area. There is no signage outside and we were completely dependent on the agent for the information. Can we cancel the offer based on the fact that the estate agent misrepresented facts that would have deterred us from putting in an offer of any kind? The market value of the property and its status as an investment is obviously also questionable.

Jaco answers:

Should the purchaser find himself in such a position, this omission of fact constitutes misrepresentation by the estate agent. Misrepresentation occurs when the presenter, in this case the estate agent, represents or indicates to the purchaser that a fact or set of facts exist when none exists. The misrepresentation may be oral, in writing, arising by implication from words or conduct or arise out of an omission, meaning failure to disclose relevant information.

According to the estate agency Affairs Board Code of Conduct, an estate agent is obliged to convey to a purchaser all relevant facts within his personal knowledge pertaining to a property, which could be material to the prospective purchaser and should not wilfully or negligently make any false statements or misrepresentations or willingly mislead and influence a prospective purchaser.

Based on misrepresentation, the purchaser shall be entitled to cancel an offer to purchase the premises. The right to cancel arises when a misleading material fact regarding the property concerned influenced the conclusion of the offer to purchase, therefore making the agreement voidable at the election of the purchaser. The purchaser, when cancelling the offer to purchase, should be placed into the same position as prior to the conclusion of the offer to purchase.

Even though the misrepresentation was made by the estate agent, it was done within the scope of his mandate authorised by the seller. The seller therefore in return has a claim against the estate agent for any damages suffered as a result of the cancellation of the agreement.