August 4, 2016
You buy a plot in a residential development and the developer agrees to build you a house to stated specifications and plans. You pay in full for the plot and it is transferred into your name. All good so far.
But then you fall out with the developer over the costs, finishes and other specs for the building work. What happens now? A High Court case illustrating a particular danger for both developers and buyers revolved around these rather unusual facts –
- A buyer bought a piece of land and, as part of the sale agreement, chose to have built on the plot a house (one of five standard types of house offered by the developer).
- A significant twist here was that, unnoticed by either party, the sale agreement had never been signed by the seller, only by the buyer.
- Transfer of the plot to the buyer went through smoothly, but when it came to building the house, the buyer asked for additions and alterations to the standard specs. He was unhappy to note that the quote for these deviations included an additional “modification fee” of R110,000.
- The buyer was having none of that and refused to agree, whereupon the seller purported to cancel the whole agreement.
- Again the buyer was having none of that and sued to keep his plot and to force the developer to build his house. The developer in turn demanded its land back.
Question 1: Can the developer get its land back?
You will know that in our law a sale of land agreement is one of the few that is only valid if in writing and signed by both seller and buyer (or by their authorised agents). So you cannot force transfer to proceed on an unsigned sale agreement.
But what happens if, as in this case, transfer has taken place anyway? What is not widely known (and perhaps seems a bit strange at first blush) is that, if the buyer pays in full and the parties intend ownership to pass at the time, the transfer is valid. A finalised transfer cannot be rolled back just because the sale agreement wasn’t in writing and signed.
The parties in this case for example didn’t even notice the lack of signature and the buyer went ahead and paid in full for the land. So the plot was validly transferred to the buyer and the developer can’t get its land back.
Question 2: Can the buyer force the developer to build his house?
This sale agreement, held the Court, was not a contract for sale of a house, it was “two notionally separate contracts: one for the sale of land and one for the construction of a dwelling on the land. It is only in relation to the contract for the sale of land that the formality of signature is required.”
Consequently the developer was ordered – per the unsigned agreement – to build the buyer his standard house, without the additions/alterations and without the disputed “modification fee”.
Plot and plan contracts are by their very nature complex, so as always, agree to nothing – verbally or in writing – without full legal advice!
Make sure your plot and plan agreements are tightly drawn, and properly signed, to avoid the sort of scenario above – you run enough risks without adding to them unnecessarily!