Should a purchaser wish to renovate / alter the property prior to registration of transfer, the contracting parties becomes vulnerable to certain risks they must consider:

1. Common law provides that the purchaser shall not be entitled to make any alterations to the property without the seller’s prior written consent

2. The sale agreement will usually contain several provisions that will require written amendment and/or consideration

2.1 The provision that provides that neither party shall be entitled to make any alterations to the property before registration of transfer without the prior written consent from the other party and shall not be entitled to any compensation for such improvements should the sale be cancelled for any reason whatsoever

2.2 The provision that provides that the risk remains with the seller until transfer is passed. The parties may be desirous to expand on this provision to the extent that the purchaser indemnifies the seller against any risks and damages suffered as a consequence of the renovations or alterations to be undertaken

3. Should the parties be amenable to these changes there are additional risks that needs to be considered and consents that may be required

Seller’s Risks

3.1 Assuming that the seller has homeowners’ insurance against various kinds of risks, any claims relating to the renovations undertaken may be invalidated if the terms and conditions of the insurance policy determines the insured seller must first notify and obtain the written consent from the Insurer prior to allowing renovations to take place and allowing builders and workmen to enter the insured premises

It will be important for the seller to have due regard to his Home Owners Insurance Policy first in order to determine what notifications and consents will be required and then to ensure that he obtains those required authorisations so as not to breach the terms of his policy and possibly invalidate his insurance

3.2 If the seller has a mortgage bond registered over the property that his buyer intends to renovate, it is likely that the bank ; in whose favour the bond is registered; will require their written consent to the intended renovations

Provisions commonly found in mortgage bond agreements state:-“The owner must not make any material alterations or improvements to the property, or remove the building or any part thereof, without obtaining prior written consent. Further if the owner undertakes home improvements using his / her own funds, the existing buildings and the additions / improvements should be adequately insured during and after the building process.”

The seller will be in breach of his agreement with the bank should renovations commence without the above consent and additional insurance in place

Therefore the seller must scrutini se the terms of his mortgage loan agreement in order to determine what notifications, written consents and additional insurance may be required by his bondholder prior to the renovations commencing

4. When the property to be renovated is a unit in a Sectional Title Scheme any renovations to be undertaken may ; in terms of the rules of the Sectional Title Scheme ; require prior consent from the Trustees or the Body Corporate

Renovations may require security clearances from the builders/ workmen that will traverse the common property in order to access the seller’s unit in addition to other incidental matters such as noise disturbance, rubble removal and compliance with conduct rules during the renovations

Additionally in a sectional title there may exists implied servitudes creating rights in favour of each section and reciprocal obligations against each section. The servitudes include, amongst others, a servitude for the subjacent and lateral support. The Body Corporate may need to have the appropriate proof that the subjacent and lateral support provided by the unit being renovated will in no way adversely impact on the support enjoyed by other units

5. Termination of the sale agreement, foreclosure by a secured creditor of the seller, or death or insolvency of a contracting party during the renovation project may also present risks. Renovation by its very nature entails a degree of demolition before the improvement commences.

If the sale agreement terminates, the property is foreclosed upon, or the purchaser were to become insolvent or die during the demolition phase of the project this likely will have adverse financial consequences for the seller The seller will need to pursue claims against the purchaser or his trustee of the insolvent buyer or the executor of the deceased buyer that may be costly and success is not guaranteed. Seller’s need to consider this risk when considering the purchaser’s request to renovate

Purchaser Risks

5.1 If the sale is terminated for whatever reason after the renovation has been completed or the sellers creditor bank forecloses on the property, the purchaser will have no way of recouping the value of the improvements made to the sellers property unless the agreement provides therefore and even then the claim may fail.

The legal principle of accessio provides that any improvements made to the immovable property of another person accedes to the immovable property and consequently becomes the property of the owner of the immovable property

Accession is an original method of acquisition of ownership. It refers to the situation where movable things which are attached to land permanently and erections attached thereto becom e part of the land with erections attached thereto and therefore the property of the owner of the land

6. The agreement will need to be scrutinised as it may also contain a provision providing that the property must be returned to the owner in its original state should the sale not proceed for any reason. This will result in the purchaser becoming liable to restore the property to its original condition

7. Scrutinise the terms of the sale agreement which will regulate the seller ’s duty to provide the purchaser with an Electrical Compliance Certificate, a Certificate of Conformity for the gas supply and the Electric Fence Certificate in terms whereof all these installations are certified safe

Renovations prior to transfer may invalidate some or all these certificates obtained by the seller at his expense. The sale agreement will need to be adjusted to deal with where liability falls to ensure that all these installations become compliant again pursuant to the renovation