WHAT NOT TO OVERLOOK WHEN SIGNING A PURCHASE & SALE AGREEMENT
LAILA CASSIM | CONVEYANCING SUPERVISOR
Buying or selling property is a major milestone. Whether it is your first home or an investment opportunity, the excitement of the transaction can sometimes overshadow the fine print.
A Purchase and Sale Agreement (commonly called the Offer to Purchase) is a legally binding contract and overlooking key provisions can lead to unexpected costs, delays or disputes.
Before signing, it is important to understand the key elements that shape the transaction and safeguard the interests of both buyer and seller. One of the most important of these is the inclusion of suspensive conditions, which determines when the agreement becomes fully binding.
SUSPENSIVE CONDITIONS
Many property agreements include suspensive conditions, being requirements that must be met before the agreement becomes fully binding. The most common is bond approval, where the purchaser must secure financing within a specified timeframe. Other conditions may include the sale of an existing property or regulatory approvals.
If these conditions are not met within the agreed period, the agreement may lapse automatically. Buyers should therefore act quickly when applying for finance and submitting documentation, while sellers should monitor the deadlines closely to ensure the process stays on track.
Once these conditions have been fulfilled and the agreement becomes binding, the next consideration for buyers is understanding the additional costs associated with transferring and financing the property.
TRANSFER AND BOND COSTS
A common misconception is that the purchase price represents the total cost of buying property. In reality, several additional expenses must be budgeted for.
Transfer costs are payable to the attorneys responsible for transferring the property and usually include conveyancing fees, Deeds Office charges and administrative costs. If the purchase is financed through a bank, the buyer will also pay bond registration costs to the bank’s appointed attorneys for registering the mortgage bond.
These costs can be substantial, so planning for them in advance is essential to avoid financial pressure later in the process.
Beyond the financial aspects of the transaction, the agreement may also regulate when the buyer is entitled to occupy the property.
OCCUPATIONAL RENTAL
Sometimes the buyer moves into the property before transfer is registered or the seller remains in the property for a short time after the sale. In these cases, occupational rental is usually payable for the period of occupation.
It is important that the agreement clearly states the rental amount, the occupation date and who is responsible for municipal services and utilities. Buyers should also remember that early occupation does not mean ownership has transferred, legal transfer only occurs once the property is registered in their name.
Another important provision often included in property agreements relates to the condition of the property being sold.
VOETSTOOTS CLAUSE
Most sale agreements contain a voetstoots clause, which means the property is sold “as is”. In practical terms, this means the seller is not liable for defects in the property that are not visible at the time of sale.
Buyers should therefore inspect the property carefully before signing the agreement. If there are concerns about the condition of the property, these should be raised and recorded in the agreement.
Importantly, a voetstoots clause does not protect a seller who deliberately conceals known defects. Sellers are still required to disclose any material defects of which they are aware.
While these provisions regulate the condition and occupation of the property, the agreement must also address what happens if either party fails to comply with their obligations.
BREACH AND PENALTIES
A well-drafted agreement will include provisions dealing with breach of contract. If either party fails to meet their obligations, the agreement may allow the other party to issue a notice of breach and provide time for the issue to be corrected. If the breach is not remedied, the agreement may be cancelled and the innocent party may claim damages or retain the deposit.
These clauses are essential because they provide a clear mechanism for resolving disputes if something goes wrong.
FINAL THOUGHTS BEFORE SIGNING
A Purchase and Sale Agreement may appear straightforward, but it carries significant legal and financial implications. Understanding key provisions in the agreement can help buyers and sellers avoid unnecessary complications and ensure a smoother property transaction.
Before signing, review the agreement carefully and ask questions where needed. A little clarity at the start can make all the difference in turning a property purchase into a successful and stress-free milestone.
For further details or advice in this regard, it is best that you consult with a Legal Practitioner.
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