Enforcing Property Sale Contracts

*  This blog is for information purposes only and should not be viewed as legal advice offered by Burden Swart & Botha Attorneys.

It so often happens, that purchasers experience buyer’s remorse after signing an offer to purchase on an immovable property.   It is important to know what recourse the Seller has when a Purchaser wants to withdraw from an Agreement of Sale, notwithstanding how far along in the process of the transfer has progressed.

Once the Seller accepts the written offer made by the Purchaser, the contract is valid and binding and both parties are compelled to comply with the terms and conditions of the contract.  Once the suspensive conditions of the contract have been fulfilled, the contract becomes enforceable and there are legal consequences should either party withdraw from the agreement.

Suspensive conditions would be the obtaining of a home loan, selling of Purchaser’s existing property, or perhaps due diligence to be conducted by the Purchaser.

 

What happens if the purchaser withdraws from the Agreement of Sale before applying for a bond?

The bond application is a contractual obligation to which the purchaser must comply. The Purchaser must provide their documents to their banker or bond originator to process the bond application.  If the Purchaser, withdraws from the Agreement of Sale, claiming that they cannot afford the bond repayment, the Seller needs to instruct the appointed conveyancer to write a letter, demanding the Purchaser to comply by applying for the bond.

Should the Purchaser claim that he applied for a bond but that the applications were declined, the conveyancing attorney needs to insist on decline letters from the bank.   On proof that the Purchaser’s applications were unsuccessful, the contract will lapse automatically and become null and void because the suspensive condition was not fulfilled.

 

What happens if the purchaser withdraws after the bond approval?

When the financial institution issues an Approval in Principle, the suspensive condition is considered fulfilled. The contract becomes enforceable and both parties are compelled to continue with the transaction.

If the Purchaser indicates he does not want to continue with the transaction for whatever reason, the Purchaser is repudiating the contract and is therefore in breach.  The conveyancing attorney needs to send a letter of demand (as per the terms and conditions of the contract) to the Purchaser, placing the Purchaser on terms to:

  • Accept the bond approval; or
  • If the bond instruction has been issued to the bond registration attorneys, place the Purchaser on terms to attend to sign the transfer – and bond documents & deliver guarantees; and
  • Inform the purchaser that should he persist with his action to withdraw from the transaction, he will be held liable for the Seller’s damages suffered (if any), the property practitioner’s commission, and the transferring – and bond attorney’s wasted costs.

 

Purchaser withdrawing from a cash transaction?

Cash transactions with no additional suspensive conditions are in general referred to as unconditional contracts.

Should the Purchaser indicate his intention to withdraw from the contract before payment of the purchase price, the following assertive steps need to be taken:

  • The conveyancer has to send a letter of demand to the Purchaser, informing him that the Seller does not accept his repudiation of the contract and insists the Purchaser complies timeously with all the terms and conditions of the contract and demands payment of the purchase price or deposit (depending on the terms of the contract).

Should the purchaser indicate his intention to withdraw from the contract after the payment of a deposit or the purchase price:

  • The conveyancer shall address a letter of demand similar to the one above and request payment of the balance purchase price and/or the transfer costs;

In both the above scenarios, the conveyancer needs to inform the Purchaser of the legal consequences should he fail to comply with the letter of demand which will be his liability for the Seller’s damages suffered (if any), the property practitioner’s commission and the transferring attorney’s wasted costs.

The final question remains, what is the Seller’s recourse should any of the abovementioned happen?

  • The Seller can enforce the contract by bringing an application to compel the purchaser to continue with the contract;
  • If there is a deposit held on trust with the conveyancing attorney, the Seller can agree to the repudiation and the deposit may be utilized for damages, commission, and wasted costs, depending on the terms and conditions of the contract.

The above-mentioned factors, stages of the transaction, and, very importantly, the terms and conditions of the contract, need to be considered before legal action is taken.