SUSPENSIVE CONDITIONS IN THE SALE OF A PROPERTY

Checking and understanding the offer to purchase is critical in the sale of a property. It protects your interests, ensures compliance with the law, avoids misunderstandings, and helps you negotiate the best possible transaction.

An Offer to Purchase contract contains two types of contractual conditions:

  1. Ordinary terms and conditions, which are conditions that either the purchaser or the seller has to comply with before registration of transfer can take place, such as the delivery of compliance certificates. The conveyancing attorney must ensure that all conditions are complied with.
  2. Suspensive conditions are defined as conditions that need to be met before the contract can come into being and must be enforced between the parties. These conditions are usually agreed upon by both the buyer and the seller, and they must be set out in the sales agreement. In other words, the sale is “suspended” should the stipulated condition not be met. If these conditions are not met, the contract will lapse automatically and become null and void.

Our rule of thumb for a condition to be a suspensive condition is that the compliance thereof must be a “deal breaker”, such as obtaining a bond or the purchaser selling his existing property.  Any other terms and conditions should not include the wording:  “The contract is subject to…….”  It should merely be a term of the contract.   Examples of suspensive conditions in the sale of a property include:

  1. Finance: The most common suspensive condition in a property sale entails the buyer’s requirement for financing from a bank or other financial institution to purchase the property. The sale agreement may be subject to the buyer obtaining a loan for the purchase price within a certain timeframe.
  2. Property inspection: The sale agreement may be subject to the property passing an inspection conducted by a qualified inspector. If the inspection reveals significant defects, the buyer may have the option to cancel the sale or negotiate repairs or a price reduction.
  3. Due diligence: A developer or a property investor may request time to conduct due diligence on the property concerning the following:
    1. Current zoning of the property and possible rezoning options;
    2. Conditions of the title deed
    3. Building plans;
    4. Rental income / peruse lease agreements;
    5. Expenses concerning the property
  1. Sale of buyer’s existing property: The sale agreement may be subject to the selling of the purchaser’s current property before the purchase of the new property can be completed.
  2. Legal requirements: The sale agreement may be subject to the completion of certain legal requirements, such as obtaining necessary permits or approvals.

Be mindful that a suspensive condition is for the benefit of the purchaser and he/she may, before the due date of the compliance condition, waive such condition in writing.

It’s recommended that both buyers and sellers seek legal advice before entering into a sale agreement to ensure that all necessary suspensive conditions are included and properly documented.

At times, fictional fulfilment of a suspensive condition can occur in the sale process.  A fictional fulfilment of a suspensive condition is a scenario where it is a term of the contract that the purchaser shall apply for a home loan and has not secured financing yet.  If the Seller can prove that the purchaser would qualify for the bond if he applied for the home loan, the suspensive condition is considered as being fulfilled.   It’s important to note that fictional fulfillments of suspensive conditions are generally discouraged, as they can lead to legal disputes and complications later.

The specific suspensive conditions in a property sale will depend on the terms of the sale agreement and the needs and requirements of the buyer and seller. It’s crucial to carefully review and understand any suspensive conditions included in a property sale before entering into a contract.

As Conveyancers, Burden Swart and Botha Attorneys manage the property transfer by providing expertise and advice throughout the registration process.  Appointing the transfer attorney is the prerogative of the seller, however, a purchaser may negotiate and suggest conveyancers to handle the transfer.

For more information regarding the conditions of the contract, contact BSB Attorneys.