The purchase of property, especially for first-time buyers, may seem riddled with legalities and leaves the buyer with many questions around their rights, what they are entitled to ask and uncertainty about their responsibilities to the seller. Understanding the impact of the offer to purchase on the transaction will ensure that the buyer feels more secure in the decision to invest in a specific property.
It is an essential document for the buyer and seller:
The offer to purchase will govern the entirety of the rights and responsibilities that the buyer and seller have toward one another. In addition to an agreed purchase price, the offer to purchase will contain several clauses that will render the sale of the property to the buyer conditional.
Some of the typical suspensive clauses in an offer to purchase include the payment of a deposit, securing a loan for the purchase or even something unique as graduating from university. The effect of a condition such as this is that only once the conditions have been met will the contract come into effect.
If either the buyer or the seller does not adhere to the rights and duties created in the agreement signed by them; they will be in breach. This could result in the agreement to purchase being cancelled and a claim for damages against the wrongful party.
Important considerations before signing the Offer to Purchase
Our law recognises that any person who signs a contract is bound by that contract. The law essentially presumes that any party fully familiarised themselves with all the consequences of an agreement and intended to be bound by it when they apply their signature to the agreement.
Therefore, any buyer must carefully read all the terms of the offer to purchase and ensure that he has understood all rights and duties before signing. In fact, the buyer’s responsibility is serious enough that should he not understand any clause in the contract he should ask either the estate agent or an attorney to clarify before signing.
The buyer should also take notice of the following factors which will impact the fulfilment of duties before signing:
- The buyer should, if possible, visit the property and properly inspect the property as this will ensure that any defects can be addressed before agreeing to purchase;
- If the offer to purchase is conditional upon the buyer having sufficient finances to purchase the property; the buyer must do the necessary financial calculations to ensure that the costs of deposit, bond and transfer attorney fees, and monthly bond repayments can be met;
- The buyer must also ensure that he is able to perform all the necessary acts to allow for the registration of the transfer of the property. This includes, among other things, paying the bond and transfer costs, providing the necessary FICA documentation, and making himself to sign the necessary documents with the transferring attorney.
The responsibilities of the Seller
As this is an agreement between the buyer and seller both parties will have reciprocal rights and responsibilities. Some of the duties of the seller include:
- The Seller must disclose all latent and patent defects in the property and all such defects must be listed in the offer to purchase;
- All outstanding levies, rates and taxes owed to municipality or body corporate must be paid and up to date and the relevant clearance certificates reflecting this must be provided;
- The Seller must further obtain all compliance certificates related to electricity, water, gas, electric fencing and beetle infestation prior to registration of the transfer of the property. The Beetle certificate is not however mandatory, but has become a standard request in the sale of immovable property.
Can the offer to purchase be cancelled?
The agreement may be cancelled by mutual agreement of the parties. In order to avoid any dispute this should be done in writing. The offer to purchase could also contain a provision stating that it will be cancelled if all the conditions contained in it are not completed by one or both of the parties.
Usually, if all the conditions of sale are met, the seller would be liable to pay the estate agent’s commission. If the buyer breaches the agreement he may be held liable for the agent’s commission and a portion of the transfer fees as well as any other damages the seller may have incurred.
If the seller breaches the agreement and tries to cancel the sale when all the conditions of sale have been met, the buyer can approach the court to have the sale agreement enforced.
Where the property purchased is less than R 250 000.00 the offer to purchase should contain a cooling-off period allowing the buyer to withdraw from the agreement within a specified time.
It is important that both the buyer and the seller take the time to properly read and understand all the terms and conditions in the offer to purchase as it has far-reaching consequences if either commits a breach.
At SchoemanLaw Inc. we have qualified conveyancers and property law attorneys who are able to advise fully on the terms of the offer to purchase and the remedies available in the event of a breach of the agreement.