Written for YourProperty

A reader has approached the Property Poser panel with a number of questions regarding the sale of a fixed property by way of instalments and also the effect that a suspensive condition might have on such a sale.

The reader is looking to sell his sectional title flat and has been introduced to a potential purchaser by an agent.

The buyer has only qualified for a bond of 85% of the purchase price and, should it be granted, has proposed to pay off the remainder in instalments.

Therefore, in this instance, the agreement of sale could be worded to reflect that final bond approval is a suspensive condition of the transaction.

A suspensive condition is typically a condition whereby the operation and/or effect of an agreement is wholly or partially suspended until it is fulfilled or waived, says Charlotte Vermaak from Chas Everitt in Port Elizabeth.

“It is quite common for the suspensive condition to be linked to a time period.

“Therefore, if the purchaser fails to obtain a bond or make an alternative arrangement, the agreement between the parties will lapse.”

In response to the reader’s question as to whether a suspensive sale is the same as a “rent to buy” option, Vermaak says the two concepts are similar but don’t necessarily go hand in hand.

“There may be some overlap, such as the tenant renting the property with a view to purchasing it and having a specified period in which to come up with financing.

“But a suspensive condition can and usually does exist outside the rental agreement scenario, so the two aren’t always linked.”

Vermaak says it is vital that there be full disclosure of any agreement between a buyer and seller to the bank where the bond is being obtained.

“This applies equally to an agreement where the buyer pays off part of the purchase price or any other consideration payable to the seller.”

According to Rian du Toit from DTS Attorneys in PE, the Alienation of Land Act addresses the issue of the sale of fixed property in instalments.

“The second chapter sets out the many aspects that must be addressed in such an agreement of sale, including the interest payable on the capital sum.”

Du Toit says the act is prescriptive about the provisions that must be included in the contract.

“Other legislation that may be applicable is the National Credit Act. It’s therefore important that both parties obtain expert legal advice to avoid possible future problems due to non-compliance.”

Du Toit says the interest is determined by agreement and should not be usurious. “The prime interest rate plus a percentage point or two is often applied.”

The reader also asks about the legalities involved in such an agreement, specifically with regard to protection of the parties as far as breach for non-payment is concerned.

“The contract should address this aspect and the seller may wish to record his remedies in the event of such a breach.”

These would generally include claiming specific performance or cancelling the agreement with the option of claiming damages, says Du Toit.

“The agent is usually remunerated when the sale becomes effective. The fact that the purchaser breaches the agreement at a later stage does not entitle the seller to a claim against the agent as he has remedies available to him as a result of the breach.”

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