Suspensive conditions in property sales agreements

A suspensive condition is a clause in the sales agreement that stipulates particular criteria that must be met in order for the contract to come into force. If the suspensive conditions are not met, the agreement will be void.

Suspensive conditions can protect both the buyer and the seller. They are typically used to allow time for certain events to occur before the sale can be finalised. The most well-known suspensive condition in property sales is probably the clause requiring the buyer to obtain finance within a certain period. If the buyer cannot get a mortgage, there is no sale.

But there can be other conditions that have to be met. The seller is required to obtain certain compliance certificates. The buyer may have signed the agreement subject to the sale of his current property. Or the seller was in the process of renovations and the sales agreement stipulates that these need to be completed before the buyer takes occupation at a certain date. Whatever it may be, it’s important to include all suspensive conditions in the sales agreement for the protection of both buyer and seller.

What if a suspensive condition isn’t met? Often the timeline is quite tight. If any condition isn’t fulfilled within the appointed timeframe, then the transfer process could be delayed.

It’s therefore important to stipulate exactly what the remedy is if something doesn’t happen by an appointed deadline. If the buyer doesn’t sell his existing property within three months, will the sale be void, or is there leeway to renegotiate the terms.

Often buyers sign a standard estate agency offer to purchase and add a few handwritten notes. The seller may add a few more notes before signing the offer to purchase, which then becomes the sales agreement. This could result in ambiguity, leaving the suspensive conditions open to interpretation.

It is advisable to consult a conveyancing attorney, if there are complex suspensive conditions to ensure the agreement is worded in such a way to protect both parties.