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.

Voetstoots – what does it mean?

Property sales agreements usually include a “voetstoots” clause. In South African law, the term voetstoots means “as is” or “with all faults”. When a property is sold voetstoots, the buyer agrees to accept the property in its present condition, including any defects or issues that may be present at the time of the sale.

This means that the seller is not responsible for any defects or problems that the buyer discovers after the sale is completed unless the seller deliberately concealed them. The buyer is expected to have inspected the property thoroughly before agreeing to purchase it and is responsible for any repairs or improvements needed after the sale.

But the voetstoots clause does not exempt the seller from his legal obligations to disclose any known defects or issues with the property. If the seller knowingly conceals defects or misrepresents the condition of the property, he cannot rely on the voetstoots clause. He may still be held liable for any damages that the buyer incurs as a result. The buyer may elect to cancel the contract or negotiate a reduction in the sale price, or even take legal action to resolve the issue.

A voetstoots clause is important for both parties. If the seller discloses all latent defects, he can avoid claims down the road. The buyer, after a thorough inspection, can make his offer based on the condition of the property, knowing what expenses may come his way in terms of repairs and renovations.

Can the seller remove fixtures?

You’ve bought a property, waited for bond approval, signed all the documents, and now the date of occupation has arrived. The estate agent hands over the keys and you’re ready to move in.

Of course, the property will look quite different to what you saw on show day. Once the furniture is gone, it usually does look rather appalling. You’re mentally prepared for that. But not for the missing water fountain in the garden, the empty space where the built-in shelves should be, and the glaringly absent awning over the carport.

These are fixtures you say, and they shouldn’t have been removed. And you’re probably right. But whether a seller can remove fixtures after the sales agreement has been signed depends on the terms of the agreement and the legal definition of what constitutes a fixture.

So what is a fixture? A fixture is a physical object that is permanently attached to the property and is considered part of the real estate. That means everything that’s built-in, bolted-on or otherwise attached, belongs to the property. Usually, these items are regarded as fixtures:

  • Alarm systems
  • Bathroom mirrors
  • Blinds
  • Built-in furniture
  • Ceiling fans
  • Curtain rails
  • Fitted carpets
  • Irrigation systems
  • Keys and remotes
  • Light fittings
  • Security cameras
  • Water fountains

Of course, the seller may have a garden shed or built-in bar that he wants to use at his next property. To avoid any misunderstanding and the unnecessary aggravation of having to resolve disputes down the road, rather list in the sales agreement the items that you agree will remain and those that the seller wants to remove.

Bottom line, a seller can only remove fixtures listed in the sales agreement.

Electronic signatures for property transactions

What if a seller lives in a house in Cape Town that he wishes to sell. A potential buyer in France, looking for an investment property, sees the house advertised online. How do they go about signing the agreement of sale and all the transfer documents? Let’s explore whether electronic signatures can be used for property transactions in South Africa.

Electronic signatures are becoming increasingly common because they’re convenient and speed up the process of getting documents signed. Applications such as DocuSign enable secure e-signature transactions with multiple levels of authentication. But contrary to other sales transactions, the sale of immovable property still requires a written document signed by all parties personally to be valid and binding in terms of the Alienation of Land Act.

Another piece of legislation, the Electronic Communications and Transactions Act, deals with electronic signatures of documents and specifically excludes agreements of sale of immovable property. Therefore, the sales agreement must still be signed “in wet ink” by the buyer and seller or their agents. The buyer or his agent can sign the sales agreement in France, but the physical paper contract will have to be couriered back and forth.

Now to the next step, the transfer documents. The transfer of property is governed by the Deeds Registries Act, which requires that any transfer of land must be in writing and signed by all parties. Traditionally this has been interpreted as requiring a physical signature. But in recent years there has been a move to recognise electronic signatures as valid alternatives to wet ink signatures.

The Deeds Office still requires documents to be printed, signed, and physically submitted for registration. But once the Electronic Deeds Registration Systems Act is fully in effect, this process will be much easier. Presently, only one section is in force. The one that authorises the Chief Registrar of Deeds to develop, establish and maintain an electronic deeds registration system. Eventually, this system will replace the current manual preparation and lodgement process. And then the entire process will speed up dramatically.

Selling or buying property – The conveyancing process

Miniature white house being past from one person to another.

Conveyancing is the means of legally transferring ownership of immovable property. It’s a complex and lengthy procedure of obtaining and preparing documents for submission to the Deeds Office to transfer a property from a seller to a buyer.

Many parties are part of this process:

  • Estate agent
  • Seller
  • Buyer
  • Financial institution
  • Transfer attorney: Transfers the property from seller to buyer, appointed by the seller
  • Bond attorney: Prepares the buyer’s bond documents, appointed by the bank that provides the mortgage to the buyer
  • Cancellation attorney: Cancels the seller’s bond, appointed by the bank that holds the seller’s mortgage

Plus, secondary parties that supply compliance certificates and clearance figures, such as tradesmen (electrician, plumber), the municipality or body corporate.

All these people must provide their services in good time for the transfer to take place. It’s important for a seller to instruct an experienced conveyancing attorney, who controls this process, to attend to the property transfer.

Here’s a breakdown of the process.

The sales agreement and other documents.

  • Buyer and seller sign the sales agreement.
  • The seller instructs a conveyancing attorney to deal with the transfer.
  • The buyer usually has an agreed period in which to get a loan. Once the buyer’s bond has been approved by a bank, the bank will instruct an attorney to attend to the bond registration.
  • If the seller has an existing bond over the property, that bank will instruct another attorney to attend to the bond cancellation. If there’s more than one existing bond, each bank will instruct its own attorney.
  • The seller provides electrical, plumbing, beetle, gas, and electric fence certificates (not all of these are required for every property).
  • The transferring attorney will obtain the title deed and the cancellation figures for the existing bond/s, rates clearance figures, levy figures, and a guarantee from the buyer’s bank for the purchase price (or the balance if the buyer paid a deposit).
  • Any suspensive conditions, for example, the prior sale of the buyer’s existing property, must be fulfilled before the transaction can continue.
  • When all conditions have been met, the buyer and seller each sign the transfer documents. The buyer also signs bond documents.

Payments

  • The buyer pays the transfer costs.
  • The seller pays rates and levies, including any advance payments.
  • The transfer attorney obtains transfer duty receipts from SARS, rates clearance certificates, and a levy certificate (if any) and makes all payments.

Lodgement

Once all documents have been signed, all certificates are in place, and costs have been paid, the documents are prepared for lodgement at the Deeds Office. All attorneys must lodge their documents on the same day.

The Deeds Office has 10 working days to examine the document. If all goes well, the attorneys will be advised that the matter is “up for registration”. If anything is not in order, the attorneys will have to amend the documents and relodge, and the Deeds Office will have another 10 working days to examine the documents.

Registration

Once the Deeds Office has completed its examination and everything is in order, the attorneys have five days to appear at the Deeds Office to register the deeds. Once the Registrar of Deeds has signed the documents, ownership of the property passes from the seller to the buyer.

  • The buyer’s new bond has been registered and the seller’s existing bond has been cancelled.
  • All guarantees have been paid, the estate agent has been paid their commission, and the seller has received the net proceeds.

The buyer can now move into his new home unless an occupation date other than “on transfer” has been agreed upon in the sales agreement.

This is not the end of the story

About three months later, the Deeds Office sends the original title deed and bond documents to the attorneys. They will forward the title deed to the bank that provided the mortgage, or to the owner if there is no bond. Copies of these documents are usually sent to both buyer and seller by their attorneys.

If you’re selling your property and would like further information, contact us. We understand the legislation governing immovable property and the complexities of the conveyancing process. You can rest assured that your property transactions are in good hands with us.

Selling or buying property – Useful information

Miniature orange house with blue door and a For Sale tag next to it.

Useful information to have at hand before buying or selling a property.

The sales agreement

By law, this agreement must be in writing, signed by both the seller and the buyer. Usually, the buyer signs an offer to purchase provided by an estate agent. If the seller accepts the offer and countersigns, it becomes a binding agreement of sale.

The purpose of the sales agreement is to capture the relevant information of both parties, the property description, the purchase price, as well as all conditions relating to the sale.

Any changes to the agreement must be in writing, signed by both parties.

The property

Usually, properties are sold voetstoots. That means at the buyer’s risk without guarantee or warranty. But it’s advisable for the seller to disclose any hidden defects to avoid disputes down the road.

Occupation date

When there are no delays, the process from signing the sales agreement to transfer should take around three months. The buyer and the seller agree on the occupation date. The buyer can take occupation on a specific date or on registration of transfer.

If the agreed date is before transfer, then the buyer will pay the seller occupational rent – an amount stipulated in the sales agreement. Should transfer take place before the agreed date, then the seller will pay occupational rent to the buyer.

Fixtures

Anything that’s fitted, from the satellite dish to a built-in braai, forms part of the property. When in doubt, specify items that aren’t included, for example, a water feature in the garden.

Clearance figures

The seller will need a rates clearance certificate from the municipality. This usually involves paying 4-5 months’ rates in advance to cater for the time from date of signature of the sales agreement until the property has been transferred into the buyer’s name.

For a sectional title property, the body corporate will have to provide a levy clearance figure.

Bank guarantee

The buyer’s bank provides a guarantee for the purchase price (or the balance if the buyer paid a deposit).

Compliance certificates

The seller must obtain compliance certificates from certified service providers that everything is in working order and compliant with industry standards, for some or all of these:

  • Electrical (house)
  • Electric fence
  • Water/plumbing
  • Gas
  • Beetle

In our next blog, we’ll outline the conveyancing process, that’s the transfer of the property from the seller to the buyer.