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Offer to purchase 101 – When is it binding?

South Africa’s land registration system is a comprehensive one, whereby, once a buyer takes transfer and the property purchase registered in their name, they have a real right to that property, says Laurence van Blerck of Knight Frank Residential SA.

It is vital, however, to understand the terms and conditions of an Offer to Purchase or Agreement of Sale for property, he says. All the essential matters regarding the Agreement of Sale are normally set out in one document and it must be clear that both parties have reached agreement on all matters.

But is it that simple?

The offer made by the purchaser and acceptance by the seller mostly takes place at different times. Once the estate agent has presented the offer to the seller, it is open for acceptance by the seller and it cannot be withdrawn by the purchaser, if made irrevocably. The offer is open for acceptance until the time for expiry, as stated in the offer, has elapsed or until the seller rejects the offer. If the offer expires or the seller rejects it, the purchaser can no longer be bound by that offer. Perhaps it is stating the obvious, but a prospective purchaser must not submit a second offer for another property whilst their offer on the first property is still open for acceptance, unless they intend to purchase more than one property. If the seller accepts the offer, subject to a suspensive condition, there is still no binding contract, until the suspensive condition is met.

An offer will usually contain at least one suspensive condition i.e. be subject to the raising of a bond by the purchaser or be subject to the sale of the purchaser’s current home or both. Suspensive conditions are very common in residential property contracts and they simply mean that the implementation of the contract is suspended until the occurrence of a future event.

It is important to ensure that a suspensive condition is properly drafted by your estate agent. It must be clear, concise and, most importantly, stipulate a cut-off date. Ensure that the timing aspects are carefully considered, for example, if it is subject to the sale of the purchaser’s property, ensure that the details of that property are recorded in the contract and the consequent effect on the transfer date of the new property being purchased is taken into account .

Also, where there is more than one suspensive condition, it is best to deal with each one separately, as this will avoid confusion. If there are costs involved, state who is responsible for the costs and consider all the consequences of the condition. If in doubt or the suspensive condition deals with an unusual matter such as a specialist’s report on the property, engage the services of a conveyancing attorney. The wording must be right the first time as there no second chances, says van Blerck.

If the suspensive condition relates to the approval of a bond within a stated time period, the timeous approval of the bond means that the suspensive condition is fulfilled. If, however, the suspensive condition is not fulfilled by the date set down in the contract, then there is no binding contract on the parties i.e. the agreement becomes null and void. Once all suspensive conditions are fulfilled, the agreement becomes a binding contract on the parties and the process of registering the purchase at the Deeds Office can commence with earnest.

It is worth repeating that it is critical that both purchaser and seller understand the fine print of the terms and conditions of an Agreement of Sale before picking up their black pen, says van Blerck.



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