Guide for Sellers / Purchasers when signing an Offer to Purchase
Category Advice
Article Provided by Leanne Jooste, B Law Inc. Attorneys
An Offer to Purchase (OTP) is a legal sale agreement between a seller and purchaser wherein the seller agrees to sell immovable property in exchange for a purchase price to be paid by the purchaser.
The OTP further includes various terms and conditions with regard to the sale of the immovable property, which includes the obligations of both parties, the details with regard to the payment of the purchase price, property description, applicable suspensive conditions, breach of contract, contact details of parties and other applicable clauses.
Validity period of contract period
In the event that the sale is not subject to a 'cooling-off period', the sale is binding until the transfer of the property or termination of the agreement.
The Alienation of Land Act provides protection to purchasers who are natural persons and who purchase residential property for R250 000 or less, by stating that such purchases are subject to a 'cooling off period'. This means that the Purchaser is allowed to revoke or terminate a sale agreement within five (5) days from the date of entering into the agreement, by providing written notice is provided to the Seller.
Can a person cancel the agreement after it has been signed?
Once an agreement has been signed by the seller, it becomes a valid and binding agreement between the parties. If a purchaser or seller wishes to retract from a sale agreement, penalties by way of damages by seller or purchaser and/or agent and/or attorneys will be payable by the defaulting party.
How does the Consumer Protection Act (CPA) impact on an OTP?
A private sale, between a seller who does not sell property in the ordinary course of his or her business and a
purchaser, is excluded from the ambit of the CPA. The CPA does however provide protection to purchasers
of property from a developer, or from a seller who is in the business of buying and selling property.
Further to note is that the CPA does not afford protection to all purchasers, and that if a purchaser is a juristic person whose asset value or turnover exceeds R2 million, such purchasers do not enjoy the protection under the CPA and the voetstoots clause in an agreement would therefore apply.
What happens if the offer lapses, and what are the circumstances that would cause a lapse?
An offer would lapse if a suspensive condition has not been fulfilled, such as the granting of a mortgage bond, within the time frame provided for in the agreement. Or in the event that the occurrence of a future event has not occurred as stipulated in the sale agreement, in the case of a resolutive condition.
Should an offer lapse for the above reasons (non-fulfillment of a suspensive or resolutive condition) the parties are placed in the same position prior to the sale agreement being concluded, no party will have a claim against the other should an offer lapse for such reasons.
De Lucia Group has been servicing the property industry for over 45 years. Contact us to ensure you get the best advice for all your property-related queries. Michael De Lucia - michaeldl@delucia.co.za
- like and view us on Facebook
The information contained herein is not intended to constitute advice and shall only be relied upon by you at your own risk. De Lucia Group does not guarantee the accuracy or completeness of any information posted in this newsletter or otherwise. Any information relied upon by you should be independently verified for accuracy. De Lucia Group reserves the right to change the content distributed or published without prior notice.
Author: De Lucia Group
