Understanding sale agreements before putting pen to paper

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BUSINESS NEWS - According to the 2022 Census, the George Municipality experienced a population growth of 4,1% per annum since 2011.

This represents the fastest growth rate over the period of the 19 intermediate cities in South Africa. Furthermore, George surpassed Drakenstein to become the most populous municipality besides City of Cape Town Metropolitan Municipality in the Westen Cape.

The remarkable growth is illustrated by the number of households in George increasing from 53 549 to 85 931 over the same period.

Population statistics in the Mossel Bay Municipality shows an increase from 89 430 to 140 075 from 2011 to 2022. This indicates a population growth of 4.36% per annum as per the 2022 census.

The immense population growth naturally has a far reaching impact on the Garden Route’s property market. Purchasers and sellers may feel the need to rush transactions due to the pressure of the lively property market and the increased demand, however every transaction needs to be met with the necessary expertise.

Investing in immovable property, especially in the Garden Route area, can be a greatly exciting proposition, however if the legal implications of the deed of sale is not understood before putting pen to paper, costly misunderstandings may arise. The breach clause, suspensive conditions and 72-hour clauses are therefore briefly discussed herein as potential stumbling blocks in a deed of sale.

Breach clause

The breach clause in a sale agreement outlines the procedures to be followed in the event that either party fails to meet their contractual obligations. Where a party is in breach of their contractual obligations, the breach clause will determine the notice period they are provided to remedy the breach as well as the legal consequences of failure to do so. The breach clause may allow the aggrieved party to cancel the agreement and claim damages or provide for alternative legal steps to enforce performance in terms of the contract.

Suspensive conditions

A suspensive condition suspends or delays the operation of the sale agreement, until the occurrence of a future event. If the suspensive condition is not fulfilled by the specified period, the agreement lapses and neither party has a claim for damages against the other, since no agreement comes into existence. If the suspensive condition is fulfilled by the period stipulated in the sale agreement, the agreement is regarded as binding from the date on which it was signed and the terms thereof are enforceable by the parties. A common example of a scenario where a suspensive condition would be included is an offer to purchase, which is subject to the approval of a loan from a financial institution within a specific period to finance the acquisition of the property.

72 hour clause

Where a property is sold subject to a suspensive condition, which would render the transaction void if not fulfilled, a 72-hour clause or continued marketing clause is often included in a sale agreement to reduce the risk of losing prospective unconditional offers. This clause allows the seller to continue marketing the property after an agreement has been entered into which is subject to suspensive conditions, and gives the purchaser 72 hours notice to comply with the suspensive conditions if a bona fide purchaser makes an unconditional offer.

There is no “one size fits all” when it comes to property transfers! Sale agreements are therefore drafted to specifically include clauses and provisions which best suits the needs of both parties. The misunderstanding and/or misinterpretation of the provisions of a sale agreement unfortunately often leads to unintended consequences and costly disputes.