Article by listed Attorney: Nanika Prinsloo
This article deals with the Offer to Purchase. It will give you an idea of what must be contained in the contract and what to look out for. It is not complete information and does not intend to make it possible for any person to draft a valid agreement from. Each property sale is unique and the Offer to Purchase must be drafted uniquely for each sale.
A lot of people refer to the Sale Agreement of property as an Offer to Purchase. The reason is basically because the Purchaser makes an offer to a Seller. Once the Offer is signed, it becomes the Sale Agreement between the parties which is subject to the terms and conditions under which the Offer to Purchase the property was made.
An Offer to Purchase or Sale Agreement of Property must be in writing, as is required by the Land Alienation Act, Act 68 of 1981. One cannot verbally purchase a property, because a verbal agreement will not be valid. Even if it is written on a paper napkin or a small piece of paper and it reads something to the effect of “A buys the property situated at TRC street, TRC city, TRC province for an amount of R1million in cash” will be a valid agreement. As long as it is in writing and the property and the parties are identifiable, the contract will be valid.
One cannot sell a farm or a portion of a farm if there is land that must be subdivided. The subdivision must be approved by the Department of Land Affairs first. No scheme or plan (lease agreements and then option agreements and then sale agreements) will be valid if signed before the subdivision was approved, no matter what anybody tells you. The bottom line is that one cannot sell farmland before a subdivision was approved. (This paragraph of course only refers to cases where a farm owner wishes to subdivide the farm and then sell of a portion – it does not pertain to cases where the whole farm is sold).
The 4 “P’s” of an agreement. The parties must be clearly described, the property must be well described, the price must be clearly set out and it must be clearly described when and how (in cash or with a bond) the purchase price will be paid.
There are conditions and there are suspensive conditions. The latter are conditions which, if they are not fulfilled, the contract will lapse and the deal will not proceed. For example, if the Purchaser applies for a bond, the Offer to Purchase will be subject to the Purchaser receiving approval for a bond from a banking institution. If the Purchaser does not receive approval, the sale will fall through and will not proceed. Any other condition can be attached to the Offer, which is not suspensive – meaning that the condition must be fulfilled but it won’t meant that the Offer will lapse if the condition is not met.
The contract must describe what is included or excluded in the sale, if there are extra items to be included/excluded. For example – the curtains will remain in the property and form part of the purchase price. Or, for example – the creepy crawly in the swimming pool will not remain on the property and will be removed by the Seller.
The Agreement must clearly state whether estate agent’s commission is payable or not. If it is, how much is payable and who exactly the estate agent (or the company) is.
Read our articles on the certificates of compliance that must be supplied by a Seller. The Offer to Purchase must state who pays for these certificates. (Usually the Seller but it can be agreed that the Purchaser will pay for it.)
One of the most important clauses in an Offer to Purchase is the breach clause. Provision must be made as to what must happen if either party breaches the agreement.
The other clauses are quite legal in nature and will not be discussed here.
Please note that the list above is not complete and is intended to give you just a general idea of the requirements of an Offer to Purchase.
This article written by Nanika Prinsloo of Prinsloo & Associates Attorneys and Conveyancers.