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Thursday Apr 30, 2015

'Sale will fail if you don't pay in time'

A standard agreement of the purchase and sale of immovable property typically includes a suspensive condition relating to the buyer arranging and securing mortgage finance.

This allows buyers to nullify a deal if they cannot obtain a bond in a stipulated time frame. In essence, the agreement is suspended until the bond is approved.

Fulfilling the suspensive condition is a prerequisite for the contract. If an appropriate bond is not approved by the due date, the sale agreement lapses.

Most sale agreements provide for the insertion of this condition for the buyer's benefit and compliance can be waived.

This could include when someone buys a property on condition a specified amount of the price be raised with a bond.

If the person gets a lower bond, accepts it and continues with the sale, he can supplement the price difference by producing guarantees or cash.

But such a waiver must take place before the end of the time frame for obtaining the bond.

The condition is meant to ensure buyers have the necessary funds to buy on the day full finance must be secured.

The purchaser's waiver must be clear and unequivocal and ideally concluded in writing.

It can be contained in an addendum provided both seller and buyer sign before the end of the time frame for securing the bond and the shortfall is secured with the appointed conveyancers.

The phraseology of a waiver can differ in sales contracts.

There have been cases in which buyers have been granted lower bonds and had the funds to cover the shortfall, but because of a failure to waive the suspensive condition and pay the shortfall in time, the agreements lapsed.

In the case of Westmore v Crestanello, the court held a buyer must waive the protection of the suspensive condition before the cut-off date and if it was not waived, the contract was deemed to have lapsed when the condition expired.

The court also held "whatever happened thereafter was, to use a phrase borrowed from Shakespeare, 'much ado about nothing' and could not 'breathe new life into the corpse' ".

This means no contract comes into existence if the suspensive condition is not fulfilled or waived in time. No remedy can be invoked for breaching a contract that never existed and that has a damaging impact.

The best option in these circumstances, if the parties are willing, was for the agreement to be reinstated and any extensions to the bond suspensive condition period contained in an addendum signed by seller and buyer.

Insider's View
Shahir Ramdass
Director of Ramdass and Associates
Sunday Tribune

    
 

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