Agreement of Sale (koopkontrak)
The estate agent should assist you in completing the Agreement of Sale. Usually the purchaser makes an offer to purchase the property in a document known as an Offer to Purchase. The offer is usually only open for acceptance until a specified date. If the seller accepts the offer by the said date then the Offer to Purchase becomes a binding contract between the seller and the purchaser. Should the seller sign the offer but alter it by adding or deleting clauses, this may constitute a rejection of the offer. The offer then becomes a Counter-Offer which will need to be accepted by the purchaser.
The essential elements of the Agreement of Sale are:
a) The buyer and the seller;
b) The purchase price;
c) The property;
d) A written agreement signed by the parties or their representatives.
The following are guidelines to completing an Agreement of Sale (non-compliance may cause unnecessary disputes between the parties):
a) Write clearly and neatly in durable black ink;
b) Delete all clauses not forming part of the agreement;
c) Cross out all blank spaces;
d) Ensure that all the parties initial at the bottom of every page and next to every deletion;
e) Ensure that the agreement is witnessed. Witnesses should initial at the bottom of every page and next to every deletion.
What follows is a brief explanation of some of the clauses that are usually found in a pre-printed Agreement of Sale.
This clause is usually worded as a “suspensive condition”. This means that if the clause is not fulfilled to the letter, then the agreement lapses or falls away. The clause usually states that if the purchaser fails to obtain a bank loan for a specified amount by a specified date, then the agreement lapses or falls away. It is very important to specify the amount of the loan required and the date by which the loan must be obtained. A purchaser should insist on the inclusion of this clause where he/she cannot afford to buy the property unless the said loan is obtained.
The sale of immovable property includes all fixtures of a permanent nature. As a purchaser, if you are uncertain as to whether or not a particular item forms part of the property and you would like it to do so, then specify this in the Offer to Purchase. An item which often causes problems is an alarm system as it may belong to the security company and not the seller. In this case it is important for the purchaser to either agree to the removal of the alarm system or to take over the existing contract with the security company.
This clause means that the purchaser takes ownership of the property as is. It protects the seller from being sued by the purchaser for any claim arising out of patent or latent defects in the property. Patents defects are obvious defects which would be found upon a reasonable inspection of the property while latent defects are hidden defects.
It is a legal requirement that a property may not be transferred into the name of the purchaser unless a valid electrical wiring certificate exists that is less than two years old. This clause usually states that the seller must provide a valid electrical wiring certificate. If the purchaser requires a new electrical wiring certificate then this must be stated in the Offer to Purchase.
This clause becomes important if one of the parties does not comply with their obligations under the Agreement of Sale. In terms of this clause the innocent party may send a letter to the defaulting party demanding that he/she comply with the Agreement of Sale. Should the defaulting party not comply timeously, and then the innocent party may choose to cancel the agreement and claim damages from the defaulting party.
This clause is usually worded as a “suspensive condition”. This means that if the clause is not fulfilled to the letter then the agreement lapses or falls away. The clause usually states that if the purchaser does not sell a specified property for a specified amount by a specified date the agreement lapses or falls away. It is very important to specify a due date by which the purchase price must be provided. A purchaser should insist on the inclusion of this clause when he/she cannot afford to buy the property unless his/her own property is sold.
This clause allows the seller to continue marketing the property where the Agreement of Sale is subject to a suspensive condition. The object of this clause is to allow the seller to accept a better offer if the suspensive conditions set out in the Agreement of Sale has not been met.
To exercise this right the seller must inform the purchaser of the better offer and require him/her to effectively delete the suspensive conditions by a specified date. Failing this the seller may accept the better offer. RAT clauses vary, but it is common for these clauses to define “better” offer.
Where the purchase price is R250 000 or less, the purchaser has a statutory right to cancel the Agreement of Sale within five days subject to certain exceptions. The Agreement of Sale must inform the purchaser of this right, as well as how to exercise this right. Failing this the purchaser may not be forced to continue with the agreement should he/she choose not to.
Where the purchaser is a company, close corporation or trust it is advisable for the seller to insist that the person signing on behalf of such entity bind himself/herself as surety for the obligations of the entity. This will protect the seller if the purchaser fails to perform its obligations in terms of the Agreement of Sale. Although a duly authorised representative may sign an Offer to Purchase on behalf of a company or close corporation that is to be formed, it is not possible for a representative to sign on behalf of a trust to be formed. Where a representative does sign on behalf of a company or close corporation to be formed, it is advisable to limit the time period allowed for such formation.
Please contact us if you need an Offer to Purchase in order to buy or sell a house. We will assist you in completing it free of charge.