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Author: AED Attorneys

Cancellation of an Offer to Purchase

To do or not to do….

What happens when a seller decides he no longer wants to sell his property or the buyer finds a more suitable property to purchase after an Offer to Purchase has been signed? Can a party simply walk away from the deal, or are there potential repercussions?

The short answer is yes, there can be major repercussions and, unfortunately, this can prove to be extremely costly for the responsible party.

Possible repercussions include the following:

  • The aggrieved party could sue for out-of-pocket expenses;
  • The conveyancing attorney could claim wasted costs for the work done on the transaction up to date of cancellation of the offer; and
  • The estate agent can claim their full commission on the sale that has been cancelled, depending on the wording of the offer.

An Offer to Purchase is a written document that, once signed by both buyer and seller, becomes an Agreement of Sale. It is important that the parties keep in mind that an agreement of sale is a legal, binding document and both parties are required to fulfil their responsibilities as laid out in the agreement.

Cancelling an agreement of sale is only possible should there be a basis in law for doing so.

An agreement can be cancelled under the following circumstances:

  • The agreement of sale can be cancelled based on a clause contained in the agreement. The said clauses can stipulate under which circumstances either party is allowed to cancel the contract. If a party can prove that cancelling the contract is in accordance with such a clause, there would be no penalties for cancelling the agreement and it would no longer be binding.
  • The agreement can further include a suspensive condition. Only once a suspensive condition has been met, will the contract come into force. An example of such a suspensive clause is where the sale is dependent on the buyer obtaining bond finance. This condition protects the buyer from being liable for the purchase price without the backing of finance.
  • A further way of cancelling the agreement is based on a party’s breach of contract. If one party to the agreement acted in a way that he contravened the agreement, the other party may lawfully cancel the agreement. The aggrieved party may also, claim damages from the party who was in breach of the contract, depending on the circumstances of the cancellation.

As noted above, cancellation of an agreement is a complicated matter with many possible repercussions. It is advisable to always seek legal advice before cancelling an agreement to ensure it is done in accordance with the relevant terms and based on merit.

The Conveyancing Process Explained

  1. Seller and purchaser sign a sale agreement
  2. Seller appoints a transferring attorney
  3. Transferring attorney awaits purchaser’s bond grant or cash to be paid into the attorney’s trust account
  4. Transferring attorney requests rates and taxes figures from local municipality
  5. Transferring attorney requests original title deeds, mortgage bond & cancellation figures from seller’s bondholders
  6. Bond attorney advises transfer attorney of amount available for guarantees
  7. Transfer attorney receives title deed and cancellation figures from cancellation attorney
  8. Transferring attorney requests guarantees from bond attorneys and draws up transfer documents
  9. Seller signs transfer documents. Buyer signs bond and transfer documents. Bond and transfer costs to be paid on signature by purchaser
  10. Bond attorneys provide guarantees to the transferring attorneys
  11. Transferring attorney sends guarantees to cancellation attorneys who obtain consent from the seller’s bondholder to cancel the seller’s existing bond
  12. Transferring attorney pays rates, levies and transfer duty to SARS
  13. Once all documents are in order, certificates and transfer duty receipts obtained, arrangements are made with the attorneys involved to have all documents lodged simultaneously in the Deeds Office
  14. Documents are examined in the Deeds Office (± 12 working days)
  15. Property is registered in buyer’s name. Seller’s bond is cancelled. Guarantees presented for payment.

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Seller and Purchaser’s Responsibilities

Seller’s Responsibility

Certificates to provide:

  • Electrical Compliance Certificate
  • Gas Compliance Certificate (if applicable)
  • Electrical Fence Compliance certificate (if applicable)

Costs:

  • Pay bond cancellation cost of seller’s existing bond
  • Pay rates clearance figures for outstanding debit plus four months in advance
  • Pay portion of body corporate levy figures or homeowner’s (if applicable)

Purchaser’s Responsibility

Costs:

  • Pay bond registration costs
  • Pay transfer costs
  • Pay transfer duty (if applicable)
  • Pay portion of body corporate levy figures or homeowner’s (if applicable)

Seller’s & Purchaser’s FICA Requirements

This article is a guide to the list of documents required when you buy or sell your property.

Information to be obtained

Identification:

  • Full names
  • Date of birth
  • Identity or passport number
  • Nationality (Foreign nationals only)
  • Confirmation of marital status
  • Confirmation of income tax numbers

Residential address:

  • Verification of residential address
  • For a customer who co-habits or lives with another person, verification documents that reflect the other person’s details, as well as proof of the relationship between the co-habitants is required.

Acceptable documentation:

  • Formal identity document
  • Valid passport (not expired)
  • Marriage certificate
  • Antenuptial contract
  • Tax return certificate
  • A formal document reflecting the name and residential address of the customer ( no less than 3 months old) such as:-
    • A utility bill
    • A bank statement
    • A lease or rental agreement
    • A municipal rates and tax invoice
    • A telephone account

Why you would want to have a last will and testament

Here are four reasons why it is important to have a last will and testament:

1. To leave a legacy

  • A last will and testament gives you the ability to nominate your heirs, beneficiaries or legatees.
  • This eliminates an estate battle when you die.

2. Provide for your family’s future

a) Nominate a guardian

  • This is the place of safety that your children will go to should both parents die simultaneous or they die within a short period.
  • With you nominating a guardian it assists in the application process.
  • Remember to tell the nominated guardians of your choice that you have nominated them, as it might surprise if they don’t feel up to it and decline the appointment.
  • This will also give you peace of mind knowing that your children will be taken care of.
  • If no guardian is nominated, anyone in the family can apply for guardianship.
  • If there is no family or close relative, then the court might place them in foster care.

b) Set up a testamentary trust

  • Important to make provision for the trust if there are minor children or handicapped beneficiaries.
  • If no provision is made, monies are payable to the guardian’s fund (not the best option — there have been instances of guardians being declared bankrupt).
  • This ensures that your minor or handicapped beneficiaries’ inheritance stays safe.

3. Nominate an experienced and professional executor and trustee

To nominate an executor and trustee who will assist the family during their time of bereavement in order to give them peace of mind, knowing that there is a responsible person taking care of your affairs.

a)  Executor

Here are a few tips when choosing an executor:

  • You need to be comfortable, but also informed, when nominating an executor as there are fraudsters who have no intention of ensuring that your last wishes be fulfilled.
  • Not everyone is suitable to be an executor so, even if you feel that you would like a family member to be the executor, the master will ask that he/she gets someone to assist — as our firm can do.
  • It is better to nominate — in advance — an independent third party, such as an attorney, trust company, bank or auditor
  • Remember to nominate someone who deals specifically with estates in order to avoid any unnecessary delays.

b) Trustee

  • You need to nominate a person who you know and trust to ensure that your minor or handicapped beneficiary’s interest will be safeguarded.
  • This goes hand-in-hand with the executor and applies similarly to the above point.
  • You need someone who knows the minor or handicapped beneficiaries, bearing in mind that — as protection — an independent third party should also be appointed.

4. Minimize estate duty taxes

You are in control of how the prescribed abatements will be used to your advantage. This will minimize the death duties payable to SARS when you die.

Finally, and, perhaps most important, what happens should you die without having a valid last will and testament?

The intestate succession act applies and this means:

  1. The act prescribes who your heirs or beneficiaries are
  2. There is no protection for your minor or handicapped beneficiaries.
  3. The beneficiaries are in control of nominating an executor and this may cause them to nominate the wrong people while they are still in the bereaved period.
  4. No control of use of the abatement for death duties payable to SARS.

The Administration Process explained

This article explains the steps that are followed to administer deceased estates (solvent and insolvent).

When someone dies this is what happens in terms of administration of the estate.

Family needs to:

  • Obtain death certificate
  • Advise AED Attorneys of the death
  • Get all relevant documents and papers of the deceased together for the first interview.

Interview and reporting of the estate.

  • Nominated executor to:
  • Set up an appointment with family to fill in documentation
  • Establish the assets and liabilities
  • Report estate to the Master of the high court
  • Notify all stakeholders (banks, creditors, policies etc.)

Advertise to creditors.

  • This advertisement is called a Section 29 advert
  • This is where you advertise in the local papers and in the government gazette (give notice to creditors & debtors)
  • Send Letters of Executorship to all stakeholders
  • Establish liquidity in estate
  • Only do this if there are Letters of Executorship
  • The stakeholders will send you the COB as at date of death
  • We start the process to transfer assets

Liquidation and distribution account.

For solvent estates

  • Complete and submit all outstanding returns to SARS
  • Drafting of Liquidation and Distribution account
  • Place advert in Government Gazette and local newspaper
  • Lay open for inspections for 21 days

For insolvent estates

  • Send Section 34 notice to SARS, Master of the High Court, and other creditors
  • Assets sold, draft Liquidation and Distribution account
  • Send Liquidation and Distribution account to the Master for confirmation
  • Once confirmation from the Master is received then we place an advert in the Government Gazette and local newspaper – 21 days

Distribution of estate.

For solvent estates

  • Nominated executor to:
  • Obtain clearance from SARS
  • Pay creditors
  • Instruct attorneys to register property in heirs name
  • Prepare final cash reconciliation
  • Pay heirs
  • Provide Master with proof of above
  • Confirm estate is finalized

For insolvent estates

  • Nominated executor to:
  • Send out divided letters to creditors with copy of liquidation and distribution account
  • Do payments to creditors
  • Prepare cash reconciliation statement
  • Provide Master with proof of above
  • Await confirmation that estate is finalized.
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