Cancellation of an Offer to Purchase

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.

conveyancing-process-explained

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-esponsibilities

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)
buyer-and-seller-fica-requirements

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
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