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AGREEMENT OF SALE
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.
COMPLETING AN AGREEMENT OF SALE
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.
THE CONTENT OF AN AGREEMENT OF SALE
What follows is a brief explanation of some of the clauses that are
usually found in a pre-printed Agreement of Sale.
1. Mortgage Bond
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.
2. Fixtures
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.
3. "Voetstoots"
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.
4. Electrical wiring certificate
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.
5. Default clause
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, then the innocent party may choose to cancel
the agreement and claim damages from the defaulting party.
6. Sale of the Purchaser's Property
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.
7. Offer by a third party or "RAT" clause
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 have 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.
8. Section 29A of the Alienation of Land Act
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.
9. Companies, Close Corporations and Trusts
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.
TRANSFER PROCESS
The transfer process starts with the Agreement of Sale being sent to an
attorney who is a qualified conveyancer. The conveyancer will then
attend to the process of changing ownership of the property from the
seller to the purchaser.
On receipt of the Agreement of Sale a reliable conveyancer will perform
numerous tasks to avoid unnecessary delays. The conveyancer will:
a) Contact the parties and request the information and documentation
required to draft the transfer documents;
b) Read through the Agreement of Sale, taking note of important dates
and
clauses, and address any issues that may affect the validity of the
agreement;
c) Search the Deeds Office database to check for potential problems with
the
property or the parties;
d) Request a Rates Clearance figure from the municipality or Levy
Clearance
requirements from the body corporate;
e) Request the bank to provide the bond cancellation requirements and
the
title deed if the property is mortgaged.
On receipt of all of the abovementioned information and documentation,
and provided all the suspensive conditions have been met, the
conveyancer will draft the transfer documents. The conveyancer will also
request payment of the transfer costs from the party responsible for
such costs (usually the purchaser).
On signature of the transfer documents and payment of the transfer costs
the conveyancer will pay the outstanding rates or levies and transfer
duty owed.
The conveyancer will then wait for the rates clearance certificate or
levy clearance certificate and transfer duty receipt. The conveyancer
may also be waiting for guarantees from the bond attorneys to secure the
purchase price. On receipt of the certificates, transfer duty receipt
and guarantees, and provided there are no outstanding issues, the
conveyancer will send the transfer documents to Cape Town for lodgement.
There may be three sets of documents for lodgement under the control of
three sets of attorneys – one attending to the transfer, another
attending to bond registration, and yet another attending to bond
cancellation. All these documents must be lodged and registered
simultaneously. An error in any of these documents will delay
registration of transfer.
Upon lodgement the Deeds Office checks the documents for errors and for
any reason why the transfer may not proceed. This process usually takes
10 working days but may take longer. Once the Deeds Office is satisfied
that the transfer may proceed, the transfer "comes on prep" also known
as "coming up for registration". At this stage, all the conveyancers
check again that registration may proceed. If there are no problems,
they will hand in their documents the next day and effect registration
of transfer. The seller will normally be paid the following day.
The process usually takes approximately 8 weeks but there are numerous
factors that may delay this process.
The most common of these are:
a) Delay in receiving the bond cancellation figures or the title deed;
b) Delay in receiving the transfer duty receipt;
c) Delay in receiving the rates clearance certificate or levy clearance
certificate;
d) Delay in the purchaser paying the purchase price or providing
guarantees
for same;
e) Delay in the fulfilment of any suspensive conditions;
f) The parties agreeing to delay registration of transfer;
g) Either party not signing the transfer documentation when requested
to;
h) The purchaser not paying the transfer costs when requested to;
i) A lost title deed;
j) Delays in the Deeds Office.
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