eader has approached the Property Poser panel with a number of questions regarding the sale of a fixed property by way of instalments and also the effect that a suspensive condition might have on such a sale.<\/p>\n
The reader is looking to sell his sectional title flat and has been introduced to a potential purchaser by an agent.<\/p>\n
The buyer has only qualified for a bond of 85% of the purchase price and, should it be granted, has proposed to pay off the remainder in instalments.<\/p>\n
Therefore, in this instance, the agreement of sale could be worded to reflect that final bond approval is a suspensive condition of the transaction.<\/p>\n
A suspensive condition is typically a condition whereby the operation and\/or effect of an agreement is wholly or partially suspended until it is fulfilled or waived, says Brian Kinnear, principal of Fresh Lifestyle Properties in East London.<\/p>\n
“It is quite common for the suspensive condition to be linked to a time period.<\/p>\n
“Therefore, if the purchaser fails to obtain a bond or make an alternative arrangement, the agreement between the parties will lapse.”<\/p>\n
In response to the reader’s question as to whether a suspensive sale is the same as a “rent to buy” option, Kinnear says the two concepts are similar but don’t necessarily go hand in hand.<\/p>\n
“There may be some overlap, such as the tenant renting the property with a view to purchasing it and having a specified period in which to come up with financing. <\/p>\n
“But a suspensive condition can and usually does exist outside the rental agreement scenario, so the two aren’t always linked.”<\/p>\n
Kinnear says it is vital that there be full disclosure of any agreement between a buyer and seller to the bank where the bond is being obtained.<\/p>\n
“This applies equally to an agreement where the buyer pays off part of the purchase price or any other consideration payable to the seller.”<\/p>\n
According to Grant Berndt from Abdo & Abdo Attorneys in East London, the Alienation of Land Act addresses the issue of the sale of fixed property in instalments.<\/p>\n
“The second chapter sets out the many aspects that must be addressed in such an agreement of sale, including the interest payable on the capital sum.”<\/p>\n
Berndt says the act is prescriptive about the provisions that must be included in the contract.<\/p>\n
“Other legislation that may be applicable is the National Credit Act. It’s therefore important that both parties obtain expert legal advice to avoid possible future problems due to non-compliance.”<\/p>\n
Berndt says the interest is determined by agreement and should not be usurious. “The prime interest rate plus a percentage point or two is often applied.”<\/p>\n
The reader also asks about the legalities involved in such an agreement, specifically with regard to protection of the parties as far as breach for non-payment is concerned.<\/p>\n
“The contract should address this aspect and the seller may wish to record his remedies in the event of such a breach.”<\/p>\n
These would generally include claiming specific performance or cancelling the agreement with the option of claiming damages, says Berndt.<\/p>\n
“The agent is usually remunerated when the sale becomes effective. The fact that the purchaser breaches the agreement at a later stage does not entitle the seller to a claim against the agent as he has remedies available to him as a result of the breach.”<\/p>\n