-Sale Agreements Common Terms…

Property Sales Agreements – Common Terms Explained:

There are many clauses that can be incorporated in a typical sale agreement. It is important that the parties understand the meanings and consequences of each clause. Here is a list of terms (and concepts) in alphabetical order, with a brief explanation of each. It is, however, important to read the exact wording of the clause as it appears in the sale agreement.

Addendum:
A supplementary agreement to an original sale contract covering points agreed to afterwards. It is a separate agreement in its own right and must be in writing and signed by all parties, and if it contradicts the original in any way, it is presumed to overrule it.

Agreement of sale:
The basic contract of sale and purchase between a willing seller and buyer. No matter what the parties have agreed to verbally no contract exists until an agreement of sale is completed and signed by both parties.

Breach clause:
A condition in a contract obliging a party to give a defaulting party written notice to remedy his breach of contract within a specific period (usually seven days) before he can cancel the sale or take legal action.

Compliance certificates: (for more detailed info – click here)
The Seller is usually (as per sale agreement) responsible for obtaining the following compliance certificates prior to registration of transfer (if applicable to the property): In many cases there will be work required before the certificates can be issued, and this cost will be for the Seller’s account. The most common certificates are:
Electrical certificate
Beetle-free certificate (also called the Entomologist’s certificate)
Plumbing certificate (in terms of the City of Cape Town Water By-law)
Gas appliance certificate of conformity
Electrical Fence Certificate

Conditions of title:
These are the restrictive conditions limiting an owner’s rights which are recorded on his title deed to a property. They cover matters such as mineral right reservations, servitudes and building limitations.

Cooling-off right:
A statutory right, recorded in Section 29A of the Alienation of Land Act, giving a buyer of a residential property costing R250 000 or less the right to withdraw from the sale within five days of making a written offer.

Electrical compliance certificate:
A certificate issued by a qualified electrician confirming that the installation on a property from its supply point is safe. Every buyer has to be in possession of one once he takes transfer of ownership.

Entomologist’s certificate:
A similar certificate required by law in some coastal provinces to be obtained before transfer of a property confirming that its structure is free of wood borer or termite infestation.

Escape clause (often called the 72-hour clause):
A condition in sale contract giving the seller the right to cancel it if he obtains a more favourable offer from another purchaser. It is usually inserted when the 1st buyer is given time to obtain a bond or to sell his own property first (i.e. there are suspensive conditions). You can then add a clause stating that you will continue to market your property, and should a more favourable offer be obtained from a 2nd purchaser (which is usually unconditional or all conditions have already been fulfilled), then the 1st purchaser will have 72 hours (or other agreed period) to remove the ‘subject to’ from his deal and thus commit himself unconditionally, failing which his offer will be cancelled and the 2nd Purchaser’s offer will carry on.

Fixtures and fittings:
These are attachments to a home which are deemed to permanently belong to it, and may not be removed by the seller when he vacates the property. This can often cause confusion and lead to disputes, so it is good to add a list of fixtures to the sale agreement, that are included in the property, so that there can be no confusion later on.

Guarantees:
Written undertakings issued by registered banks (or other acceptable institutions) guaranteeing payment of part or all of the purchase price on registration of transfer. They are furnished to the transferring attorney.

Interest-bearing trust accounts:
A savings account or other short-term investment opened by an attorney or estate agent to invest any deposit paid by a buyer. The interest accruing will accrue to the buyer on transfer if it is agreed as such in the sale agreement.

Jurisdiction:
Most sale agreements contain a clause providing that, should either party take the other to court for any alleged default, he may do so in a Magistrate’s Court even though the amount in dispute may exceed its normal jurisdiction.

Null and void:
A legal expression emphasizing a final cancellation or lapse of a sale agreement. It puts both parties in the position they were in before the agreement was signed and leaves each without obligation to the other.

Occupation date (Prior occupation and Occupational rent):
A buyer’s right to take personal occupation of a property before transfer takes place if agreed as such by the parties. A rental, agreed to in advance between the parties, will be payable by the buyer until registration of transfer.

Offer to purchase:
A document setting out the proposed purchase price and conditions on which a buyer is prepared to purchase a property. It will be submitted to the seller and, once he signs it, it becomes a valid sale agreement.

Possession:
A stronger right than occupation which usually only passes on registration. It entitles the buyer to , amongst other things, receive all rentals paid by existing tenants while obliging him to pay all assessment rates.

Property description:
This is the definition of the property sold in a sale agreement. It can simply be its street address but should record its erf number and township as described in the owner’s title deed.

Subject-to sale:
An expression used by estate agents to describe a sale contract which will only become unconditional between the parties if and when the buyer sells his own property. A time period of sixty to ninety days is usually allowed.

Suspensive condition:
A provision in a contract suspending its operation until a specific condition is fulfilled. A clause stating that the sale will only be confirmed if a mortgage loan is granted, or if the buyer manages to sell his existing property, are typical suspensive conditions.

Transfer Costs:
The cost incurred to effect transfer of the property into the name of the purchaser, including transfer duty, conveyancer fees, loan application costs, mortgage bond costs, stamp duty and all other charges incidental to transfer.

Voetstoots:
A Dutch expression meaning that a property is bought “as is” with all its patent and latent defects. A Seller can still be held liable for latent defects if they were known to him but which he failed to disclose to the buyer.