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Beware of buying a house with a Pro Forma contract
20 July 2017 ,
Alta Botha
953
When you place your house on the market, you suddenly realise how many estate agents are active in your area. Almost daily a new estate agent will contact you to ask if they cannot also help you to market your house. Every estate agent will have their own pro forma Offer to Purchase / Deed of Sale of immovable property that will hopefully soon be a signed contract between the seller and purchaser.
With the legion of legal requirements and contractual principles applicable to an Offer to Purchase of immovable property, you have to ask yourself if this pro forma Offer to Purchase would actually be valid, binding and enforceable once you have signed it.
Most estate agents’ pro forma Offer to Purchase / Deed of Sale are prepared by a legal advisor and will therefore meet the legal requirements. But did you read the contract thoroughly? Do you understand all the conditions and provisions? Do you know what it means, if the contract refers to the Alienation of Immovable Property Act or the Consumer Protection Act? And what does “voetstoots” really mean in practice, and how does it affect your transaction?
Apart from the requirements of the Offer to Purchase / Deed of Sale itself there are other principles playing a very important role in the Offer to Purchase / Deed of Sale of real estate specifically as well as contracts in general. Is the buyer who has signed the contract married in community of property? If so has the spouse given his/her written consent? Is the buyer a Closed Corporation, Trust or Company? In that case, has the entity already been established? Does the entity’s constitution/Trust Deed/Founding documents allow it to buy immovable property? Who may sign on behalf of the entity and is there a resolution in place confirming same?
Are there approved plans for the additions to the house? Are there servitudes registered against your property? Does the title deed of your property contain conditions that you and the buyer have to be aware of? Certainly, you have read through your title deed … or not?
The Offer to Purchase / Deed of Sale may further determine that the buyer must deliver guarantees for example “21 days” after acceptance of the offer. As and when is this time period calculated? Do “days” mean only week days or does it include weekends and public holidays?
Does the home have electric fencing? Has the contract made provision as to who will be responsible for the required certificate?
It often happens that pro forma contracts make provision for open spaces for additional information and deletion of irrelevant clauses. Do these spaces have to be struck through and initialised by all parties? What happens if irrelevant clauses are not taken out?
So many questions and so few answers. It is preferable to discuss any Offer to Purchase / Deed of Sale with an attorney both by the seller as well as the purchaser. Too often our courts hear cases where the buyer or the seller dispute the validity of a sales agreement because it did not comply with the basic legal requirements.
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