FAQ Deed of Sale

FREQUENTLY ASKED QUESTIONS ARISING IN
CONNECTION WITH A DEED OF SALE
1) Must the spouse of a Purchaser who is married in community of property sign the Offer to Purchase in order for it to be valid and binding?

In terms of the Matrimonial Property Act, either spouse can sign the Offer to Purchase for
the acquisition of immovable property and in so doing, bind the joint estate. It is
however preferable to obtain the signature of both spouses because the purchase binds the joint estate and the property will be transferred to the joint estate of the two spouses.

However, where Spouses are married in community of property sell their immovable property, either spouse may sign the sale agreement but the written consent of the other spouse must be obtained. Practically therefore, it is preferable If both spouses sign the Offer to Purchase together.

2) Does a minor selling or purchasing property have to be assisted by his
guardian(s) when signing the Offer to Purchase?

A minor is someone who is younger than 18 years .

Yes, where a minor is sells immovable property, the assistance of both guardians is required. This also applies where the minor is registering a bond over immovable property. The Master of the High Court must also consent to the transaction.

Where a selling price or bond amount is more than R100000,00, a High Court must, in addition to the guardians, consent to the transaction.
(When a minor purchases immovable property, the assistance of one guardian is sufficient.)

3) Can you sign a Deed of Sale in a representative capacity or on behalf of another person or entity?

Section 2(1) of the Alienation of Land Act No 68 of 1981, determines that land may not be alienated unless it is contained in a written deed of sale signed by the parties thereto or by their agents acting on their written authority. Therefore, if X is singing a agreement of Sale on behalf of Y, he must be authorised in writing by Y to do so. An example of such an authority would be a Power of Attorney, either General or Special.

If a seller or purchaser in an agreement of sale is a company trust, close corporation or some other legal entity, then estate agents should verify whether the person signing on behalf of the entity has been validly authorised to do so. Most agreements of sale have a
clause in terms whereof the seller/purchaser signing on behalf of an entity warrants his authority to act. In the absence of such a clause the representative should insert after his signature “Who warrants that he duly authorised to bind the Co/CC/Trust hereto.

If no inquiries were made as to the other contracting party’s authority to bind the entity
and there was no warranty clause included in the deed of sale, then the other
directors/members/trustees of that entity can challenge the validity of the agreement. However, if on questioning the representative lied about his authority then the other party Is protected. It is important therefore for the question to be asked and then recorded as to whether that person is authorised to enter into the contract or not. It must not just be assumed.

It is important to note that with trusts selling or buying property, all the trustees are
required to either sign the deed of sale or better still (and more practical), a resolution
authorising the sale. Compare with companies or cc’s selling or acquiring property
where it is in order for the members or directors to ratify the sale or purchase at a later
stage.

4) What legal principles determine whether a fixture or fitting is included as a part
of the property sold?

The Law states that unless otherwise agreed, all fixtures and fittings form part of the property and may not be removed by the seller. Sometimes though there is a dispute whether a certain item is a fixture or not. Over years many court cases have been reported with regard to fixtures and fittings. The courts have set guidelines to determine whether something is to be regarded as permanently fixed so that the seller may not remove aspects that have to be taken into account:

1. Does the fixture/fitting accede to the property? By that we mean does it become a part of or add to the property?
2. Does it relate to the purpose for which the property is to be used?
3. What is the nature thereof?
4. On installing it what was the intention-for it to remain or for it to be taken away with the owner in due course?
To avoid uncertainty it is at the end of the day advisable to expressly deal with the tricky fixtures and fittings in the deed of sale-specifically !

5) Special Levies: Who is responsible for payment of a special levy raised before or
after the deed of sale is signed?

Special levies are levies raised by a body corporate for necessary unexpected (not budgeted for) expenses.

Unless an Agreement of Sale provides otherwise, it is the registered owner at
the time the special levy was raised who is responsible for the. A special levy
is raised the body corporate meets and passes a resolution to the effect that a
special levy will become payable on a certain date. Where ownership have already passed to the purchaser on the date the body corporate passed the
resolution, then the purchaser would be responsible for payment.

This might become problematic if a special levy is raised and becomes due and payable after an owner has sold his property but before transfers has taken place. As soon as the unit has been transferred, the seller may think he is no longer liable to pay the special levy. It would be advisable that a seller and purchaser negotiate this issue at the time of contracting.

6) If the bond clause in the deed of sale does not state that the approval must be a
final approval then does an Approval in Principle suffice? In other words, is the
suspensive condition as to bond approval met on the date the AIP is issued?

The answer is NO, a final approval must be furnished on or before the due date.

7) Banks often make the bond approval subject to certain conditions. Such as, the sale
of the purchaser’s property and cancellation of his existing bond, foreign
exchange approval, unlimited suretyship by a third party, building repairs etc.
Is the purchaser is obliged to accept these conditions? Can it be argued that
the purchaser’s bond has been approved and that the condition in the sale agreement has been met and that therefore a valid and binding agreement of sale
come into existence.?

Most deeds of sale specify that the agreement is subject to a bond being granted “on the
bank’s normal terms and conditions. ” Normal conditions are not defined but would Include:

• Where the Bank requires a suretyship by the member or director of a CC or Company that has applied for a bond; or

• Where a foreigner is registering a bond and foreign exchange approval is made a bond
condition; or

• If a 62 year old man is applying for a bond and the financial institution grants the bond
but the term of the bond taking into account his age is to be 10 or 15 years;

However,if a bond is granted but is made subject to a condition that the roof of the property must be replaced by the purchaser before registration, (and assuming the roof problems were
patent defects accepted by the purchaser) then the purchaser is not obliged to accept that
bond from the particular bank. This in turn means that the seller cannot claim that the condition has been met thereby keeping the purchaser bound to the agreement.

Similarly, a condition requiring that the purchaser’s existing bond over another property be
cancelled is not a standard bond grant condition. Cancelling the existing bond would in almost
all cases necessitate the sale and transfer of the purchaser’s property and where the
agreement of sale is not subject to this special condition, it may be unacceptable to the
seller.

 

 

8) Where an Agreement of Sale is subject to the purchaser obtaining a bond in the
amount of R1mil and the purchaser is granted a bond of R1,1 mil, is an
addendum?

No, unless the clause is worded to the effect that a higher bond is not acceptable, which would be quite unusual.

However, if the purchaser obtains a bond of onlyR900000, 00, then an
addendum is necessary and the parties must signed before the expiry date for bond approval. However if the wording of the bond clause is “...or such lesser amount as may be
acceptable to the purchaser˜”.

9) What happens if your purchaser’s bond is approved a day after the expiry
period for bond approval ? Can the seller and purchaser sign an addendum
accepting the purchaser’s bond, albeit out of time?

If a bond is not approved within the time period agreed to, in the agreement of sale, then the
lapses and becomes null and void. Signing an addendum (extending the date by which bond approval must be obtained) after the agreement has lapsed, will be ineffectual because as our courts have noted “you cannot breathe life into something that is already dead”.

The way to revive the Agreement of Sale, is for the parties to sign a Memorandum of Agreement in which the parties Include a provision such as:

“The parties contract with one another on exactly the same terms and conditions as
contained in the Deed of Sale annexed hereto save for Clause “x” dealing with bond
approval which shall read as follows:

The Agreement is subject to the purchaser obtaining a mortgage loan in the amount of
Rabc which has already been granted to the purchaser by x Bank and accepted by
her.

The initial Deed of Sale must then be attached as an addendum to the Memorandum of Agreement and each page must be initialed by both seller and purchaser.

10) Suspensive versus Ordinary condition : The bond clause versus the deposit
clause?

The bond clause is suspensive whereas the deposit clause is not. The Agreement is
conditional on the purchaser obtaining the bond timeously. Essentially, the Agreement of
Sale is hanging in the air, suspended, until the purchaser obtains the required bond. If the
bond is not obtained timeously, the Agreement lapses automatically. Similarly, where an
Agreement is subject to the purchaser selling his property by a certain date and that does
not happen, the deal falls through. The purchaser is not in breach and the seller does not
have to put the purchaser to terms. There is no deal.
Compare with a cash offer. The deal is “on” from the word go. There is no waiting for a
condition to be fulfilled first. If the purchaser does not then pay the deposit when required
to do so, the purchaser is in breach of contract and the conveyancers will have to put the
purchaser to terms to perform, failing which the seller will have an election whether to
sue for specific performance or cancel the sale.
If however the purchaser qualifies for the bond but has buyer’s remorse and no longer
wants the property, the purchaser may frustrate the bond approval, well knowing that if
not obtained by a certain date the sale will lapse. In such a scenario, if the seller can
prove that the purchaser in fact qualifies for the bond, the seller could sue the purchaser
for “fictional fulfilment” . My view is that unless the purchaser has paid a deposit and the
seller has some hold over the purchaser, it is not worth forcing a reluctant purchaser to
the deal. I say if there are other buyers interested in the property, rather put the property
back on the market.

11) Your client intends renovating his property. He has a grumpy neighbour who he
does not get on with and inquires whether the neighbour’s consent to the
alterations will be required.

Firstly your client’s builder/architect will look at the zoning and building regulations and
title deed conditions. Neighbour’s consent is only required if you are deviating from them
with council approval.

12) How far can you build from your side and street front boundary walls?

This also depends on the zoning and building regulations, and title conditions.

13) What is involved if a seller or purchaser wants to have a title deed condition
removed. What is the cost? How long does it take?

There are two options available. Firstly, one can make application to the High Court for a
court order that the title condition be removed. In this instance the decision rests with a
judge who will hear the application and require that the applicant advertise the intended
removal in the Government Gazette and local press. In exceptional circumstances the
court can dispense with notice if it deems appropriate. This option is more costly but the
quicker option if there are no objections to the intended removal. However, if an
interested party who appears to have vested rights objects, that can be fatal to the
application as the court will not overrule the objection and it would then refer the
applicant to the administrative channels (see below).
The other option is to make application to the local authority. Advertising in the local
press and Government Gazette is a requirement. The whole process through council can
take from 6 months up to a year. If there are objections, the local authority has the power
to overrule them whereas as seen above, a court is reluctant to do so.

14) A property is sold subject to the purchaser selling his property and obtaining a
mortgage bond. There is a 72 hour clause in place in favour of the seller. The
seller receives another offer which is subject to a bond but is not subject to the
purchaser selling his property. Can the seller accept that new offer even though
it is also subject to the purchaser getting a bond?

It all depends on the wording of the 72 hour clause but the second offer is not a nonsuspensive
or unconditional offer until that second purchaser’s bond has been approved.

15) In what instances can a purchaser who has paid vat or transfer duty claim it
back?
Whether the purchaser can claim vat or transfer duty back will firstly depend on whether
the purchaser is registered as a vat vendor and secondly on what the purchaser intends
using the property for. With regards to the first requirement, the Receiver does not
require that the purchaser be registered as a vat vendor on the date the property was
purchased or even before transfer is registered; however, the purchaser’s vat registration
approved later on would need to be effective from the date of sale. (ie the vat registration
is back dated to at least the date of sale).With regards to the intended use for the property,
for the purchaser to succeed in claiming vat or transfer duty back s/he must show that the
use of the property is directly linked to the income earning activity of the purchaser. For
example, if a Doctor (registered for vat) acquires a property and practices from there, the
doctor will be able to claim the vat or transfer duty back. But if the doctor acquired the
property in order to live there, then claiming back the vat or transfer duty back would not
be an option. If a doctor acquires a property 50% of which will comprise his residence
and 50% his practice, he will effectively be able to claim back 50% of the vat or transfer
duty paid.

16) Can funds brought into SA from offshore to acquire a property be repatriated
on sale of that property further down the line?

Yes, together with any profit, proportionate to the non-resident’s shareholding. The title
deed would need to be endorsed non-resident once returned by the deeds office.

17) Is a guarantee from an overseas bank acceptable?

It’s not really worth the paper it’s written on, to coin a phrase. The point is that a
guarantee issued by an overseas bank is not readily enforceable , for obvious reasons. It is
better to provide for the purchaser paying the purchase price into the conveyancer’s trust
account on an agreed date or into a local account opened and a guaranteee issued against
the funds in that account. Guarantees are costly though and therefore it is better for the
funds to be transferred straight into the conveyancer’s trust account and interest earned
form that date. (Back to back guarantees are an option but they are complicated and
costly. )

18) Your client who has given you a mandate to sell his property is very ill and
deteriorating rapidly. You get an offer on the property. What do you do?

If your client is sane and of sound mind then he can accept the offer; however, if he is
mentally incapacitated then application would have to be made to court for a curator to be
appointed. Similarly, if there is a power of attorney in place in favour of a member of his
family, then that family member can accept the offer to purchase on his behalf provided
that your client, although ill, is mentally in a position to comprehend his actions and the
consequences thereof. If however your client has become mentally incapacitated since
giving the power of attorney, for example fallen into a coma, then an application must be
made to court for a curator to be appointed and that existing power of attorney would no
longer be valid.
Discuss if your seller passes away either before the offer to purchase is accepted or after
sale but before transfer.

19) Your seller is sequestrated before transfer.
The transfer would be put on hold until such time as a trustee was appointed to administer the seller’s estate. Discuss.

20) What is the difference between possession and occupation?

Occupation is the right to use and enjoy the property. Possession is associated with legal
risk in the property and the right to enjoy the benefits associated with the property. The
purchaser should insure the property from date of possession.

21) A pool pump is working on the date of sale and breaks just before transfer or a
geyser bursts after sale but prior to transfer.
The property is at the seller’s risk until possession passes which is most often on transfer.
Therefore the seller is responsible for repairing the pool pump or geyser, UNLESS the
seller can prove that what caused the problem was a latent defect that existed at the time
of sale. (A property is sold with all attendant patent and latent defects.)

22) Discuss whether a seller is contractually obliged to furnish the purchaser with an
electrical clearance certificate. How long is a clearance valid for once issued?

What about beetle certificates?

A seller is not contractually bound to furnish a purchaser with an electrical or beetle
clearance certificate. An Agreement of Sale is not invalid if the seller has not undertaken
to provide the purchaser with same. In terms of the Occupational Health and Safety Act,
every consumer of electricity is legally obliged to be in possession of a valid certificate of
compliance. The certificate is transferable from one user to another provided that no new
electrical work has been done since the issue of same. If the seller is not in possession of
the certificate then that seller is breaking the law as it were, but nothing more. The fact
that the seller is breaking the law does not invalidate the contract between seller and
purchaser. The purchaser can use the fact that the seller is in contravention of the law to
force the seller to furnish him with an electrical clearance certificate.
That said, almost every Deed of Sale provides for the seller furnishing the purchaser with
an electrical clearance certificate. We are often asked how long the clearance is valid for?
The answer is “forever”, provided that no electrical changes have been made to the
property since the issue thereof. It is my view that unless the clause specifies that the
seller is in possession of an electrical clearance certificate dated “xyz” which shall be
provided to the purchaser, then the seller must have the property inspected and a new
certificate of clearance issued. Or, the clause might specify that the clearance certificate
shall not be older than 6 months. In that instance, an existing certificate issued 6 months
back or less would suffice.

23) At what stage of the transfer process can the seller request guarantees from the
purchaser?

This depends on the wording of the Agreement of Sale. If the Agreement specifies a
date on which guarantees must be furnished, then the purchaser is obliged to furnish
guarantees by that date. The date must be clearly determinable. Compare the
following: “The purchaser shall furnish guarantees within 7 days of request by the
conveyancers.” With “The purchaser shall furnish guarantees on 1 December or
within 7 days of signature of the Agreement of Sale”. In the first instance the date is
not a set date whereas in the second and third instances it is. If a set date was not
agreed upon in the Agreement of Sale then guarantees need only be furnished as and
when the conveyancers are in a position to lodge the deeds at the deeds office.

24) A purchaser signs an offer to purchase with an expiry time of 12 pm the
following day. The seller is presented with the offer and makes a counter offer to
the purchaser. Can the seller withdraw that counter offer before it is signed by
the purchaser?

Yes, the counter offer can be withdrawn before acceptance by the purchaser unless the
expiry clause in the deed of sale specifically provides that any counter offer made shall
be open for acceptance for “x” hours and be irrevocable until presented to the other party.

25) A purchaser makes an offer to purchase a property and the offer expires at
12pm the following day. The seller wants to accept the offer but is not available
until 2pm the following day. If the purchaser verbally agrees to an extension until
2pm, is that in order or must the extension be signed by the purchaser?

In most Deeds of Sale there is a clause to the effect that no variations shall be of any
force or effect unless reduced to writing. Therefore, it is not in order for the expiry time
to be extended verbally although this is common practice by estate agents. The validity of
an offer concluded on that basis is lying wide open to attack if desired by seller or
purchaser later on.

27) A purchaser requests that the transfer duty he is required to pay be deducted
from the deposit that he paid. He has a 100% bond. Can this be done?

Yes, with the seller’s consent. Herewith an addendum one can use.

ADDENDUM “A’

Clause 1.1.: DEPOSIT

1.1.1. The Purchaser shall pay a deposit in the amount of R100 000,00 (ONE
HUNDRED THOUSAND RAND) to ABC (Estate Agents) by close of business
on Friday, 5th November 2004. The deposit shall be invested by ABC with
interest to accrue to the Purchaser. Upon notification by the Seller’s
conveyancers to ABC that transfer duty is payable by the Purchaser, the amount
required for transfer duty shall be released by ABC to the Seller’s conveyancers
and utilized for such purposes. The Purchaser shall not be entitled to any interest
on the deposit once released by ABC to the conveyancers.
1.1.2 In the event of the Agreement of Sale being cancelled as a result of a breach of
contract by the Purchaser, as contemplated in clause “x” thereof, the Seller’s
conveyancers shall immediately apply to the Receiver of Revenue for a refund of
the transfer duty and once refunded to the conveyancers, it shall for all intents and
purposes constitute a deposit paid by the Purchaser and be dealt with accordingly.
(To be signed by Seller and Purchaser)

28) Other questions :

Can a purchaser sign as trustee for a trust to be formed?
Can transfer and bond documents be signed overseas and if so what is the procedure?
What is the rate of estate duty and what is the exempt amount?
What is the difference between a “meat or beat clause” and the “72 hour clause”?
A non-resident or Affected person is bonding. What restrictions apply?
At what stage of the transfer proceedings is transfer duty payable?
When is vat payable and by whom?
What is a tripartite agreement?