Understanding Suspensive Conditions in Property Sales

When buying or selling property in South Africa, legal terms in contracts can often be confusing. One phrase that frequently causes uncertainty and confusion is "suspensive conditions." These are crucial clauses in property sale agreements that determine whether a contract will proceed or become void, and there are several excellent reasons to understand what their implications are. 

Let's break things down: we'll cover what suspensive conditions mean, how they impact property transactions, and why they must be carefully managed to avoid unnecessary delays or legal complications.

Key Provisions in a Property Sale Agreement

A sale agreement can include different types of conditions, each with distinct legal implications. These fall into three typical categories:

• Standard contractual terms - These are obligations that both parties must meet, such as paying a deposit by a set date. If they are not met, the defaulting party may be found in breach of contract.

• Resolutive conditions - If these conditions are triggered, the agreement will be terminated. For example, if a clause states that a sale will be cancelled if a neighbouring property owner objects within seven days, the agreement will no longer be valid if an objection is lodged.

• Suspensive conditions - These conditions that must be met before the sale agreement takes effect. If they are not fulfilled within the agreed time, the contract is automatically cancelled (or suspended, as the name suggests), and neither party is under obligation to proceed.

Read more:  Get the Sale Agreement and Addendums Right

What Happens If a Suspensive Condition Is Not Met?

A suspensive condition essentially puts a sale agreement on hold until a specific event occurs. The most common suspensive conditions in property transactions relate to mortgage bond approval, where the buyer must obtain financing within a set period, often at a specific loan amount. If the loan is not granted in time or the approved amount is lower than required, the sale does not proceed. Another common condition is the sale of an existing property. In such a case, the buyer may need to sell their current home before purchasing a new one. If they do not finalise the sale within the agreed-upon timeframe, the purchase agreement for the new property is terminated.

Suspensive conditions must be clearly defined and met in full. For example, if a contract states that the buyer must secure a bond of R1 million within 30 days, an approval of R990 000 on day 31 does not count as compliance. There is no such concept as "substantial compliance" when dealing with suspensive conditions.

Read more: A guide to understanding the Offer to Purchase

Can a Suspensive Condition Be Extended or Waived?

If it becomes clear that a suspensive condition may not be met within the agreed timeframe, both parties can agree to extend the deadline. However, this must be done before the original period expires. An addendum to the contract must be drafted and signed by both parties to formalise the extension.

Once a suspensive condition expires without being fulfilled, the contract becomes null and void, meaning it cannot be revived. A new agreement would need to be drafted if both parties still wish to proceed with the sale. Simply continuing with the process or signing an addendum after the deadline has passed would not be legally valid.

In some cases, a buyer may choose to waive a suspensive condition, such as needing to obtain bond approval. This must be done explicitly in writing, and the buyer would then proceed with the purchase without relying on financing. However, not all suspensive conditions can be waived, and it is absolutely vital to seek legal advice before doing so.

Why Suspensive Conditions Matter in Property Transactions

When buying or selling property, it is important to:

• Ensure that all suspensive conditions are clearly worded to avoid disputes.

• Monitor deadlines closely and request extensions if necessary, before time runs out.

• Understand the legal implications of failing to meet a condition, as it may result in the agreement becoming void.

Working with an experienced real estate professional can help ensure that all contractual obligations are properly managed. If you are considering buying or selling property, get in touch with a Chas Everitt Property Expert to guide you through the process.