A contract of sale for immovable property can be a daunting document to sign, and understandably so. It binds both the buyer and seller to specific terms and there are significant commitments and undertakings on both sides. This should, however, not put anyone off investing in property, but there are a few things that should be included in the contract of sale to reduce risks and avoid any disagreements or negative outcomes.
Firstly, whether the contract of sale is being drawn up by individuals for a private sale or by experienced estate agents, common law requires certain essential elements to be included in order for the contract to be valid. These elements are:
1. Who the parties to the contract are;
2. The purchase price of the property;
3. The property description.
The contract of sale is the cause of the transfer and in terms of legislation it must be in writing and signed by the parties thereto.
While these are the basic elements that have to be included, there are many additional clauses that are commonly included in a contract of sale and are considered best practice. For example, because of the monetary value of these transactions, most property sales are dependent on a buyer either obtaining a home loan or selling their current home. As such, a clause is often included to this effect, stating that the contract of sale is dependent on these conditions being met. In addition, to protect the seller’s interests, a clause that is frequently included is one that allows the seller to give the buyer a particular time frame (typically 72 hours) within which to meet the conditional clauses, otherwise a subsequent offer from another buyer may be accepted.
Particularly important are two clauses, one relating to occupation and one to breach of the contract.
A contract of sale will often stipulate that occupation of the property by the buyer will take place upon registration. However, because this can be ambiguous due to changes or delays in the process, it is advisable to have a clause that clearly states the date on which the buyer will take occupation as well as a value that will be paid pro rata (occupational rent) for the time of occupation prior to registration. This occupational rent will also be due by the seller if he occupies the property beyond the date of registration.
The breach clause protects both buyer and seller from a situation where one of the parties does not honor the terms thereof. This clause in a contract of sale will give details as to the remedies of each party should this happen, to avoid any uncertainty.
It is worth noting here that should the situation change, and both parties agree that one or more terms of the contract should be altered, it is possible to do so if provided for in the original contract without either party breaching the agreement. The contract can be updated or amended through an addendum that is signed by both parties resulting in the same contract remaining in force with the updated terms.
The key to ensuring a successful property sale is gathering as much information as possible to have the best chance of a positive outcome for all parties. Making contact and working with established and trusted conveyancing attorneys will help streamline the process and make it as smooth and stress free as possible.
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