OTP: A Binding Contract – Think Before Signing

An offer to purchase (OTP) can be seen as the quintessential document governing the sale agreement between the seller and purchaser.

August 29, 2017

As such, it should be completed accurately and with great care.

Legal consequences of an OTP

An offer to purchase, once signed by both seller and purchaser is a legally binding contract. This means that both parties to the contract are bound by the terms and are required to fulfill his or her responsibilities as set out in the contract.

Failing to adhere to the terms of an OTP, without any legal cause, amounts to breach of contract. Should either party be found to be in breach of the terms of the OTP, the typical remedies will be available to the other party, including cancellation and claim for damages or enforcing specific performance in terms of the contract. In addition, the party causing the transaction to be cancelled may also be liable for agency commission in the case of the OTP not being subject to suspensive conditions.

What should you consider before signing?

Because signing an OTP has a significant impact on the parties involved, it should not be entered into lightly. As such, the following considerations and roles should be undertaken by each individual involved to ensure the contract is completed and entered into correctly.


  • The buyer is responsible for reading the terms of the OTP carefully and requesting assistance from the estate agent should anything need clarification.
  • Consideration must be given to factors such as the date of occupation, occupational rent, fixtures and fittings and the conditions of sale.
  • It is essential for the buyer to visit and thoroughly inspect the property before signing an OTP as this will help ensure that nothing has been missed and that any concerns can be addressed prior to signing.
  • If the OTP states that the property will be financed through a bond, the buyer is responsible for calculating his or her finances to ensure the deposit, transfer and bond attorney fees, and ongoing monthly bond repayments can be met.
  • Should there be a suspensive condition relating to bond approval, the buyer should also consider stipulating an acceptable interest rate as a condition of the OTP. This can avoid being negatively affected should the bond be approved with an unfavorable interest rate.
  • The buyer is also responsible for performing all necessary acts to allow for registration, including paying bond and transfer costs, providing FICA documentation and being available to sign the necessary documentation with the transferring attorneys.
  • The buyer should check that there is a defects disclosure lists included in the OTP.


  • The seller is required to disclose all patent and latent defects to the property to the best of his or her knowledge. This defects list must be included in the OTP.
  • As with the buyer, consideration must be given to factors such as the date of occupation, occupational rent, fixtures and fittings and the conditions of sale.
  • All outstanding levies, rates and taxes owed to the municipality or body corporate must be paid and the relevant clearance certificates acquired.
  • The seller’s annual tax returns must be up to date.
  • Sellers must obtain all relevant certificates relating to electricity, gas, electric fence, etc. at their own expense prior to registration.

Estate Agent

  • Should the buyer have any questions, the estate agent is required to explain each clause in the OTP and the rights that the buyer has in respect of the agreement.
  • The estate agent is given the authority by the seller to negotiate the selling price with the buyer on behalf of the seller.
  • All specifications as set out by the buyer (e.g. regarding painting, fixing or improving any aspects of the property) must be noted by the estate agent and shared with the seller in order to reach an agreement as to what will be concluded by the seller.

Transferring Attorney

  • The transferring attorney must obtain the necessary FICA documentation from all parties to the transaction.
  • Communication with the appointed bond (purchaser) and bond cancellation (seller) attorneys will be conducted by the transferring attorney, ensuring the correct guarantees are provided.
  • The transferring attorney will also contact the relevant authorities (e.g. SARS, municipality or body corporate) to obtain the outstanding figures in order to calculate payment of these and obtain clearance certificates.
  • The transferring attorney will control the finances throughout the transaction and will make the necessary payments upon registration and provide the seller and purchaser with their respective final accounts to that effect.

Although signing an offer to purchase may seem daunting, it remains an exciting milestone for any buyer and seller. It is simply important to be completely comfortable with all the terms of the contract before signing.

Keeping in contact with both the estate agent and transferring attorney can also provide the necessary guidance needed to ensure a smooth process and a successful transaction for all parties.

Written by Wessel de Kock

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