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FAQ's ARISING IN CONNECTION WITH THE DEED OF SALE
 

FREQUENTLY ASKED QUESTIONS ARISING IN CONNECTION WITH THE DEED OF SALE

•  Where a Purchaser is married in community of property, does the Purchaser's spouse have to sign the Offer to Purchase in order for it to be valid and binding?

In terms of the Alienation of Land 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 preferable however to obtain the signature of both Purchasers, for obvious reasons. Obviously that spouse is binding the joint estate and the property will have to be transferred to the joint estate. To that end, the Purchaser's spouse will have to co-sign all the transfer and bond documentation, if applicable.

However, where Sellers are married in community of property, either spouse may sign but the written consent of the other spouse is required. Practically therefore, both spouses should sign the Offer to Purchase as the law does not permit the consent to be given by way of ratification at a later stage.

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

Yes. Where a minor is selling property, the assistance of both guardians is required. This also applies where the minor is registering a bond.

When a minor is purchasing a property, the assistance of one guardian is sufficient.

Further intervention is required in terms of the Master's consent to the alienation or mortgaging of immovable property by the minor and where a selling price or bond amount is over R100000,00, a High Court order is required.

For property transactions, majority status is attained at 21. Often the Court can insist that the sale proceeds be paid into the Guardian's Fund.

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•  What is the position with parties signing Deeds of Sale in a representative capacity/on behalf on another person or entity?

I n terms of section 2(1) of the Alienation of Land Act No 68 of 1981, no alienation of land shall be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority. Therefore, where someone is signing on behalf of someone else, he must be authorised in writing to perform that act. For example by a Power of Attorney, either General or Special.

Where either the seller or purchaser is a company, trust, close corporation or some other legal entity, then estate agents should be careful to establish that the person entering into the sale agreement has been validly authorised to do so. Most agreements of sale have a clause in terms whereof the seller/purchaser warrants his authority to act. It would however be a good idea for the seller/purchaser to write after his signature, "Who warrants that he is duly authorised to bind the Co/CC/Trust hereto." -A belts and braces approach.

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 could challenge the validity of the contract, if desired. The other contracting party is however protected in a case where the person signing in the representative capacity lied about his authority when queried thereon. 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.

As the transferring attorneys, we make sure that we get a Resolution signed by all directors, members, trustees etc ratifying and approving the sale. It is the period between the date of sale and the date we get the above resolution signed that is vulnerable for either party and yourselves as the agents.

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

There are no hard and fast rules which govern this issue but guidelines. There have been many cases dealings with fixtures and fittings. One needs to consider the following:

Does the fixture/fitting accede to the property? By that we mean does it become a part of or add to the property?

Does it relate to the purpose for which the property is to be used?

What is the nature thereof?

On installing it what was the intention -for it to remain or for it to be taken away with the owner in due course?

There have been so many borderline cases and at the end of the day it is highly advisable to expressly deal with the tricky fixtures and fittings in the deed of sale-either exclude or include!!

A classic question at the moment is that regarding the satellite dish. There has been no case law dealing with the satellite dish. I am of the opinion that it is not a fixture or fitting. It is an essential accessory to the DSTV decoder which would be taken away by the owner and not function without it. You may argue "but so would a television set be taken away and surely a television aerial is a fixture?" I would agree. But let's face it, satellite dishes are still a novelty whereas televisions are not and therefore, most houses sold nowadays would have a television aerial which is part and parcel of the property sold.

Consider a borehole and irrigation system. The irrigation pipes buried under ground are without doubt a part of the property sold. However, the big drums into which the water is pumped are not actually fixed or fitted to the property, but standing on the ground. However, by their sheer weight, size and volume they accede to the property. What's more, they are an essential part of the functioning of the irrigation system which is a fixture and fitting. On installing those drums, clearly the intention was that they remain there permanently.

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

Unless the Agreement of Sale provides otherwise, whoever was the registered owner at the time the special levy was raised is responsible for the payment thereof. A special levy is raised when at a meeting of the body corporate a resolution is passed to the effect that a special levy will become payable on a certain date. But, where the risks and benefits of ownership have already passed to the purchaser on the date the body corporate passed the resolution, then the purchaser would be responsible for payment.

In a nutshell, in terms of the Sectional Titles Amendment Act 29 of 2003, managing agents and body corporates can request payment up front of all levies owing until the end of their financial year. Practically, the effect is the same as with the payment of rates and taxes in conventional property transfers. The amounts due will simply be pro-rated between the seller and purchaser and collected accordingly. Body corporates have a discretion however with regards hereto and most are as before collecting levies due until the end of the month in which transfer is registered and requesting a written undertaking from the purchasers to pay all levies falling due beyond the date of transfer. Perhaps as agents you could warn the purchasers that they might need to make a lump sum payment for levies in advance.

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•  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 is required.

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•  Often a bond is granted but subject to certain conditions. For example, the sale of the purchaser's property and cancellation of his existing bond, foreign exchange approval, unlimited suretyship required, certain building repairs needed to be done at the property, etc. The question arises as to whether the purchaser is obliged to accept these conditions and whether it can be argued that the purchaser's bond has been approved and 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. " What is normal or special may depend on the circumstances. Consider the following:

Where the Bank requires a suretyship by the member or director of a CC or Company bonding, this is standard practice and a normal bond condition in the circumstances. (But what if an unlimited suretyship is required?)

Where a foreigner is registering a bond and foreign exchange approval is a bond condition, that is standard.

If a 62 year old man is applying for a bond and the financial institution grants the bond but the term of the bond is to be 10 or 15 years taking into account his age, then this is a standard bond condition in the circumstances.

If a bond is granted but subject to a condition that the roof of the property be replaced by the purchaser at great cost before registration, and assuming the roof problems were patent defects accepted by the purchaser, then the purchaser is not obliged to accept that bond.

Similarly, the condition that the purchaser's existing bond over another property be cancelled is not a standard bond 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 would be unacceptable to the seller.

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•  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 necessary?

No, unless the clause is worded to the effect that a higher bond is not acceptable, which is unusual. However, if the purchaser only obtains a bond of R900000,00, then an addendum is necessary and must be signed before the expiry for bond approval. The wording of the bond clause may however be "...or such lesser amount as may be acceptable to the purchaser..." in which case an addendum would not be necessary. It all depends on the wording of the bond clause.

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•  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, then the Agreement of Sale lapses and is null and void. An addendum which only deals with the bond approval is not in order as " you cannot breathe life into something that is already dead ". The way to effectively revive the Agreement of Sale, albeit cumbersome, is for the parties to sign another one page Memorandum of Agreement in terms whereof :

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. (simplified wording but you get the just of it)

The original Deed of Sale is then attached as an addendum and each page initialled by seller and purchaser.

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•  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.

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•  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.

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•  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.

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•  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.

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•  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 non-suspensive or unconditional offer until that second purchaser's bond has been approved.

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•  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.

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•  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.

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•  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. )

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•  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.

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•  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.

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•  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.

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•  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.)

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•  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.

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•  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.

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•  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.

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•  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.

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•  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.

•  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)


 
 

 

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