You Signed a Property Sale Agreement, Can You Still Accept a Better Offer?

You Signed a Property Sale Agreement, Can You Still Accept a Better Offer?

You put your property on the market and an acceptable but not-perfect offer comes in. On the “a bird in the hand is worth two in the bush” principle you want to accept the offer even though it’s not ideal.

Perhaps it’s not perfect because it’s subject to a suspensive condition – common ones give the buyer time to sell his/her current house or to obtain a bond. In both scenarios your sale will fall through if the buyer is unsuccessful within the stated time, and if that happens you are back to square one after a long and fruitless delay. Bear in mind that that delay could be a protracted one depending on what your sale agreement actually provides – normally no less than 30 days to get a bond, sometimes several months to sell an existing house. That’s a lot of very valuable marketing time lost – and you’ll never know for sure whether you just missed out on that “perfect offer”.

The “72-hour clause” and what it does

This is where the “72-hour”, “continued marketing” or “escape” clause comes in handy. 

In a nutshell, it allows you to continue marketing your property until suspensive conditions are met. If your marketing pays off and an unconditional offer does come in, you can give your existing buyer 72 hours’ notice to match it. So the buyer would have an opportunity to make the sale unconditional – either by waiving (abandoning) the condition or by fulfilling it.

If the buyer fails to do whatever the clause requires within the 72 hours, you are clear to accept the new offer. If on the other hand the buyer does perform in time, the existing sale immediately becomes fully binding and the transfer process can get underway.

A note for buyers

The clause is usually there for the seller’s benefit so perhaps avoid it when you can. But if it’s a choice between your offer being accepted or not, bear in mind that having a signed sale agreement at least gives you a solid base for a full bond application and/or a concerted effort to finalise your own house sale.

Just be ready to react quickly if the seller does indeed give you the 72 hour notice – you don’t want to be rushing around in a last-minute panic.

Buyers and sellers – check the wording!

Although 72-hour clauses are common in standard sale agreements, the exact wording can vary substantially, and may need tailoring to meet your specific needs. You might for example want to be given proof of availability of funds together with a bond clause waiver, or proof that the sale of the buyer’s house is a viable one – every situation will be different. 

Apart from everything else, make sure that – 

  • The 72 hour period specifically excludes Saturdays, Sundays and Public Holidays (religious holidays too if important to you), 
  • You can extend the 72 hours by mutual agreement if you want to, 
  • There are clear requirements for the method and timing of giving notice and of waiving conditions, and 
  • You aren’t binding yourself to anything else that could turn around and bite you down the line. 

Delete the clause if it doesn’t apply. 

As always, have your lawyer check it all for you before you sign anything!

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Security Estates: Can You Fine Speedsters?

Security Estates: Can You Fine Speedsters?

“When the [property owners] chose to purchase property within the estate and become members of the Association, they agreed to be bound by its rules” (extract from judgment below)

There are many advantages to buying in a security estate or other community scheme, including quality of life and increased potential for growth in your property’s value.

As a buyer just be aware that you will almost certainly be binding yourself to a set of rules and regulations imposed by the Homeowners Association (HOA) or Sectional Title Body Corporate. Check that you are happy with them before you sign anything! Our courts have regularly confirmed the general principle that you are bound by what you agree to, and a recent high-profile Supreme Court of Appeal (SCA) decision provides an interesting example.

HOAs and Bodies Corporate on the other hand will be particularly pleased with the outcome, the High Court having originally held that the speed limit rules imposed by the estate in question were an unlawful attempt to usurp State powers over public roads and therefore invalid.

Speeding fines in a golf estate
  • A large golf estate (comprising some 890 freehold and sectional title properties with extensive common areas and facilities) is serviced by a network of roads and pathways. It has imposed a speed limit of 40km/h on its roads, with penalties for speeding. 
  • A property owner was fined R3,000 for his daughter’s repeated speeding contraventions, but he refused to pay, and the dispute has since then been grinding its way through the courts.
  • The High Court originally held the speed limit rule to be invalid on the grounds that the estate’s roads were “public roads”. 
  • But the SCA overturned this ruling, holding that the estate is a “private township” and its roads are (and were from inception) “private roads”. The “general public” has no right to access the estate’s roads, admission being restricted by electrified perimeter fencing and strict control at gated access points to owners, tenants, employees, guests, invitees and other “duly authorised persons”.
  • Even if the roads had been “public”, said the Court, owners had voluntarily agreed to bind themselves contractually to use the estate’s roads subject to the conduct rules. And because invitees are only allowed into the estate with the owner’s prior consent, the rule making the owner responsible for any breach by them of the rules is valid. 
  • Moreover, the estate’s imposition of a speed limit is not unreasonable, especially given the presence of children, pedestrians and animals (wild and domestic) in the estate.

The end result – the estate’s speed limit is valid, it is entitled to impose penalties for breaches, and the owner must pay his daughter’s speeding fines together with some (no doubt substantial) legal costs.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Estate Agents: Securing Your Trade Secrets (and Your Commission)

Estate Agents: Securing Your Trade Secrets (and Your Commission)

“In short, it [a Fidelity Fund Certificate] is a licence to practice without which you cannot practice.” (Extract from judgment below)

As an estate agent you will know that without a valid Fidelity Fund Certificate (FFC) you are not entitled to any commission for the successful sales or leases you put together. All your hard work in fulfilling your mandate will come to naught. Your client need pay you nothing. 

As a recent High Court case warns, you will also be unable to enforce any restraints of trade you enter into with your employees. And that’s a major risk if your trade secrets are as valuable to you as they are to most agencies.

The company that converted from a CC without changing its FFC
  • A close corporation (CC) trading as an estate agency held an FFC.
  • It converted to a company, retaining the same name so that the only change was the “CC” at the end of its name becoming “(Pty) Ltd”. 
  • The agency’s fatal mistake was that for 5 years after the conversion it continued to hold FFCs in the CC’s name. During that period it employed an intern agent in terms of an Intern Agency Agreement which included a restraint of trade clause prohibiting the employee “from engaging or participating in the property industry for a period of six (6) months after the termination of the agreement”. 
  • When the intern agent resigned and joined another agency, the company approached the High Court for an order interdicting and restraining her “from utilising and/or communicating confidential information relating to its business affairs, property listings, pricing, valuations etc” and “from operating in any capacity in the residential property market” in a list of named suburbs for 6 months. 
  • In the 18 months she had been with them, said the agency, she had “gained knowledge of valuable importance pertaining to the business of the [agency]. To that extent this matter was of cardinal importance to the [agency].” 
  • The agency argued that the FFC issued to the CC should be deemed to have been issued to the company “because it is the ‘same’ entity”. Rejecting this, the Court said the FFC had been issued for 5 years to a different, non-existing entity. Moreover an agency must if operating in a corporate entity have separate FFCs for all its directors (if a company) or members (if a CC) in addition to its own.
  • Accordingly, said the Court, the company could not act as an estate agent and its internship agreement incorporating the restraint of trade was “null and void thus unenforceable”. 
A final thought for agencies

Check and double check that all your FFCs are in order and in the correct names. Change nothing in your holding structure without having a plan in place to update all your FFCs immediately.

Take into account possible administrative delays, the Court here specifically warning that “It is not enough that the application is being processed or some other hiccup is in the process of being solved. The provisions are clear and peremptory.” Either you have a valid FFC in place at the critical time or you don’t.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Property Buyers: There’s a New Deduction from Interest Earned on Your Deposit

Property Buyers: There’s a New Deduction from Interest Earned on Your Deposit

When you buy property, the sale agreement often provides for you to pay a deposit (normally 10% of the sale price) to the conveyancer (the attorney transferring the property into your name), to be kept in trust until transfer.

Don’t lose out on earning interest on your deposit money – check that the sale agreement’s deposit clause says that the deposit must be invested in an interest-bearing trust account with interest to accrue to you. Also an instruction to the conveyancer to do this is normally in the standard documents you sign at the start of the transfer process. A good tip here is to have all your FICA documents in order as the investment can only be opened after you are FICA’d.

After transfer the conveyancer accounts to you for net interest accrued after bank charges, handling fees and the like, plus – a new charge – a fixed 5% deduction in favour of the Legal Practitioners Fidelity Fund.

That new 5% deduction is mandated by the new Legal Practice Act, it kicked in on 1 March 2019, and it boosts funding for the Fidelity Fund. In most cases it will be only a small amount, and it’s a bit like paying an insurance premium to make sure that your money is safe and secure. 

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Neighbours Building? Know Your Rights Re Plan Approval

Neighbours Building? Know Your Rights Re Plan Approval

“You can be a good neighbour only if you have good neighbours” (Howard Koch, “Invasion from Mars” author)

Your neighbours apply to the municipality for approval of building plans. You object strongly – if allowed, you say, the new building/addition/alteration will seriously impact on your property’s appeal and value. It will be unsightly and objectionable. It will ruin the neighbourhood.

How must the municipality’s “decision makers” assess the plans in light of your concerns? A long-running legal fight over just that question has finally been resolved by the Constitutional Court.

The Court’s decision is a vitally important one for all property developers and owners planning to build, as well as for their neighbours, for the simple reason that no construction work can proceed without municipal approval of the building plans (although note that some categories of “minor work” may not require plan approval – ask your local authority for details).

Passed plans and blocked off balconies 
  • The owners of a seventeen story city building had been allowed to build balconies right up to the neighbouring four story building’s boundary.
  • The neighbouring building’s owners applied for approval of plans to add another four stories. The problem was that the balconies on three floors of the first building would touch the top stories of the new additions.
  • Predictably, strenuous objections to the building plans were lodged, but in the end result the municipal decision makers approved the plans, and building commenced.
  • Had the plans been properly approved? A string of court battles later, the highest court in our land has had its (final) say on the matter.
3 disqualifying factors and the “legitimate expectation” test

Central to this decision is a statutory protection for buyers and neighbours in regard to various “disqualifying factors”. The proposed building cannot be (our emphasis) “erected in such manner or will be of such nature or appearance that–

  1. The area in which it is to be erected will probably or in fact be disfigured thereby;
  2. It will probably or in fact be unsightly or objectionable;
  3. It will probably or in fact derogate from the value of adjoining or neighbouring properties”.  

The Court’s decision – the building plans had not been properly approved. They must go back to the municipality for re-assessment, and the developer is accordingly back to square one. Presumably a demolition order will be on the cards if they are ultimately unsuccessful in having their plans passed.

A decision maker must, held the Court, in assessing the 3 factors above consider the impact of the building proposal on neighbouring properties, from the perspective of a “hypothetical neighbour”. In a nutshell, will it probably, or in fact, be so disfiguring of the area, objectionable or unsightly that it would exceed the neighbour’s “legitimate expectations”? 

And whilst it has always been clear that neighbours have to be considered in regard to the “derogation of value” (i.e. reduction of value) aspect, this decision for the first time confirms that their viewpoints are relevant, and must be considered, in regard to all three aspects. 

Stronger rights – but not for “sensitive neighbours”

That certainly doesn’t mean however that neighbours can willy-nilly object to plans and expect the municipality to back them regardless of the facts. On the contrary, the Court made it clear that “The legitimate expectations test is not a subjective test determined by the whim of a sensitive neighbour.  The test is objective and based on relevant facts, which would, in the ordinary course, be placed at the disposal of the decision maker”.

The important thing remains that your rights as the “non-building neighbour” just got a lot stronger. Protect them!  

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Property Buyers: Beware Unlawful Occupiers!

Property Buyers: Beware Unlawful Occupiers!

“The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell” (Sir John Templeton, billionaire investor)

You are it seems in good company if you view times of depressed property prices and general uncertainty as a great buying opportunity. 

Just be aware that if it is a house you are after, whether as an investment or to live in, you should do your homework if the property is (or might be) occupied. Generally speaking, buying a property with occupiers is fine if you know about them and have a binding deal in place with them (see the end of this article for more on that). 

But, as a recent High Court decision illustrates, if you aren’t aware of occupiers and/or don’t have a proper agreement in place with them, you could find yourself unable to evict them even if you buy the property “free of lease”. 

Before we discuss the case itself, it is important to know that to get an eviction order from a court, you need to prove in terms of PIE (the Prevention of Illegal Eviction From and Unlawful Occupation of Land Act) both – 

  1. That the occupants are “unlawful occupiers” and
  2. That it is “just and equitable” to grant such an order after considering all the relevant circumstances.
The Bo-Kaap flat, the sale in execution, and the occupiers
  • A property investor bought a flat in a sectional title development on a sale in execution. As we shall see below, the history of the flat’s ownership, and its location in Cape Town’s historic Bo-Kaap area, were relevant to the outcome of this matter.
  • The Sheriff of the High Court sold the flat for R375,000 “free of lease”, but also with “no warranty that the Purchaser shall be able to obtain personal and/or vacant occupation of the property or that the property is unoccupied and any proceedings to evict the occupier(s) shall be undertaken by the Purchaser at his/hers/its own cost and expense….”
  • The people living in the flat refused to leave or to “legalise … their rights to the property”, and the investor applied to the Court for their eviction.
  • The eviction order was refused firstly because the investor was unable to prove that the persons it was trying to evict were “unlawful occupiers” for lack of information as to –
    • Who the occupants of the flat actually were, with the result that “the court has scant knowledge of essential details of the occupiers of the property in circumstances where these are material to the exercise of the court’s discretion under the provisions of PIE”. Crucially, there was nothing before the court as to the ages or circumstances of the occupiers, so it was unable to consider “all the relevant circumstances including the rights and needs of the elderly, children, disabled persons and households headed by women”.
    • When and under what legal right the occupiers originally took occupation (lease, right of habitation, usufruct etc), when that right was terminated and under what circumstances. Note that timing is important here because once unlawful occupation has lasted for more than 6 months, the question of relocation to land supplied by the municipality or government becomes relevant.
    • Whether or not the occupants had any form of written or verbal lease. That’s important because of our law’s “huur gaat voor koop” principle – literally “lease goes before sale”, meaning that you are generally bound to honour an existing lease (there are a few exceptions – take specific advice). 
  • Secondly, the investor failed to convince the Court that it was “just and equitable” to grant the eviction. 

    Again, the lack of information as to the occupiers was relevant, and the Court’s comments on the particular facts of this matter are worth noting in full (our emphasis): “The residents of the area are, generally speaking, not wealthy and Bo-Kaap is home to many poor and working-class people. An eviction of the type sought in this matter, in which a group of related persons appear to occupy a family home that was acquired from the City of Cape Town some time ago, might well render them homeless or at the very least require them to relocate to one of the outlying suburbs that are now home to the many who fell foul of the Group Areas Act. If those circumstances obtain, a court would be required to think long and hard about the justice and equity of ordering people to vacate a dwelling, long occupied, which has been snapped up by a buyer distant to the neighbourhood for investment or development potential. Certainly, it is to be expected of such buyers that when they seek to move established families out of their homes, they do their homework properly and place all relevant facts before the court.”

Do your homework, and do it properly!

Investor or not, the Court’s warning to do your homework applies to you. Establish whether anyone is living in the house, exactly who they are, how long they have been there, and on what basis. 

Bear in mind that because leases need not be in writing, you could find yourself battling occupiers who claim to be tenants under a verbal lease. Without a written record they could well claim to be entitled to pay minimal rent and to have many years left on their “verbal lease”. 

So first prize will always be to reach a written, water-tight deal with any occupants before buying – ask your lawyer for help.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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