A Property24 reader asks:
A Property24 reader says she got an offer on her property making it possible to buy her dream home, but the buyer has not come up with the cash. What to do?
I received a cash offer to purchase my property from an agent. This offer put me in a position to subsequently make an offer on a property I wanted in a nearby estate. The offer documents for the sale of my property were handed to my conveyancer but the buyer did not come up with the guarantees as stipulated in the contract. He had promised to produce the full cash amount within a week.
I have been looking for a suitable property in the estate for 7 years and may lose my dream home as I do not have the cash offer as promised. What are my legal rights? Can I force the buyer to see it through?
Jaco Rademeyer, from Jaco Rademeyer Estates, responds:
Before it can be said that a contract has been concluded between two or more parties, it must be clear that the parties have reached an agreement on all aspects of the contract.
When a party signs a contract he is taken to be bound by the ordinary meaning and effect of the words which appear over his signature.
A contract of sale is concluded when a seller and a buyer agree on the property sold; the purchase price and the prescribed formalities have been complied with. In the absence of an agreement to the contrary common law principles regulate the relationship between the parties.
At common law the purchaser is obliged to pay the purchase price on transfer of the property to him. It can, naturally, be agreed that the purchase price must be paid in full before transfer, this however must be set out in clear terms.
In the usual case in which the buyer is obliged to pay the purchase price simultaneously with the transfer of the property into his name, the purchaser fulfils his obligation by furnishing the conveyancer with a suitable guarantee (normally a guarantee by a bank) that the price will be paid in full once the property has been registered in the purchaser’s name. In practice the date on which the guarantee must be supplied to the conveyancer is usually stipulated in the contract. In the absence of this point, the general rule is that the buyer must furnish the conveyancer with the guarantee once the conveyancer is in a position to lodge the transfer deed with the Deeds Office.
A seller may do the following if the buyer does not to go through with the purchase:
- Retain the initial down payment and terminate the contract (this will not apply in this case as no payment was made);
- Sue for breach of contract and damages; or
- Bring an action for specific performanceand damages. Damages is based on the difference between the contract price and the market value of the property at the time of the breach, less any down payment or other payment already made, plus interest from the date of default.
Specific performance is where the person claiming a breach of contract wants to complete the transaction according to the terms of the contract, rather than receive money. A seller does not have a right to specific performance; whether or not to grant specific performance is up to a court. A court may consider granting specific performance if the contract is clear and definite and an award of money will not return the individuals to the positions they were in before signing the sales contract.
If the agreement is definite in all of its essential elements, specific performance can be granted. Essential elements of the contract typically include the purchase price, deposit amount, down payment amount, legal description of the property, financing terms, closing date and effective time period of the contract.
It's helpful to know about your possible remedies if your sale falls through, and then you can decide what to do next. You'll want to talk to your real estate agent and possibly a real estate lawyer before proceeding.
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