A Property24 reader asks:
A reader says he and a friend bought a plot but wish to withdraw from the sale. Can they pull out and get their deposit back?
I need advice regarding a land purchase and whether we pull out of this purchase without claim ramifications from the seller.
A friend and I have put down a deposit on a plot and signed the agreement of sale with the seller. However, we now wish to withdraw from the sale. The question is, are there any legal grounds for any form of claim against us should we now withdraw from this purchase and can we get the deposit money back (which is held in a trust account by the selling agent)?
Jaco Rademeyer, from Jaco Rademeyer Estates, responds:
This matter deals with cancellation of an offer to purchase land. As a purchaser it is very important to be aware that the most important document when dealing with a sale of land is the “offer to purchase” also known as the agreement of sale. All the terms and conditions pertaining to a sale are stipulated in that document. It is advisable that the parties involved in the said agreement should always ensure that they understand the terms and conditions therein to a great extent because all aspects, including legal implicated aspects, pertaining to the sale in question will be stipulated in that agreement.
The offer to purchase is a contract which is binding between the parties. The Alienation of Land Act 68 of 1981 provides that contracts for the sale of immovable property or rights in immovable property must be in writing and signed by the parties or their duly authorised representatives in order to be enforceable.Just like any other contract, upon signature thereof, the offer to purchase becomes a binding legal transaction between the parties. Until the signature of the seller and the buyer (or their agents) appears in the offer to purchase, none of the parties will be bound by the terms of the aforementioned agreement.
In the matter in question, the first thing that the purchasers should determine is whether the agreement of sale which they entered into was subject to any suspensive conditions. If the said agreement was subject to suspensive conditions, then the purchasers should ascertain whether the said suspensive conditions were fulfilled. If suspensive conditions in an agreement of sale are not fulfilled, then the entire agreement becomes null and void unless both parties (seller and purchaser) in the sale agree to have an addendum to their agreement whereby they waive compliance with the suspensive conditions contained in the offer to purchaser.
Upon fulfilment of all suspensive conditions contained in the agreement of sale, the seller will be liable to pay the agent’s commission due to the fact that the agent fulfilled its duties. If the purchasers decide to withdraw from the agreement of sale where all the suspensive conditions (if any) were fulfilled, then that would mean that the purchasers would be in breach of the agreement. In the ordinary course of the sale, if no breach occurred, the seller would be the party liable to pay the agent’s commission.
In this matter, the purchasers would be in breach if they cancel the agreement unilaterally, meaning that they would be liable for the commission and not the seller. If the breach occurs and purchasers remain in default for a period of days (normally 7 days) after written notice has been given to them by the other party or his agents, then the aggrieved party, in this case the seller and the agency, shall be entitled to claim performance or damages.
If the purchasers and the seller agree to cancel the sale, then both the seller and the purchasers might be liable jointly and severally to the agent for commission. It must always be borne in mind that the agent fulfilled his or her mandate, whether or not the sale proceeds, he or she would be entitled to his or her commission. The party in breach of the contract would be those whom the agent will claim his or her commission from. If the seller complied with all the terms of the agreement of sale and the purchasers are the parties in default, they will be liable for the commission.
The claim will not merely be just commission; the seller could institute a claim for damages or specific performance, in other words, an order to make the purchasers continue with the agreement of sale. If there was a Conveyancer involved and he or she had already performed his or her duties, in particular, transfer and/or bond registration, he or she will be entitled to claim his or her costs from the party in breach. Therefore, the purchasers in this matter should be aware that there is a possibility of numerous claims against them if they breach the agreement. The claims will not only derive from the seller but also from the agent and the Conveyancer (if any).
It is of the utmost importance that the purchasers and sellers become aware in detail of the terms and conditions of the agreement of sale before signature. Termination of a contract unilaterally wherein all the suspensive conditions have been fulfilled amounts to breach of contract which creates room for claims being instituted against the party in breach.
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