Understanding suspensive and special conditions in property transactions
Navigating property transactions can feel like wading through a sea of paperwork and legal jargon, but one of the trickiest aspects often involves suspensive and special conditions outlined in the Offer to Purchase. To ensure you get through the buying process smoothly it is imperative to scrutinize the clauses to meet all the requirements as stipulated in the OTP.
What Are Suspensive Conditions?
Suspensive conditions are stipulations in a property sale agreement that must be fulfilled for the contract to become binding. If these conditions are not met by the specified deadline, the agreement becomes void, and neither party is obligated to proceed with the sale.
Example of Suspensive Conditions: Imagine you've found your dream home and made an offer. If the contract includes a suspensive condition requiring bond approval by a specific date, failing to secure that approval on time could cause the contract to lapse. If the seller receives a better offer in the interim, they have the right to accept it, potentially leaving you without the home you hoped for—or even without a place to live if you've already sold your current property.
The most common suspensive conditions include:
- Securing a home loan The buyer must obtain financing within a set period.
- Selling a current property: The buyer must sell their existing home before the transaction proceeds.
The 72-Hour clause: A significant clause often found in property agreements is the 72-hour clause. This provision allows the seller to continue marketing their property and entertain other offers even after accepting a conditional agreement from the buyer. Should a better offer come along, the seller can notify the original buyer, giving them 72 hours to meet the suspensive conditions. If the conditions are not met within this timeframe, the seller can proceed with the new offer.
Key tips for handling suspensive conditions
- Clarity and specificity: Ensure each suspensive condition clearly states what must be done, by whom, and within what timeframe. Ambiguities can lead to disputes or missed deadlines.
- Separate conditions: When multiple suspensive conditions are involved, handle each one independently to prevent confusion.
- Extensions: The clause should ideally include provisions for extending the deadline if necessary, allowing for some flexibility in meeting the conditions.
What Are Special Conditions?
Special conditions are additional stipulations beyond the standard terms of the contract. They provide extra protection for the seller by addressing unique circumstances or requirements that could affect the sale.
Examples of special conditions:
- Council-approved building plans: The seller might need to provide approved building plans by a certain date.
- Repairs and guarantees: Conditions might include repairing a leaking roof and providing a workmanship guarantee.
Importance of detailing special conditions: Including detailed special conditions helps prevent disputes later on. For instance, if a repair is required, the agreement should specify whether a guarantee is needed. Without such details, once the repair is confirmed as complete, the sale can proceed without addressing potential additional requirements.
We always suggest that both sellers and buyers call in the professionals to do a professional building inspection. This way all faults can either be addressed before listing a property or buyers are fully aware of the condition of a property that will allow them to make an informed decision.
Find out more about home inspections
To further ensure both parties are fully aware of the condition of a property and the legalities involved with condition reports and the voetstoots clause, our guide will explain what you need to be aware of.
Purchasing a property is a significant investment, and understanding every aspect of the contract is crucial. Suspensive and special conditions are critical elements that can affect the outcome of the transaction. By ensuring these clauses are clear, specific, and reasonable, you can avoid complications and safeguard your investment.
Before you sign any property agreement, carefully review all terms and conditions, and consider seeking advice from a legal expert or real estate professional. This diligence will help you navigate the complexities of property transactions and make informed decisions.
