Sale Subject To The "Successful Sale" Of The Purchaser's Property
Category Property Advice
Financing the purchase of a new property with the proceeds of the sale of your existing home is not without any risks.
A suspensive condition in the Offer to Purchase that the sale of the property is subject to the "successful sale" of the Purchaser's property does not completely protect the Purchaser. It creates a loophole which a Seller could exploit if he wants to cancel the sale.
In the High Court case of Koen v Punyer 1984 (1) SA 334 (SE): The Plaintiff sold certain immovable property to the Defendant subject to the "successful sale" of the Defendant's property by a specific date. The Defendant managed to sell his property subject to bond approval. Shortly thereafter, the Plaintiff called for guarantees from the Defendant for the purchase price balance. The Defendant claimed that it was too early to call on him for guarantees, because he was waiting on the buyer of his property to pay the purchase price.
The Plaintiff claimed that the suspensive condition was fulfilled when the Defendant entered into a Deed of Sale Agreement with the buyer. The Defendant, however, claimed that the sale was conditional upon the successful sale of his property, which meant, amongst others, his receipt of the purchase price. The Court had to determine what a "successful sale" was and held that the words "successful sale" meant the successful signing of a Deed of Sale, and NOT the completion of the whole transaction and payment of the purchase price.
The Court ordered the Defendant to pay the purchase price balance to the Plaintiff against registration of transfer of the property into the Defendant's name. This was disastrous for the Purchaser who did not have the sale proceeds of his own property. It should be noted that failure to provide guarantees for the balance of the purchase price, when called upon by the Seller to do so, would effectively place the Purchaser in breach of the contract, entitling the Seller to cancel the sale. This would have serious financial consequences for a Purchaser who could lose his deposit and be held liable for payment of the estate agent's commission and the attorney's wasted costs. In a more recent High Court case, namely, Terry and Another v Solfafa and Others (2263/2019) [2019] ZAFSHC 143 (29 August 2019), the Court followed the decision in Koen v Punyer regarding the meaning of a "successful sale.
To close this loophole and to better protect the Purchaser, an Offer to Purchase, which is subject to the successful sale of the Purchaser's property, should also be made subject to the registration of transfer of the Purchaser's property into the name of his Purchaser prior to, or simultaneous, with the registration of Purchasers property. Care should furthermore be taken to ensure the Purchaser will, in such circumstances, not be placed in a position where it may have to issue guarantees until he or she will be in a position to do so, from the proceeds of the sale of his or her property.
Author: Van Zyl Kruger Attorneys
