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Is suspensive condition bound by additional loan?

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This week, a reader has sought the Property Poser experts’ advice about a suspensive condition on an offer to purchase a fixed property.

She seems to have signed an offer that contained a suspensive condition relating to the successful acquisition of bond finance.

The finance was approved but the reader applied for a further loan to cover the additional costs, including transfer duty and legal fees.

The reader explains that the bank rejected her application for the additional sum and wants to know whether the seller would be able to sue her for breach of contract if she cannot afford to go ahead with the transaction.

Sean Radue, of Radue Attorneys in Port Elizabeth, says an offer to purchase is simply a contract between a seller and potential purchaser.

“When the offer is accepted by a seller, it becomes a binding contract between the two parties.”

In this instance, the contract contained a suspensive condition regarding the financing of the property but didn’t address any further costs, says Radue.

“A suspensive condition should be worded in such a way that it is specific about the purchaser’s requirements.”

As the offer is made by the purchaser, Radue says it should be personal to his or her circumstances.

“It should address the extent of the financing required, which is typically expressed as a percentage of the full bond, and any additional amounts needed to be in a position to purchase the property.”

The bank is not a party to the contract and must abide by certain requirements, in particular the National Credit Act, when considering whether an applicant is to be successful in securing bond finance, says Radue.

According to Radue, a contractual stipulation that could give rise to a financial penalty is not a consideration for a bank in approving additional finance.

“Unless there are additional suspensive conditions that remain unfulfilled, the contract is now binding, as the bond financing has been approved.”

Up to this point, the operation of the contract has been suspended pending the fulfilment or waiver of the suspensive condition, says Radue.

“The failure to secure the additional finance is not a breach of the contract as such.

“The actual breach, if our reader intends to derail the sale, will probably be as a result of her not signing the necessary documentation to permit the transfer of the property from seller to purchaser.”

Radue says the seller would, on the facts provided, probably have a claim for breach of contract and any damages suffered as a result thereof.

“The longer our reader waits to address the situation, the more the seller’s damages could accrue as a result of missed opportunities with other potential buyers.”

If the reader is really not in a position to continue, Radue says she should approach the seller sooner rather than later to attempt to resolve the matter amicably rather than allow it to escalate to legal proceedings.

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Fullstop

Full Stop Communications is a public relations consultancy in Port Elizabeth in the Eastern Cape of South Africa focusing on media relations and copywriting. We drive regional and national media campaigns in a number of fields, most notably in the property, legal and sports arenas. We also specialise in media monitoring, ghostwriting, editing, translation and advertising. See more articles by Full Stop.