The South African economy has taken a beating due to the Coronavirus, with many individuals finding themselves under financial pressure. A Property24 reader wants to know under what circumstance can they cancel an offer to purchase, as they now believe they are unable to afford the Property due to a change in their financial circumstances.
"I have signed an offer to purchase a property in South Africa on the 21st January 2020. The property costs R1 000 000 and we are still waiting for the bond application outcome. Can I cancel this offer as I foresee that I won't be able to pay it due to a new medical discovery, which will put a strain on my finances? How can I go about cancelling?"
Kim Bam, Managing Director at Bam Law advises that it is always possible to cancel an offer to purchase, but not without consequences - unless the Offer to Purchase (OTP) provides for this.
"In situations as above, to address this issue fully one would need sight of the OTP. The OTP which is usually drawn up by the estate agent holding the mandate. Once the OTP is signed by all parties, it becomes legally binding on the parties.
"If the purchaser changes her mind after all parties have signed the OTP, is it still possible to cancel? While it is virtually always possible to cancel, the purchaser needs to bear in mind what it will cost them, they will most likely lose the deposit.
'Suspensive conditions not met'
"In occasion one of the few exceptions to the above would be if the provisions of the OTP have a suspensive condition which is not met. A typical suspensive condition will be that the buyer must secure a bond for a specified amount within a specified timeframe. Should the purchaser fail to secure the bond the OTP will fall away without consequence.
"Many people are under the misconception that the Consumer Protection Act (CPA) gives them a cooling off period when entering into a sale agreement.
"The Alienation of Land Act states that residential property transactions of R250 000 or less are subject to a cooling-off period of five working days from the signature of the OTP. Unfortunately, the cooling-off period does not apply to residential homes sold above the R250 000 threshold as in this situation.
"If a purchaser has signed an OTP but is no longer interested or unable to purchase the property, it would be best for them to be honest with the seller, and the bank in your situation, and let them know promptly rather than breaching the contract.
The seller might consider letting the purchaser off the hook and look for another purchaser, rather than drawing out the situation. It is possible for the seller to pursue the matter legally, which could leave the purchaser with a very expensive impulse purchase on their hands."
*Article sourced from Property 24*
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