The Offer to Purchase/Agreement of Sale will typically contain the following standard provisions:
PURCHASE PRICE
A deposit is not mandatory but serves as a gesture of good faith on the part of the purchaser and an indication of financial ability. This amount will be invested by the estate agent/ conveyancer in an interest-bearing trust account, interest accruing for the benefit of the purchaser. Both attorneys and estate agents are covered by Fidelity Funds, which guard against the risk of loss and oversee the operation of these trust accounts. Provision will be made in the Agreement for a guarantee to be called for in respect of the balance of the purchase price. In general, a guarantee will only be acceptable if issued by a local financial institution which means that the funds will actually have to be remitted to South Africa in order for a local bank to issue such a guarantee or, alternatively, arrangements must be made between a foreign and local bank for a back to back guarantee to be issued. It is, however, possible to negotiate the issue of a Standby Letter of Credit from an overseas institution in certain circumstances.
OCCUPATION, POSSESSION, TRANSFER AND OCCUPATIONAL INTEREST
Occupation is the physical occupation of the property whereas possession is generally deemed to be the date upon which the purchaser assumes responsibility for the property and it is customary for possession to pass on the date of registration of transfer. Transfer refers to the actual date of registration of ownership in the Deeds Registry in favour of the purchaser. Occupational interest is the rental payable by the party occupying the property belonging to another where the date of occupation and date of transfer differs and is normally expressed in Rand terms or as a percentage of the outstanding balance of the purchase price.
VOETSTOOTS
This is a standard inclusion in all deeds of sale and implies that the property is bought ‘as is’, which means ‘in the exact condition in which the property is found.’ The Consumer Protection Act applies to sale agreements where the seller is in the business of selling land, such as a developer. In such instances, the seller is obliged to provide the purchaser with property that is free from defects, as defined in the Act.
ELECTRICAL AND BEETLE-FREE CERTIFICATES
The property owner is required by law to be in possession of a valid electrical compliance certificate certifying that the electrical installation at the property meets certain statutory safety requirements. The beetle-free certificate certifies that all accessible parts of the property are free of infestation by certain defined beetle and this, whilst it is a standard inclusion in the Agreement of Sale, is neither a legal requirement nor is it included in sales of sectional title units. Beetle-free certificates only apply to properties in the Western Cape and KwaZulu-Natal provinces. The cost of attending to the necessary repairs in order for the aforesaid certificates to be provided is generally accepted as being for the account of the seller, although the parties can contractually agree otherwise.
GAS, ELECTRIC FENCE AND WATER INSTALLATION CERTIFICATES
If there is a gas appliance installed in the property a Gas Certificate of Compliance must be obtained, confirming that the installation complies with certain statutory safety requirements. A compliance certificate must also be obtained where there is an electric fence installation on the property. Moreover, with regards to all properties situated in the jurisdiction of the City of Cape Town municipality, a Certificate of Compliance of Water Installation must be provided by the Seller to the municipality before transfer.
FIXTURES AND FITTINGS
A property is sold together with all fixtures and fittings of a permanent nature. Generally fixtures and fittings include anything which is attached to the property or which by virtue of its considerable mass accedes to the property. To avoid uncertainty, the purchaser is cautioned to ensure that all items intended to be included in the purchase price are specified in writing in the Agreement of Sale.
Agreements for the acquisition of shares/member’s interest and loan accounts in property-owning companies/close corporations, contain many of the clauses discussed above. Such agreements are, however, substantially different from property sale agreements and include numerous warranties and indemnities that the seller gives to the purchaser, as the latter is acquiring the property-owning entity together with its financial history