Just as it is important to know which clauses not to agree to in an offer to purchase, it is also critical to know which clauses you should insist on and understand why these clauses are there to protect you as a buyer.
So, get advice from an independent expert or a lawyer before you sign.
Remember, although the estate agent may take you through the contract, agents are incentivised to make a sale and they are appointed by the seller.
Here are 5 clauses that you should ALWAYS INSIST are included in any Offer to Purchase that you sign:
1. The sale is suspensive on you being granted a home loan sufficient to purchase the property AND pay for any upfront transfer costs (if necessary)
If you are buying the property for cash then this clause will not apply to you... but then you would be one of the fortunate 1%! For the rest of us, we will need to loan money to buy the property and so we need to make sure that the purchase agreement is suspensive on us actually getting the necessary funding.
As an example, if you are buying an existing property for R 1 000 000 and have no savings to put toward the purchase then you will need a loan of R 1 000 000 and you will also need to pay transfer costs and duties of about R 53 000.
You need to ensure that the Offer to Purchase has a clause that says that it is suspensive on you getting a home loan for R 1 000 000 and an additional clause that says it is also suspensive on you getting an additional loan for all the related upfront costs.
ALWAYS INSIST on these clauses - that way, if you do not get the necessary finance the agreement will never come into effect and you will not bear any consequences of breaching the agreement.
WARNING: Be particularly careful of a situation where you pay a deposit but still need to raise funds for any of the upfront costs. Without the additional suspensive clause you could lose your deposit if you get the home loan but are unable to raise the additional funds for these costs.
To get an estimate of what these costs would be you can use our transfer and bond cost calculator. You can also get an explanation for each of these costs in our section on understanding the costs of buying - part of our comprehensive page on buying a home.
2. Make sure you get vacant possession of your new property
So you have just bought a new home and you are ready to move in - only to find that there is someone else renting your new home and they say they won't leave...
You have a problem!
On the one hand, if they have a valid lease you will need to honour the terms of the lease because in South African law there is a legal principle that says "huur gaat voor koop" - this means that the lease has precedence over ownership and the tenant has the legal right to stay in your home until the lease expires.
If the person occupying the house does not have a valid lease but refuses to vacate the property you will not be able to evict them until you get a court order to this effect and then follow the necessary eviction processes. This process can be very costly and time consuming.
So, ALWAYS INSIST that there is a clause in the Offer to Purchase where the Seller warrants that you will be given vacant possession of the property. In this way you will be able to claim damages from the Seller if you do have to deal with a tenant that does not want to leave. This is not a guarantee that you will get your money back - but at least the Seller knows they may be held to account.
3. The property will remain in the same condition as when you purchased it
After you have signed the Offer to Purchase, the transfer of the property to you can take anything from as little as 6 weeks to 6 months (or more if there are complications with the transfer).
A lot can happen in this time that could affect your investment and so you want to make sure that you are protected against any damage, theft or unauthorised changes to the property.
ALWAYS INSIST that the Offer to Purchase contains clauses to protect you against these events.
- Make sure the agreement is clear on which items are included as "fixtures and fittings" so that you know what is included in the purchase and what is not. In particular, make sure that any expensive items such as stoves, extractor fans, built-in heaters, pool equipment, alarm systems and TV aerial installations are included. If you are not sure then rather list the item in the agreement. Also, include a clause saying that these items must be in good working order if they were in good working order when you viewed the property.
- The Offer to Purchase should include a clause in terms of which the Seller undertakes or warrants that they will maintain the property in good repair until the property is transferred to you.
- The Seller should also agree not to make any alterations to the property.
4. The Seller should disclose any hidden/latent defects
If you are buying from a private seller the sale will be on a "voetstoots" basis - this means that you are buying the property "as you see it" and you are not protected against any hidden or unseen problems with the property - so called latent defects.
There is good reason for such sales being on a "voetstoots" basis - once the Seller has sold the property it is reasonable that all the risks and rewards in the property are for the new owner and the Seller is freed from all their obligations.
But, the Seller should not be able to deliberately hide any flaws that they are aware of.
So, you should ALWAYS INSIST that the Seller warrants that to the best of their knowledge:
- There are no significant defects that the Seller is aware of in respect of the roof, plumbing or structure of the building
- There are no encroachment relate issues affecting the property
- There are no demolition orders related to the property
- All buildings on the property have got properly approved plans and the buildings comply fully with these plans
- The property is not subject to any proposed rezoning
- The property is not subject to any expropriation proceedings
- The property has not been designated as a heritage building
- There are no servitudes that are not reflected in the title deed
This is not a guarantee that you will not experience problems with any of these issues but this will give you recourse against the Seller if you do subsequently find out that the Seller deliberately hid any of these from you.
If the Seller does have something to hide, insisting on these clauses may result in them selling to someone that does not ask for these assurances - you may feel like you lost that house but it is more likely that you saved yourself from a lot of trouble!
5. Fair occupation dates and occupational rent
The timing on transfer of a property from the Seller is never certain and can generally take anything from 6 weeks (normal) to 6 months (if there are difficulties).
This creates a lot of uncertainty for buyers (and sellers) as they cannot be sure when the property's ownership will change.
If the parties agree that occupation can only occur on transfer then this also potentially creates challenges for both parties as there is no certainty about when they will be able to move into their new home (or when they need to move out of their existing property).
To make this process more certain for both the buyer and the seller, the parties can agree on an occupation date (that does not depend on when the property transfers). The date on which the buyer will move into the house is then fixed and this makes it much easier for the buyer to plan their move. For example, the buyer can give notice on the termination of their current lease to coincide with the date they will move into their new property and avoid "double" payments (where the buyer has to pay rent and also pay the bond).
So, if the Seller is not currently occupying the property then ALWAYS INSIST on occupation on the earlier of a specific date that suitable to you and the seller or the transfer date - whichever is the earlier.
And we also recommend that you ALWAYS INSIST on occupational rent at between 0.9% and 1% of the offered price for the property.
If you are a first time homebuyer and feel that you would benefit by having a home consultant to guide you through the process of buying a home then visit our sign up page to see the services that we offer buyers.