I have often heard people proudly referring to "offers" for their property, which (in terms of South African law) simply weren't legal offers to purchase.
They'll say: "I recently had an offer of two million rand for my house!"
But when I ask if they still have a copy of the offer to purchase, they go: "No, man! It was a telephonic offer!"
And then they will give me a look as if I'm a total idiot...
Oral offers to purchase are not legal
Anyone who knows anything about South African real estate will tell you that an "oral offer to purchase" immovable property is not worth the paper it was written on. An offer to purchase must be reduced to writing in order to be binding.
If an "oral purchaser" decides not to make a written offer, there is absolutely nothing the "oral seller" can do to legally enforce that "oral offer to purchase".
If it is not in writing, it does not exist.
What is a legal offer to purchase?
In South Africa, the Alienation of Land Act, which governs the sale of real estate, requires the sale agreements for immovable property to be reduced to writing. So, a legal offer to purchase must be in writing.
The parties to a sale of real estate can negotiate orally, but the final agreement of sale has to be reduced to writing to become legally binding. Until the agreement of sale is reduced to writing, the buyer and seller are still just talking.
Talk is cheap, but a written offer is what buys a house. The offer to purchase becomes the legally binding agreement of sale upon written acceptance by the seller.
Required details in a legal offer to purchase
To be a legal offer to purchase, the offer should at least decribe the following details unambiguously:
- The purchaser
- The seller
- The property
- The purchase price
These details, as all the other details that may be included in the offer to purchase, must be unambiguous and determinable.
If the seller is described in the offer to purchase as "Piet Poggempoel", but the seller's full name is actually "Pieter Kobus Poggempoel", this might not be a train smash. If it can be reasonably determined that Piet Poggempoel is, in fact, Pieter Kobus Poggempoel, the offer to purchase will still be binding.
Similarly, if the property is simply described as "2 Church Street, Pretoria", the specifics, such as erf number, title deed, etc. can be determined with certainty. The important thing is that the description must be unambiguous. It there are two properties known as 2 Church Street in Pretoria, the description will have to be more specific.
It is always best to stipulate as much information about these required details as possible, to avoid any misunderstandings and delays in the sales process.
Additional details in a legal offer to purchase
The written offer to purchase will become the binding contract of sale, once both parties accept the terms of the offer in writing. So it is very important that all the details of the sale should be addressed in the written offer to purchase.
Any details regarding the sale that are not stipulated in the offer to purchase, will be determined according to common law principals and legal precedent. This should ensure that the sale process will be fair and equitable. But do both parties know how common law and legal precedent will determine all of the important aspects of the sale?
No! The average South African does not have this much legal knowledge and experience. The buyer and seller could easily end up in court, to contest the details of the sale. This is why it is always advisable to describe the conditions of the sale in as much detail as possible, right at the start - in the offer to purchase.
Other details in a legal offer to purchase
It is a widely promoted fallacy that there is something called a "standard offer to purchase". No two real estate sale transactions are exactly alike. Each sale has different factors and requirements. And each offer to purchase can (and should) therefore be constructed for that specific transaction.
In the sale of real estate, anything goes. Anything (legal) can be included in a offer to purchase immovable property. If the purchaser wants to include the seller's collection of Beetles longplay Vinyl Records in the sale of a two bedroom townhouse, the offer to purchase the property can be constructed to reflect those terms. If the seller wants to retain the right to lay flowers on the backyard grave of his beloved goldfish, Buster, this too can be written into the sales agreement.
In offers to purchase, anything goes, but some things go more often than others. Most legal offers to purchase immovable property include some, or all, of the following details:
- A deposit amount
- A deposit escrow clause
- A mortgage contingency
- An occupation date
- Details about occupational interest
- Who pays the rates, taxes and/or levies for the property
- A list of fixtures and fittings included in the sale
- A voetstoots clause
- An electrical certificate of compliance clause
- A pest-free certificate clause
- A real estate agency clause
- A breach of contract clause
- A dispute resolution clause
- A cooling-off clause
- A clause stipulating who appoints the transferring attorney
- A 72-hour contingency clause
- A contingency clause for the sale of another property
- A clause describing who will be responsible for paying the costs of transfer of ownership
- A clause stipulating a preferred date for transfer
- A clause to describe the passing of risk to the purchaser
- A clause about Value Added Tax
- A co-operation/fulfillment clause
- The parties' domicilia citandi et executandi
- A clause about the extension of the sectional title scheme
- An "Entire Contract" clause
- An expiration clause
- A definition/interpretation clause
- A seller declaration clause
- A home inspection clause
- A "subject matter" clause
- An "owner finance" clause
- A guarantee clause
- A variation of agreement clause
- An indulgences clause
- A termination of contract clause
This list of legal offer to purchase details are by no means exhaustive. Some people call different clauses by different names. But someone who knows their stuff can easily grasp the meaning of a clause.
Legal offer to purchase
A legal offer to purchase document can be changed to suit both parties before the offer gets signed by the purchaser. But any later changes to the offer will have to be accepted in writing by both parties.
It is always a good idea to have your own attorney review an offer to purchase before you sign it. And remember that the first legal offer to purchase a property may simply end up becoming the starting signal for negotiations about the details of the sale. But please, stop talking pie in the sky and get down to writing and submitting a legal offer to purchase.
That is how property gets sold in South Africa!
