It is not uncommon for buyers to try and cancel a house sale or for a seller to decide they no longer want to sell their property after both parties have signed the contract. In these scenarios, the buyer or the seller is essentially breaking a legally binding transaction between these two parties. In the eyes of the law, there will be repercussions for this.
In short, Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, explains that if the signature of the Seller and Buyer (or their Agent) appear on the offer to purchase, then both parties are bound to honour the contractual agreement. “Not doing so puts you in breach of said contract. This means that you will probably have to foot the bill for some hefty penalties if you pull out at this stage – even if you’re backing out for reasons that are completely beyond your control,” Goslett warns.
He also adds that the seller will be allowed to re-advertise the property for sale again, so if the buyer changes their mind and wants to go ahead with the purchase, it may already be too late. “Because the penalties for pulling out of a house sale can be financially significant, it’s always worth ensuring that you are extremely certain before you sign on that dotted line and commit to an OTP in the first place,” Goslett recommends.
If the OTP has been signed, neither party can opt out without incurring legal repercussions simply because they are no longer interested. Goslett explains that there needs to be a legal basis for cancelling the agreement and some of these reasons include:
- A suspensive condition was not met: These are conditions in the OTP that suspend the obligations of the contract (for all parties) until they have been fulfilled.
- A breach of contract: If this happens, the party not at fault can justifiably cancel the OTP and claim any legitimate damages or losses from the party in breach.
- The home is priced under R250,000: A buyer can cancel their Offer to Purchase, regardless of suspensive conditions or other clauses, on a home priced under R250,000. In this case, notification in writing is provided to the Seller within five days of signing (as stipulated in section 29A of the Alienation of Land Act). This cooling-off period does not apply to residential homes that are sold for more than the R250 000 threshold.
It is important that all parties keep in mind that an agreement of sale (the OTP) is a legal, binding document and that both parties are required to fulfil their responsibilities as laid out in the agreement. Therefore, there are a number of possible penalties that could be incurred should you cancel this agreement without legal grounds. These are often determined by the Offer to Purchase conditions and wording and could include penalties such as:
- The aggrieved party could sue for out-of-pocket expenses.
- The conveyancing attorney could claim wasted costs for time spent up to date.
- The estate agent could also claim their full commission on the cancelled sale.
The cancellation of an agreement is a complicated matter with many possible repercussions. When withdrawing an OTP, Goslett recommends that buyers or sellers always seek the advisement of a qualified legal professional. “This will ensure that it is done in accordance with the relevant terms and based on merit. Similarly, when it comes to making sure you won’t want to back out of the deal, find yourself an expert property professional to represent your needs to ensure a trouble-free transaction,” he concludes.
Writer : Kayla Ferguson