It is perfectly normal to feel anxious before signing all the documents associated with a house purchase or sale. The reality of one of the biggest decisions of your life can weigh heavy, and feel even more burdensome when you are committing to a number of legal obligations. Bear in mind that the law exists to protect everyone, but that does not mean you should just sign documents put in front of you.
Khairiyah Safeda, attorney, notary, conveyancer and founding Director of Safeda & Associates provides insight into the buying/selling and conveyancing documents that you will be presented with.
Q1: What are the legal documents that buyers and sellers must sign over the course of a sale/purchase?
The key documents include:
Offer to Purchase (OTP) : This is a binding agreement that sets out the terms and conditions of the sale.
Agent’s Mandate: This is signed by the seller authorising the estate agent to market the property.
Transfer Documents: Prepared by the conveyancer to transfer ownership to the buyer.
Bond Documents: If the buyer is financing the purchase, bond registration documents are required. This part of the transaction is handled by the bond attorney.
Bond Cancellation Documents: If the property is currently bonded, the seller is required to notify the bank and cancel the bond. This part of the transaction is handled by the bond cancellation attorney.
Q2: What do these documents provide for?
What is an OTP?
An OTP is a legally binding agreement between a buyer and a seller that sets out the terms and conditions of a property sale. It serves as the foundation of the transaction and outlines key details such as the purchase price, payment terms, property description, and any suspensive conditions (e.g., subject to bond approval or sale of the buyer’s existing property).
Once signed by both parties, the OTP becomes a legally enforceable contract. It is crucial for both buyers and sellers to carefully review the OTP with the assistance of a legal professional to ensure all terms are clear, fair, and legally compliant before committing to the agreement.
Cancellation of Offer to Purchase Agreements in Terms of the Consumer Protection Act (CPA)
Under the CPA, buyers have the right to cancel an OTP agreement within five business days of signing, provided the property was purchased as a result of direct marketing. This is known as the “cooling-off period.” If cancellation occurs within this timeframe, no penalties may be imposed, and any deposit paid must be refunded in full. Outside this cooling-off period, the OTP becomes legally binding, and cancellation without just cause may result in financial penalties or a claim for damages by the other party. Sellers should note that this cooling-off period applies only to direct marketing scenarios, not standard property transactions.
Q3: What is an Agent’s Mandate?
An agent’s mandate is a legal document signed by the seller, authorising an estate agent to market and sell their property. The mandate sets out the terms of the agreement between the seller and the agent, including the scope of the agent’s authority, the agreed-upon commission, and the duration of the mandate. There are different types of mandates, such as sole mandates (granting exclusive rights to one agent) and open mandates (allowing multiple agents to market the property). A properly drafted mandate protects both parties and ensures clarity regarding roles and expectations.
Q4: What Are Bond Documents?
Bond documents refer to the suite of legal and financial documents required when a buyer finances a property purchase through a home loan (mortgage bond). These documents are prepared by the bond attorney and typically include the bond registration agreement, loan terms and conditions, repayment schedules, and supporting documentation like identity and financial verification. Once signed, these documents authorize the bond registration process, linking the property to the bank as security for the loan.
Q5: What Are Bond Cancellation Documents?
Bond cancellation documents are prepared when an existing mortgage bond on a property is settled or canceled, typically during the property sale process. The bond cancellation attorney handles this process on behalf of the bank and ensures that the bond is removed from the title deed once the outstanding loan amount is paid in full. These documents include a cancellation instruction from the bank, confirmation of settlement figures, and any other supporting legal paperwork. Sellers should note that bond cancellation fees are usually their responsibility.
FAQs
Are they legal and binding, and what are the consequences if either party wishes to cancel?
Yes, these documents are legally binding once signed. Canceling without legal justification can result in financial penalties, such as the forfeiture of the deposit (for buyers) or a claim for damages (for sellers). Legal advice is crucial to navigate such scenarios.
What are the red flags to look out for in these legal documents?
- Ambiguity in clauses or terms.
- Omission of essential details like suspensive conditions (e.g., subject to bond approval).
- Penalty clauses or cancellation terms that are not clearly outlined.
- Unusual exclusions of fixtures or fittings.
- Misrepresentation of property or defects.
- Not having an expiry date as to when the offer expires.
If, for example, a name or ID is misspelled, does this make these documents null and void?
Errors like misspelled names or incorrect ID numbers do not render the documents void but must be corrected immediately to prevent delays in the process. Rectification typically requires a signed addendum.
What if personal circumstances change after signing and the buyer or seller cannot proceed with the sale/purchase?
Cancellation is possible but challenging. The consequences depend on the terms of the agreement. For cash deals, parties must carefully review the cancellation clauses. Negotiation may be possible, but penalties often apply.
How often do clients ask for an interpretation of these legal documents?
Frequently. Property sale documents are complex, and many clients rely on conveyancers to ensure they fully understand their rights and obligations before signing.
Can add-ons be included after the documents are signed?
Yes, add-ons can be negotiated post-signature. These add-ons must be formalised in a written separate contract agreed upon by both parties. Examples include curtain rails, pool equipment, or appliances.
Your best advice before signing?
I recommend that buyers and sellers always seek legal advice before signing any property-related documents. An experienced conveyancer ensures compliance with all legal requirements and protects the parties’ interests.
