Agreements of sale of immovable property: Part 2 – Tips for Buyers and Sellers

Following on from Part 1, there are a number of aspects relating to the basic sections within a contract of sale that should be considered before either party signs on the dotted line.

Property Blog Articles | Advice | Contractual Matters | Market News

In terms of the Alienation of Land Act, 68 of 1981, an agreement of sale of immovable property, also known as an Offer to Purchase (OTP) in the industry, must be in writing and signed by the parties thereto. In addition to this crucial element, there are  further key considerations for buyers and sellers to into account.

Suspensive conditions

A seller must be aware that until such time as this type of condition contained within the Offer to Purchase is met (typically relating to the approval of a buyer’s bond application or the sale of a buyer’s existing property), the fulfillment of the agreement is uncertain. As such, if the condition is not met within the required timeframe, the contract will become null and void and the seller will need to explore further avenues to conclude the desired property sale.

Agent Commission

Again, it becomes important to clearly state the agent commission that the seller agreed to pay, including whether this amount (usually in the form of a percentage of the sale price) is VAT inclusive or exclusive. If not stated, it is deemed that the commission value is VAT inclusive.

This agent commission is payable upon registration of the transfer. However, should either party cancel the contract once it has become unconditional and prior to registration, the agent is entitled to claim commission from the defaulting party.

VAT and Transfer Duty

All sales will be subject to either VAT or Transfer Duty. The general rule is that if the seller is registered for VAT, the sale will be subject to VAT.  Commercial property transactions will typically be subject to VAT.

Individuals, Companies and Trusts

If a legal entity such as a company or trust buys immovable property, the legal entity must be represented by an individual or individuals with the necessary capacity to act on behalf of the company or trust by way of a resolution. This would normally be a director in the case of a company, or a trustee in the case of a trust.

The sale of a property can be a complex transaction and the written agreement of sale will need to reflect all the relevant requirements and be tailored for each particular sale. As such, this should be handled with a property professional to ensure all relevant information is accurately recorded in the necessary documentation.

Follow Snymans on Facebook for more legal information, tips and news about property.

10784

Recommended for you

Property Transfers | Bond Registrations | Snymans Attorneys
Contractual Matters

The right of first refusal

2026

A right of first refusal is a mechanism in a contract that affords the holder of such right the preference to buy a particular property, should the owner ever choose to sell it. However, it is worth noting that the…

Read More
Property Transfers | Bond Registrations | Snymans Attorneys
Contractual Matters

Different forms of ownership

2070

There are a number of forms of ownership of immovable property in South Africa, and sometimes prospective buyers as well as homeowners are not aware of the intricacies of each. To take the mystery out of this for you, we have put together the basics on each of the 3 most common types of ownership: full title ownership, sectional title ownership and long-term lease.

Read More
Property Blog Articles | Advice | Contractual Matters | Market News
Contractual Matters

Auctions in the property industry

4240

To help buyers looking to purchase property on auction, here is some crucial information relating to auctioned property.

Read More
Property Blog Articles | Advice | Contractual Matters | Market News
Contractual Matters

The sale of a property as a going concern

4152

Given certain conditions being met, a property can be transferred as a ‘going concern’ which can be beneficial to the transacting parties.

Read More
Property Blog Articles | Advice | Contractual Matters | Market News
Contractual Matters

The Lapsed Offer to Purchase

8255

For prospective buyers who have found the right property, it is always an exciting but also a daunting time when an Offer to Purchase (OTP) has been signed and presented to the seller. The wait then begins before finding out whether or not it has been accepted.

Read More

Need more Snymans content?

Sign up for our monthly newsletter.

Agreements of sale of immovable property: Part 2 – Tips for Buyers and Sellers

Following on from Part 1, there are a number of aspects relating to the basic sections within a contract of sale that should be considered before either party signs on the dotted line.

Property Blog Articles | Advice | Contractual Matters | Market News

In terms of the Alienation of Land Act, 68 of 1981, an agreement of sale of immovable property, also known as an Offer to Purchase (OTP) in the industry, must be in writing and signed by the parties thereto. In addition to this crucial element, there are  further key considerations for buyers and sellers to into account.

Suspensive conditions

A seller must be aware that until such time as this type of condition contained within the Offer to Purchase is met (typically relating to the approval of a buyer’s bond application or the sale of a buyer’s existing property), the fulfillment of the agreement is uncertain. As such, if the condition is not met within the required timeframe, the contract will become null and void and the seller will need to explore further avenues to conclude the desired property sale.

Agent Commission

Again, it becomes important to clearly state the agent commission that the seller agreed to pay, including whether this amount (usually in the form of a percentage of the sale price) is VAT inclusive or exclusive. If not stated, it is deemed that the commission value is VAT inclusive.

This agent commission is payable upon registration of the transfer. However, should either party cancel the contract once it has become unconditional and prior to registration, the agent is entitled to claim commission from the defaulting party.

VAT and Transfer Duty

All sales will be subject to either VAT or Transfer Duty. The general rule is that if the seller is registered for VAT, the sale will be subject to VAT.  Commercial property transactions will typically be subject to VAT.

Individuals, Companies and Trusts

If a legal entity such as a company or trust buys immovable property, the legal entity must be represented by an individual or individuals with the necessary capacity to act on behalf of the company or trust by way of a resolution. This would normally be a director in the case of a company, or a trustee in the case of a trust.

The sale of a property can be a complex transaction and the written agreement of sale will need to reflect all the relevant requirements and be tailored for each particular sale. As such, this should be handled with a property professional to ensure all relevant information is accurately recorded in the necessary documentation.

Follow Snymans on Facebook for more legal information, tips and news about property.

10784