UNDERSTANDING SUSPENSIVE CONDITIONS IN THE BANK GUARANTEE AND HOW IT IS ARRANGED

Understanding Bank Guarantees in Property Sales

A bank guarantee is often used to secure the payment of the purchase price, or part of it, when a property is transferred at the Deeds Office. It gives the seller peace of mind that the money will be paid once the transfer is final.

However, the date for providing the guarantee should not be too soon after the buyer receives their home loan approval. This is because several steps need to happen before a guarantee can be issued.

It is generally recommended to allow 15 to 20 days from the date the loan is granted for the guarantee to be delivered.

Important Points About Guarantees:

Guarantees are costly.

• If the buyer uses their bank, the bank will charge a fee.
• If the buyer's money is held in the attorney's trust account, the attorney may also charge a fee.

 If the guarantee is based on a new home loan, and the bond later falls through, the buyer may have to pay cancellation costs to the bond attorney.

A Practical Alternative:

Instead of requiring a formal bank guarantee (which can be expensive), sellers and their attorneys can consider accepting an undertaking (promise) from the conveyancer.

This undertaking can be given once all suspensive conditions are met and the transaction is properly secured.

This option can save the buyer money and reduce the risk of delays or wasted costs.

OFFERS ACCEPTED AFTER THE EXPIRY OF THE ACCEPTANCE PERIOD

Offers to Purchase - Validity and Acceptance

Most Offers to Purchase are only valid for a limited time. This means the Seller must accept the offer within the time stated in the document.

If the Seller accepts the offer after the deadline, the agreement is not automatically valid. The Purchaser then has the right to cancel the agreement - but they may also choose to accept the late signature and allow the sale to continue.

To avoid confusion or disputes, it is very important that both the Purchaser and Seller initial next to the acceptance date if the Seller signs after the deadline has passed.

THE REQUIREMENT OF MUNICIPAL PLANS

Building Plans and the Sale of a Property

If a property does not have approved municipal building plans, it is seen as a latent defect (a hidden problem).

• If the Seller did not know there were no plans, the voetstoots clause (sold as-is) protects the Seller, and the Purchaser cannot demand the plans-unless the sale agreement specifically states that plans must be provided.
• If the Seller does know there are no plans, this must be disclosed to the Purchaser.
• Once disclosed, the Seller does not have to provide the plans unless:
  • The Purchaser includes this as a condition in the agreement, or
  • The Seller guaranteed (warranted) that the property has plans.
• If the Seller knew there were no plans and purposely hid this from the Purchaser (fraud), then the voetstoots clause does not protect the Seller. In that case, the Purchaser can legally insist on getting the plans.

Important Advice:

If a condition about building plans is included in the Offer to Purchase:

• It can delay the transfer process by weeks or even months.
• The condition must be clearly written and must include a deadline for when the plans must be provided.