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What is a suspensive condition?
A suspensive condition is a contractual condition that suspends the rights and obligations of the parties to the agreement until such a time that an uncertain future event takes place, in essence, this means that the offer to purchase will only take effect and become completely binding once the suspensive condition has been met.
What happens if a suspensive condition is not met?
In principle should the suspensive conditions not be met; the contract ceases to exist and no party to the contract has any recourse against the other.
What are examples of suspensive conditions?
Examples of suspensive conditions in an offer to purchase can include:
Bond finance:
A condition that is very common when a property is being purchased is that the purchaser must obtain a bond from a financial institution within a specified period, which allows for the sale to only commence once the funds have been secured.
Sale of an existing property:
In instances where the purchaser is required to sell their existing property before being able to purchase a new property, the condition is known as a ‘subject to sale’ condition, which allows for the sale to only proceed once the property of the purchaser has been successfully sold, these conditions can be due to financial implications or preference of the purchaser.
Due Diligence Inspections:
A purchaser can be allowed an opportunity to inspect the property physically and all paperwork relating to the property before proceeding with the sale, the documentation can include zoning information, title deed conditions, building plans, any lease agreements, and property expenses.
This type of suspensive condition is most common when developers or investors are purchasing properties.
Can the period of a suspensive condition be extended?
Upon agreement by all parties and prior to the due date of the suspensive condition, the specified period in a suspensive condition can be extended by means of an addendum to the offer to purchase, which must be done before the due date of the suspensive condition, in writing and signed in wet ink by all parties in order for the addendum to be compliant with the requirements of the Alienation of Land Act 68 of 1981, an extension to the initial period can also be provided for in the offer to purchase itself.
Conclusion
Taking the above into consideration, a suspensive condition is a valuable tool in an offer to purchase, it is important to remember to comply or extend the time period of the suspensive condition before the due date to ensure a smooth start to the sale of a property.
Habibi Properties