Conditional clauses – what are they and why do they matter?

First-time buyers especially, have a lot to get to grips with as property transactions are lengthy processes with reams of documentation and copious legalese to navigate, but there are also often suspensive conditions included in the Offer to Purchase and these need to be gone over with a fine toothcomb.

When included, these clauses are a pre-requisite for a contract to come into force and effect and any condition written into a property sale agreement contract should always state which party must do what, by when, how it should be done and which party is to cover costs, if applicable.

It’s therefore imperative that each party clearly understands what is expected of them and is fully aware of the implications of failing to meet the stipulated conditions as failure to so could have far-reaching and often costly consequences.

Suspensive conditions

A suspensive condition is one, which if not fulfilled by the date specified in the agreement, causes the entire agreement to lapse, after which the parties are no longer contractually bound as the agreement will not have any force or effect.

The conditions that are generally encountered in the contract of sale:

• That the sale is subject to the purchaser obtaining a bond from a financial institution and/or; 
  
  
• That the sale is subject to the purchaser selling his existing property within a certain time frame. 

Imagine a scenario in which, after much searching, you finally find your dream family home and make an offer, only to discover later on that the contract has lapsed because your bond was approved a few days too late.

And, should the seller have received a better offer in the meantime, they would be within their rights to accept it, leaving you out in the cold at best or even without a home if you have already sold your current property in the meantime.

The most important point for a seller to stipulate in the Offer to Purchase is a definite time frame within which the condition/s must be met. 
One that is commonly used is the ‘72-hour clause’ which basically states that a seller may still market his property and accept offers, after having accepted the conditional sales agreement from the buyer.

And should an unconditional offer come along, the seller must inform the first buyer that they have 72 hours to meet their suspensive conditions or, the seller is free to accept the second offer.”

In a situation where there is more than one suspensive condition, it’s best to deal with each one separately to avoid confusion.

And to avoid the adverse legal implications of a suspensive condition, it’s also advisable that the clause should be constructed in such a way that it allows the parties to extend the time period within which a suspensive condition must be fulfilled should it become necessary to do so.

Special conditions

These are additional conditions attached to the sale of the property outside of the standard conditions you would normally see in the contract.  

These conditions can cover anything the parties want to agree on, but the most common ones:

• Conditions making the contract subject to a buyer’s due diligence inspections;
  
  
• Conditions requiring the seller to provide the buyer with evidence of final council approvals for building works already done or to be done on the property;
  
  
• Conditions specific to the property, for example, an obligation for the seller to undertake certain repairs or works prior to conclusion;

Special conditions provide that extra layer of protection as a contingency for extenuating circumstances where the sale may not go according to plan and, as with suspensive conditions, the golden rule is to establish a time frame and it’s important to include every detail before the document is signed.

For instance, if the purchaser comes back at a later date and states that he requires a workmanship guarantee on the repair, but the agreement did not stipulate a guarantee, once the transferring attorney receives confirmation that the repair has been made, it is permitted to proceed to register the sale.

Both parties should ensure that special conditions clearly contemplate what action is to be undertaken, who is responsible for undertaking the action and by when, and what the rights are of the parties if the relevant actions are not undertaken at all or satisfactorily.

Purchasing a property is likely to be one of the biggest investments you will make and so it is important to know what you are getting yourself into and that you carefully review all contracts before you sign on the dotted line.