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Beware the suspensive conditions in the offer to purchase
09 August 2017
 

“I’ve made a written offer on property that has been accepted by the seller. The offer was subject to the condition that I acquire a mortgage from a bank for the full purchase price within 30 days. I received a mortgage quotation from a bank and notified the seller that I will accept it. In the meantime, I‘ve sought for additional quotations and asked the seller for extra time to search for a better interest rate. However the seller refused and indicated that he was going to accept a higher offer from another buyer because I had not complied with the conditions. Can he do that? I did accept the first quotation.”

The legal question to be answered in this situation is whether or not the suspensive condition has been timeously and properly complied with. A suspensive condition is a condition that has to be complied with before the agreement between the parties is enforceable. Because such a condition can have important consequences, it is vital that the parties’ intentions are clearly and accurately set out in the offer to purchase. 

In a recent judgement, our High Court had to rule on the interpretation of a mortgage clause in an offer to purchase. The clause read that “…the buyer should acquire a mortgage and provide the seller with the mortgage offer, mortgage quotation and pre-agreement statement within 30 days from the parties’ signing of the agreement.” The buyer had accepted the bank’s mortgage quotation and was of the opinion that the condition has been complied with. The seller, however, was of the opinion that the court should interpret the mortgage clause to mean that the seller had to be provided with the documents as proof of the condition’s fulfilment. 

The court strictly interpreted the clause and determined that because the mortgage clause in an offer to purchase exists for the buyer’s protection and the fulfilment thereof was within the seller’s discretion, the written acceptance of the mortgage quotation by die buyer, before the 30 days had expired, did in fact establish a valid purchase agreement between the parties, and was therefore enforceable.  

In your particular situation is means that due to your acceptance of the mortgage quotation, and because no material provisions existed regarding the provision of proof thereof to the seller, you have complied with the suspensive condition and thereby established a valid purchase agreement. However we advise that you consult with an attorney to determine exactly whether you have indeed complied with the wording of the suspensive condition and, if need be, approach a court to halt the selling of the property to another buyer.

 
 
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