Buying a property is a very serious , long term commitment and requires a legal contract to be signed by both the buyer , who offers to purchase the said property , and the seller , who in turn agrees that indeed he / she is selling the property . This agreement of sale is called an Offer to Purchase , commonly referred to as the OTP .
DOES AN OFFER TO PURCHASE DIFFER BETWEEN A COMMERCIAL AND RESIDENTIAL PROPERTY ?
There is a difference but the main thing is that they are both agreements to purchase property . For instance , in a commercial OTP , the purchaser is usually given a chance to do due diligence , and fact check in order to ensure or see the sustainability of the commercial business . For instance , there could be a problem with lifts in a building , and if repairing these is costly , the seller may be forced to reduce the price or the purchaser could cancel . Also , in commercial sales there ’ s more time allocated depending on the complexity of the business and what may be required to be investigated regarding the property .
For residential properties , the normal financial institutions may give a 100 % mortgage bond , but with commercial properties , the funders would require a deposit because the amounts are usually quite high and some of commitment is required from the purchaser . Therefore , without a deposit the sale could fall through even after many months , and unfortunately suing the purchaser could drag and cause more financial distress for the seller .
WHAT ARE SOME OF THE LEGAL IMPLICATIONS ENTAILED WHEN ONE CANCELS AN OFFER TO PURCHASE ?
As we know , the Offer to Purchase is a legally binding contract and a very important document at that . Therefore , it ’ s crucial that the purchaser should ensure that when they sign it they know what they are signing for , that they should make sure that they are aware of all the defects in the property , which the property practitioner is obliged to disclose , especially since the new Property Practitioner ’ s Act came into effect on 1st February 2022 .
Most of the time it is the purchasers who tend to cancel , and when they signed the OTP , the agent would have explained the breach clause and the implications should the sale be cancelled . If the purchaser has paid the deposit , this deposit could be used to pay any claims by the affected parties due to wasted time by the purchaser especially if the purchaser may have played cat and mouse games with other stakeholders .
SOME OF THE INSTANCES WHERE AS A REAL ESTATE PRACTITIONER I HAVE WITNESSED AN INDIVIDUAL CANCELLING AN OFFER TO PURCHASE
Many years ago , when I was still naive as a young estate agent , I had a purchaser who signed an OTP , I got the seller to also sign , then the client was going to pay cash , but we wanted proof of funds at the time because we did not want to just get going without the necessary checks and balance . So after a while , the buyer said the money was still stuck in investments , but a proof of payment will be sent as soon as it was
SA Real Estate Investor Magazine APRIL 2022 55