Real Estate Investor Magazine South Africa October/ November 2019 | Page 8

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Amendment to purchase offer
Q
“My partner and I have made a cash offer on multilet
house in Johannesburg with multiple tenants, without
getting a bank loan. We wanted to buy property as
a cash. We have signed an offer to purchase for R6,2
million in our own names and have already paid R3
million cash to the conveyancing attorneys to date.
We still owe an additional R3,2 million which is due
and payable in December 2019.Transfer will only take
place on full payment of the property. However, we
now want to get finance for the property as opposed
to paying cash. The agent is concerned that if the deal
is changed that they will lose their commission.
What are our options if we want to change the entity
and finance agreement on the deal and ensure that
a) we don’t lose the property and b) the seller doesn’t
feel that they will lose out and c) the agent still gets
their commission?”
A T
he problem by changing a purchaser “mid-air”
during a transaction has a few “red flags” says
Meyer de Waal a Cape Town conveyancing
attorney.
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6
SARS can regard the change of a purchaser as a
“double transaction” and as such levy transfer duty
twice. Transfer duty on R6,2 million is already a hefty
R515 000.00 and one wants to avoid paying it twice.
If one cancels the first agreement and then enter
into a new agreement with a new purchaser/legal
entity, what happens if the second transaction falls
through due to lack of performance by the second
purchaser? If the first transaction is legally canceled,
the first purchaser is “left off the hook”.
The “timing”. There is a fine time line in between
the termination of the first agreement and the
signature of the second agreement. For a few
moments, in between the termination of the old
and the signature of new agreement, technically
there will be no agreement between the parties.
What happens if a mistake is made in the drafting
of the new agreement? The result can be that the
purchaser may then lose the property, as example
if the seller does not sign the new agreement, or
a dispute arises. The estate agent may lose out
on commission, or will not know who to claim
commission from.
OCTOBER/NOVEMBER 2019 SA Real Estate Investor Magazine
MEYER DE WAAL
Director of MDW
incorporated
A tri-partite agreement will be the solution, explains
de Waal. A tri-partite is exactly what it means, it is an
agreement between three parties, such being the first
purchaser, the seller and the new purchaser. Such an
agreement is drafted that the existing[old] agreement
remains in place, (one can add in a few changes, as in
this example in this instance related to the finance being
raised by the purchaser, without prejudice to the rights
of the seller - cash offer vs home loan required), and
agreeing to bring in the new purchaser to replace the
first purchaser, on complete fulfilment of the terms and
conditions of the agreement.
It is very important to also reflected that no additional
consideration is being paid by either party as any
additional payment may have the risk of transfer duty
being levied as a “double transaction”.
If the second purchaser fails to fulfil his obligations, then
the first purchaser remains liable for due performance.
A well drafted tri-partite agreement protects the rights
of the seller, first purchaser, second purchaser and estate
agent all in one document, incorporating the terms of
an agreement already negotiated and agreed upon,
without the risk of attracting double transfer duty.