By Chantelle Gladwin-Wood, Partner and Divina Naidoo, Candidate Attorney
This article explores some of the more common mistakes that often crop up in practice, when sale agreements are drafted using precedents that are not properly altered by qualified professionals. Every deal is unique and proper advice should be sought on every deal, lest a silly mistake result in severe financial consequences or other unintended liability for the parties concerned
1. Alienation of Land Act 68 of 1981
This Act states that a sale of land must be done in writing. Many sale contracts are badly drafted and don’t actually say that the seller sells the property to the purchaser and the purchaser purchasers from the seller. Without this simple line, the agreement is worth nothing and any transfer based on a contract missing this essential allegation will be invalid in law.
2. Signed and Witnessed correctly
In terms of the Alienation of Land Act, a deed of sale for land must be signed by the parties and two witnesses. Failure to sign the document properly will result in it never coming into effect in law.
3. Suspensive Conditions
It is common for a sale of land agreement to include a clause to the effect that the purchaser is given a time period to obtain mortgage finance (a bond), and a clause to the effect that if the bond is not obtained the sale agreement lapses ab initio (meaning that it will be “null and void” as if it had never existed).
Other suspensive conditions can also be created, such as the sale being suspensive on the sale/transfer of the purchaser’s existing property. What many people don’t realize is that, until the suspensive conditions have been fulfilled, there is no agreement at all that can regulate the relationship between the parties. If you allow early occupation of a property before the suspensive conditions have been fulfilled, you have no valid sale agreement in terms of which occupation can take place and be governed unless your document expressly provides for part of it to come into being before the suspensive conditions are fulfilled. In that situation the common law governing occupation would “kick in” and fill that gap, especially if the sale never goes through and you need to evict the tenant, and you don’t have written lease terms to rely on in court.
4. Cancellation/ breach clauses
We often see lease and sale agreements that give a residential tenant/purchaser 7 days to remedy a breach (normally non-payment of rent) and threaten cancellation and eviction after 7 days, if the breach is not remedied. To the extent that the sale agreement/lease is subject to the Consumer Protection Act 68 of 2008, the law provides that a minimum of 20 business days must be given in which to remedy the breach before cancellation can take place and this cancellation period will only be operative in law where the consumer was in breach. Any premature cancellation, even if done in terms of the wording of the lease/sale agreement itself, will be invalid if this is not complied with. Imagine spending 6 months in court to evict a tenant/purchaser who refuses to vacate after a sale is cancelled and losing because the court finds that the sale agreement/lease was never properly cancelled.
5. Immediate Ejectment/Eviction
Most leases and many sale agreements provide that the tenant/purchaser must vacate the property immediately if the lease/sale agreement is cancelled, and that if the tenant/purchaser fails to do so, the landlord/seller can “enter the property” and “eject” the tenant/purchaser immediately. This kind of clause is contrary to the provisions of section 25 of the Constitution which provides that everyone has the right not to be evicted from their home without an order of court, and as such, is entirely unenforceable until you have a court order.
6. Forgetting to attach annexures
Very often important details of the agreement between the parties are recorded in annexures to an agreement, but the annexures are accidentally left out. It might be that the wording of the agreement is precise enough to be able to identify the annexure concerned, but if not you might end up in a fight about what document should have been attached, or which version of a particular document should have been attached.
7. Incorrect clause references
Many sale agreements have been adapted from prior versions used for other clients/deals, and often an aspect that is overlooked is the clause number referencing. Inaccurate clause references can cause huge prejudice to the parties (and much confusion).
In conclusion, it is clear that quite often the smallest mistakes, such as forgetting to include annexures in an agreement, or the incorrect use of a precedent when referencing lease specific clauses, can be detrimental to the enforceability of the agreement and thus create prejudice for the parties. Always have a professional draft or check your important documents, because the cost of not doing it right from the start will often exceed the cost of getting the right advice from word go.
Written by Chantelle Gladwin-Wood