Agreement of Sale
The Offer to Purchase/Agreement of Sale will contain certain of the following standard provisions:
- PURCHASE PRICE
A deposit is not mandatory but serves as a gesture of good faith on the part of the purchaser and an indication of financial ability. This amount will be invested by the estate agent/conveyancer in an interestbearing trust account for the benefit of the purchaser.
Provision will be made in the Agreement for a guarantee to be called for in respect of the balance of the purchase price. In general, a guarantee will only be acceptable if issued by a local financial institution which means that the funds will actually have to be remitted to South Africa in order for a local bank to issue such a guarantee or, alternatively, arrangements must be made between a foreign and local bank for a back to back guarantee to be issued. It is, however, possible to negotiate the issue of a Standby Letter of Credit from an overseas institution in certain circumstances.
- OCCUPATION, POSSESSION, TRANSFER AND OCCUPATIONAL INTEREST
Occupation is the physical occupation of the property whereas possession is generally deemed to be the date upon which the purchaser assumes responsibility for the property and it is customary for the risk of ownership to pass on the date of possession. Transfer refers to the actual date of registration of ownership in the Deeds Registry in favour of the purchaser.
Occupational interest is the rental payable by the party occupying the property belonging to another where the date of occupation and date of transfer differs, which is better expressed in Rand terms or as a percentage of the outstanding balance of the purchase price.
- VOETSTOETS
This is a standard inclusion in all deeds of sale and implies that the property is bought ‘as is’. ‘As is’ means ‘in the exact condition in which the property is found’. However, all latent defects present in the property within the sellers’ knowledge must be brought to the attention of the purchaser. It is not standard in South Africa to conduct property surveys but these can be arranged with the assistance of the estate agent or an attorney and should be included as a condition of the purchase.
- ELECTRICAL AND BEETLE-FREE CERTIFICATE
The property owner is required by law to be in possession of a valid 'electrical compliance certificate' certifying that the electrical installation at the property meets certain statutory safety requirements. The beetle-free certificate certifies that all accessible parts of the property are free of infestation by certain defined beetle and this certificate, whilst a standard inclusion in the Agreement of Sale, is neither a legal requirement nor included in sales of sectional title units. The cost of attending to the necessary repairs in order for the aforesaid certificates to be provided, is generally accepted as being for the account of the seller, although, the parties can contractually agree otherwise.
- FIXTURES AND FITTINGS
A property is sold together with all fixtures and fittings of a permanent nature. Generally fixtures and fittings include anything which is attached to the property or which by virtue of its considerable mass accedes to the property. In the event of any uncertainty, the purchaser is cautioned to ensure that all items intended to be included in the purchase price are specified in writing in the Agreement of Sale. The format of agreements concluded for the acquisition of shares/members interest and loan accounts in property-owning companies/close corporations contains many of the aspects discussed above, although it is substantially different and includes numerous warranties and indemnities given by the seller to the purchaser who acquires the property-owning entity together with its financial history.
- EXCHANGE CONTROL/REPATRIATION OF FUNDS
All funds introduced from outside South Africa to acquire fixed property within South Africa may be repatriated together with any profit on resale of the property, provided, the title deed of the property has been endorsed "non-resident". Similarly, funds introduced to acquire shares in a company/members interest in a close corporation may be repatriated together with any profit on resale, provided, the relevant securities have been endorsed "non-resident". Funds, introduced into South Africa in the form of a foreign loan to fund acquisitions of corporate entities which own property in South Africa, may be repatriated in terms of the original loan approval by the SA. Reserve Bank. The profit on resale may also be repatriated, provided, the relevant securities have been endorsed"non-resident".