SPECIAL / SUSPENSIVE CONDITIONS – HEIGHT RESTRICTIONS
In the Real Estate industry, the protection of property views can be a crucial and deciding factor when considering an offer to purchase.
By concluding a sale agreement between a Seller and Purchaser, the real estate agent establishes a relation between the parties, stretching for a period from introduction of the property up to conclusion of the transfer and beyond. The extent of this relation can be smooth and peaceful, as it should be, or a terrible and frustrating experience for all relevant parties.
The essence of a successful real estate transaction lies in the drafting of an offer to purchase. The real estate agent carries an enormous responsibility as the successful conclusion of the transaction depends on the intended agreement between the parties, being correctly formulated in the offer to purchase.
Most sale agreements stipulate certain special or suspensive conditions, but often the wording and description of such conditions can be misleading or misinterpreted, with a possible cause of cancellation of the sale agreement.
The result of a badly worded condition can have extreme results/effects for all parties concerned:
1. The Purchaser can insist on cancellation of the sale agreement, and will have to incur legal costs to:
a. Defend a claim for specific performance by the Seller;
b. Prove probable cause for cancellation;
2. The Seller can:
a. Insist to proceed with transfer and institute a claim for specific performance, incurring legal costs;
b. In the event of successful cancellation, lose out on achieving the asking price and is forced to place the property back on the market;
3. The real estate agent receives NO commission.
A practical example can be as follows:
“A real estate agency concludes a sale agreement for a high profile property, subject to the following condition imposed by the Purchaser:
‘Height restriction on property in front’
The wording of the condition at first glance clearly indicates danger-on-the-way and a possible misinterpretation of the true intention of the parties.
Although the offer to purchase was completed by the estate agent, there was however an obligation on the Purchaser/s, in their own interest, to protect their valuable future investment by using the correct wording in the agreement.”
The point-in-case lead to the following conclusion:
“The Land Surveyor prepared a draft diagram to peg the height above mean sea level, at the property on which the height restriction would be imposed; which draft is subsequently accepted by the registered owner. The confirmed height restriction is however more in favour of the owner of the property in front, than in favour of the Purchaser.
At this stage of the transaction, the Purchaser realizes they had a different impression of what the final height restriction will be, and that their highly expensive sea views will not be as unobstructed as they have envisaged. The Purchaser now blames the real estate agent for misrepresentation, while considering cancellation of the agreement.
The Seller has complied with their suspensive conditions and the conveyancer is obliged and instructed to proceed with the transfer of the property.
The Purchaser obtains legal advice and is informed that they do not have grounds for cancellation, due to the limited wording attached to the condition, which was clearly not in their favour. The Purchaser is obliged to proceed with transfer of the property, while taking the risk that the ‘views-that-sold-the-property’ might be limited in the near future.
Not a good position to be in.”
A huge amount of time, energy and money was spent by the Real Estate Agent to conclude the sale agreement. If proper care was taken with the wording of the agreement, the agent could have prevented all the drama, delays and a very frustrated/unsatisfied Purchaser (and the loss of a future client).
The suggested wording to such a suspensive condition could have been as follows:
“This offer is made subject to the registration of a height restriction over ERF… in favour of the property hereby transferred. The final height above mean sea level to be confirmed by a signed copy of the Land Surveyor’s drawing, on/before ___/____/2014. The Purchaser to confirm their satisfaction with the proposed height restriction within 7 days of receipt of the final drawing. In the event of the Purchaser not being satisfied with the proposed height restriction, this offer will become null and void, at the choice of the Purchaser. The Purchaser to exercise their choice in writing, within the specified period of time.”
The intention of the wording to the above is to ensure that the Purchaser is completely satisfied with what they are buying, and leaves no room for misinterpretation. The wording ensures that the Seller will act in good faith and will submit the final drawings within a specified period of time, to further ensure that there are no unnecessary delays. Transfer can proceed and can be finalised in good spirit.
Al parties ie. the estate agent, the seller and the purchaser, should therefore always take extra care with the wording of special/suspensive conditions.
Act in good faith while maintaining complete transparency – protect the views – keep the peace – show me the money!
Wietz Viljoen, WVA INC.
This article is for general information purposes and is aimed at advising the public. It should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.