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Understanding ‘suspensive conditions’ in a property sales contract

25 Jan 2018

If an offer to purchase has been signed by both buyer and seller, it is accepted that they are both serious about the transaction going through and the only thing that would prevent this from happening is that one of the suspensive conditions listed in the contract is not fulfilled.

It is important to ensure that a suspensive condition is properly drafted by your estate agent. It must be clear, concise and stipulate a cut-off date.

So says Michael Bauer, managing director of property company, who explains that if a suspensive condition is listed, it is something that has to be completed before the agreement between the parties is enforceable. “Because such a condition can have important consequences, it is vital that the parties’ intentions are clearly and accurately set out in the offer to purchase.”

Both buyer and seller are bound by this contract once all the conditions have been met, and neither can retract without being penalised for breaching the terms of the agreement, says Bauer.

An example of a suspensive condition that often arises in property transactions is when a bond is required by the buyer before he can fully commit to purchasing a property. Another is when there is a property to be sold before the second one can be bought.

It is important to ensure that a suspensive condition is properly drafted by your estate agent. It must be clear, concise and stipulate a cut-off date.

Always ensure that the timing aspects are carefully considered, for example, if it is subject to the sale of the purchaser’s property, ensure that the details of that property are recorded in the contract and the consequent effect on the transfer date of the new property being purchased is taken into account.

In addition, where there is more than one suspensive condition, it is best to deal with each one separately, as this will avoid confusion. If there are costs involved, state who is responsible for the costs and consider all the consequences of the condition.

If in doubt or the suspensive condition deals with an unusual matter such as a specialist’s report on the property, engage the services of a conveyancing attorney. The wording must be right the first time as ambiguity can cause major problems for all parties concerned, says Bauer.

It has to be checked so that both purchaser and seller understand the fine print of the terms and conditions of an offer to purchase before they sign, as everything stated in the contract is binding once this is done, he says.

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