Understanding conditional clause when buying (or selling) a property

As if property transactions weren’t already convoluted enough with reams of documentation and legalese to navigate, there are also often suspensive conditions included in the Offer to Purchase that needs to be met by one or both parties, and these need to be gone over with a fine tooth comb.

So says Grahame Diedericks, Manager Principal for Lew Geffen Sotheby’s International Realty, adding that, when included, these clauses are a pre-requisite for a contract to come into force and effect. 

“Any condition written into a property sale agreement contract should always state which party must do what, by when, how it should be done, and which party is to cover costs, if applicable,” explains Diedericks.   

He adds that understanding what is expected of each party and the implications of failing to meet certain conditions are critical as failure to do so could have far-reaching and even dire consequences.

Suspensive conditions

“A suspensive condition is one, which if not fulfilled by the date specified in the agreement, causes the entire agreement to lapse, upon which the parties are no longer bound by it as the agreement will not have any force or effect.

“Imagine a scenario in which, after much searching, you finally find your dream family home and make an offer, only to discover later on that the contract has lapsed because you obtained bond approval a few days too late.

“Should the seller have received a better offer in the meantime, they would be well within their rights to accept it, leaving you out in the cold at best or even homeless if you have sold your current property in the meantime.”

Diedericks says that the most common suspensive conditions in property agreements are: securing a mortgage and selling your current property.

The most important point for a seller to stipulate in the Offer to Purchase is a definite time frame within which the condition/s must be met.

“The 72-hour clause, as it’s known, is one which basically states that a seller may still market his property and accept offers, after having accepted the conditional sales agreement from the buyer.

“Should an offer without suspensive clauses come along, the seller informs the first buyer that they have 72 hours to meet their suspensive conditions or, the seller is free to accept the second offer.”

Diedericks advises that where there is more than one suspensive condition, it’s best to deal with each one separately to avoid confusion.

“To avoid the adverse legal implications of a suspensive condition, it’s also advisable that the clause should be constructed in such a way that it allows the parties to extend the time period within which a suspensive condition must be fulfilled should it become necessary to do so.”

Special conditions

These are additional conditions attached to the sale of the property outside of the standard conditions you would normally see in the contract. 

“Special conditions provide that extra layer of protection to the vendor to account for extenuating circumstances where the sale may not go according to plan and, as with suspensive conditions, the golden rule is to establish a time frame.

“Such conditions could include by when the seller must produce council-approved building plans or have fixed a leaking roof and it is important to include every detail before the document is signed.

“For instance, if the purchaser comes back at a later date and states that he requires a workmanship guarantee on the repair, but the agreement did not stipulate a guarantee, once the transferring attorney receives confirmation that the repair has been made, it is permitted to proceed to register the sale.”

Diedericks concludes: “Purchasing a property is likely to be one of the biggest investments you will make and so it is important to know what you are getting yourself into and that you carefully review all contracts before you sign on the dotted line.”