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Buying or selling real estate? Why it is absolutely essential to ensure that every aspect of the deal is in writing

selling real estateIt may surprise South Africans to know that, in South African Law, agreements do not always have to be in writing: verbal agreements are binding and have, time and again, been upheld in the courts.

Provided it can be shown that there was a meeting of the minds, verbal agreements are acceptable. Where it is argued that this was not the case, the parties may have to go to court for a judge to decide whether there was in fact a meeting of the minds or not.

 

The exception: buying and selling real estate

There is one very definite exception to the verbal rule: when an agreement involves immovable property (e.g. buying or selling real estate), the Alienation of Land Act makes it clear that every aspect of the deal must be in writing and this includes any change, deletion or addition made to the contract.

The thinking here is that the ownership of property is a real and entrenched right in South African Law. Properties are also often of great value they can be one or both parties’ chief asset. So it is vital to have absolute clarity regarding the sale thereof by putting everything in writing.

A case on buying and selling real estate

This fact was emphasised recently by a Supreme Court of Appeal decision in a case between Rockbreakers and Rolag Property Trading.

Rolag made an offer to purchase a portion of a property owned by Rockbreakers. A clause was later inserted in the agreement stating that the agreement was subject to the seller obtaining subdivision of this property. This amendment was not countersigned by Rolag, the purchaser.

Both buyer and seller expected that there would be no difficultly in obtaining this subdivision as it related to a diagram dating back to 1967, which had been submitted to the local municipality but not followed through. The deposit was accordingly paid and the guarantees given.

When approval for the subdivision was granted by the local authority, it was made subject to certain previously unforeseen conditions, including the establishment of a township on the property and a prohibition of any other development prior to its promulgation.

Rockbreakers did not want to go ahead with the sale under these onerous conditions. They therefore argued that Rolag had never accepted the conditional offer, i.e. by failing to countersign the amended deed of sale reflecting the conditions relating to the subdivision so the agreement was invalid.

Rolag then applied to the Johannesburg High Court to uphold the agreement and to compel Rockbreakers to proceed with the sale of the portion they wanted. They won their case.

On appeal, however, this decision was reversed because the clause, added later to the agreement, making the sale conditional upon subdivision, had never been countersigned by the buyer, Rolag.

What you need to know when buying or selling real estate

It could be argued that this was merely an oversight as subdivision of the property was clearly the intention of the parties at the outset of the agreement. But as the Alienation of Land Act makes it clear that all agreements have to be in writing and signed, Rolag having not signed the amendment meant that Rockbreakers could not be held to the agreement.

The law insisting on written and signed property agreements is absolute. On any property transaction, it will pay to employ a lawyer to check each clause and to ensure that the other party has countersigned wherever this is required.

Image courtesy of ponsulak at FreeDigitalPhotos.net

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