Property Sellers - Why It Is Important To Include A 72 Hour Clause In Your Property Transaction
The South African property market is now in a buyer’s market phase – i.e. that period of the property market cycle where the buyers has gain the initiative due to a variety of reason. Although sellers obviously want the best price for the property in the shortest period, the reality is that cash purchasers are becoming an increasingly scarce commodity and sellers may have to seriously consider offers introduced subject to suspensive conditions.
Suspensive conditions is always linked to a period in which the buyer should comply to a specific condition – effectively suspending the operation of an agreement of sale until such time as the specific condition contained therein has been complied with. This simply means that all rights and obligations contained in the agreement of sale shall only become enforceable and binding upon fulfilment of such suspensive condition(s).
A typical illustration of such a condition is for example (a) “the purchaser shall obtain bond approval in the sum of a specific amount by no later than a specific date in time” or (b) “this sale is subject to the sale of the purchaser’s property situated at a particular address by no later than a particular date in time”.
Since it is clearly not always the best option for a seller to accept an offer subject to a suspensive condition, the practice has evolved to introduce the so-called 72-hour clause to help mitigate the risk of losing a possible future unconditional buyer. The introduction thereof into an agreement of sale of a property has the effect that the seller is entitled to call upon the purchaser to comply within 72-hours with all the suspensive conditions, if and when, a bona fide unconditional offer to purchase is received from a third party or lose out on the transaction.
The 72-hour clause provide the seller therefor with an opportunity of not losing a second cash buyer whilst the seller is still waiting for the purchaser to comply with the suspensive condition.
A seller cannot normally demand of the purchaser, in the first instance, to pay a higher purchase price, if an unconditional second offer is received for a higher purchase price. That will only be possible if the so called “meet or beat” condition was introduced as part of the 72-hour clause, in which instance the purchaser will be compelled to at least match the price as may be offered by the third party offeree.
Getting your attorney involved will ensure that most of the typical challenges as may be encountered when notifying the purchaser in the first instance of the third party offer that was received and which have over time often been the subject of many a legal dispute, is effectively sidestepped.