An Offer to Purchase a property is an agreement that sets out the provisions that the seller and buyer have to comply with, as well as the consequences in the event of non-compliance by either party. Once signed by both parties, an Offer to Purchase becomes a legally binding and valid agreement that cannot be cancelled without attracting certain legal consequences.
Any party who fails to comply with or withdraws from a valid and binding Offer to Purchase without good reason is in breach of such an agreement. Where a property transaction was facilitated by an estate agent, one of the usual consequences for withdrawing from a binding agreement (depending on the contract wording) is that the agent can claim payment of their commission regardless of whether the transaction was registered in the Deeds Office. It is quite standard for an Offer to Purchase to contain a provision that the agent’s commission can be claimed from the party who is responsible for the cancellation of the agreement. This provision can be overlooked by buyers as it is assumed that the general rule is that it is the seller’s responsibility to pay the agent’s commission.
To take an example from our case law. In the recent case of Naidoo and Another v Wakefields Real Estate (Pty) Limited (AT638/17) [2023] ZAKZPHC 95, Wakefields Real Estate instituted action against Mr and Mrs Naidoo after they failed to carry out their obligations in terms of the Offer to Purchase. A few days after signing the Offer to Purchase, Mr and Mrs Naidoo notified the agent that they no longer wished to proceed with the purchase as it was no longer financially feasible. The Offer to Purchase contained a provision that the agency would be entitled to claim its commission from the purchasers if the latter failed to comply with their obligations in terms of the agreement. In response to Wakefield’s claim, Mr and Mrs Naidoo argued that they were not aware of the said provision, it was never explained to them or brought to their attention and for that reason, they cannot be held liable.
The Pietermaritzburg High Court relied on the cavaet subscriptor-rule which states that a party who signs an agreement, consents to the contents of the document even if it subsequently turns out to be unfavourable to them. The Court found that Mr and Mrs Naidoo had sufficient time to read the agreement before signing, and by signing the agreement, they automatically agreed to all the provisions, regardless of whether they understood the terms thereof. The Court then ordered them to pay Wakefield’s commission for the property even though they were no longer buying it. On appeal, the Supreme Court of Appeal upheld the decision of the High Court.
This should stand as a stark warning to buyers, especially inexperienced buyers, to not rush into a property sale and sign agreements before they are ready, as the consequences could be dire if the deal is not the right one for them and claiming that you didn’t know about these provisions won’t save you from having to pay the estate agent their commission as contractually agreed to by you.
When in doubt, rather press pause, and if you can, have an attorney or property specialist review any proposed Offer to Purchase with you so that when you sign, you are aware of the consequences and 100% ready for the transaction.
Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy have been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken based on this content without further written confirmation by the author(s).
