What happens when the purchaser is granted a loan for less than the amount required in terms of the sale agreement?
In Kovacs Investments (Pty) Ltd v Marais the Supreme Court of Appeal, what is asked among other things, is concerning the effect of the non-fulfillment of a condition to obtain a loan for a certain amount by a certain date by a buyer in terms of an agreement of sale of land.
The amount granted was R9,650,000 which was R4,199,722 short of the required R10,149,722.
The issue came to attention 20 months after the purchaser had taken occupation of the property, when the seller’s attorneys advised that the actual amount of the loan obtained was slightly less than the amount specified in the agreement of sale.
In June 2007, the seller went to the High Court so as to obtain an order declaring the agreement to be null and void on the basis of the non-fulfillment of the conditions.
The court found no suggestion of any waiver of the condition before the date the bond was to be granted. It was thus held that on that day, the agreement of sale automatically lapsed and it granted the seller the order that they sought for.
In the purchasers appeal, it was stipulated that both parties were aware that a loan for a lesser amount than was agreed to had been granted, but they still proceeded in terms of the agreement.
And so, both parties had agreed to waive the benefit of any further compliance with the condition.
There was a non-variation clause that was in place for the sale agreement, and so any variation or alteration of the terms and conditions of the agreement or consensual cancellation of them had to be down in writing and signed by both parties.
Because the alterations of the clause were made verbally between the two parties, these alterations fell foul of the provisions of section 2 of the Alienation of Land Act.
The court held its decision that the agreement had lapsed at the end of the day on which the loan had to be granted.
The judgement that was reinforced by this case is that if the loan is not granted for the sum required in terms of the sale agreement, an amendment to the agreement is required changing the amount of the loan and setting out how the balance of the purchase prices is to be paid.
Also the purchaser has to waive compliance with the conditions timeously and make the payments of the agreed to purchase price.
Van Deventer & Van Deventer Incorporated are ready to assist you navigate the process of buying and selling property. Contact us to arrange a free consultation.
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