The continued marketing clause in an Offer to Purchase | Legal Articles

 

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The continued marketing clause in an Offer to Purchase

Most offers to purchase property contain suspensive conditions protecting the Purchaser in the sales agreement.

Continued-Marketing-Clause-72-hours

Examples of suspensive conditions protecting the Purchaser:

  • That the purchase offer is subject to the Purchaser selling his or her current property;
  • That the Purchaser obtains a loan from one of the major financial institutions.

But what about the Seller's protection in the sales agreement? There is always uncertainty whether the Purchaser will be able to meet the suspensive condition(s).

What is a suspensive condition?

A suspensive condition is an uncertain future event. The Offer to Purchase is thus subject to the fulfillment of this uncertain future event.

Should the Purchaser fail to comply with the suspensive conditions pertaining to the specific offer within the allotted time frame, the Offer to Purchase becomes null and void and is of no effect.

Having to remove the property from the market for an extended period, places the Seller in an unfortunate position, and the “continued marketing” clause has been introduced to alleviate this disadvantageous situation. 

The Continued Marketing Clause – The 72-hour clause

The “continued marketing” clause, better known as the '72 hour' clause, provides the Seller with the opportunity to accept other, similar or better, unconditional offers on the property for sale.
  
In practice, when this occurs, the Seller is obligated to give the Purchaser written notice that he or she has received a similar or better unconditional offer. The Seller must indicate a willingness to accept this competing offer.

In the written notice the Seller must indicate to the Purchaser that he or she has a period of 72 hours from receipt of the notice to waive the suspensive conditions applicable to the first Offer to Purchase or to comply with all the suspensive conditions within the 72-hour period.

Should the Purchaser not waive the suspensive conditions applicable to their Offer to Purchase or not comply with the conditions within the 72-hour period, the contract between the parties will become null and void and be of no effect.

The Seller will then be in the position to accept the other offer.

Offer to Purchase Agreement

Should the Purchaser waive the suspensive conditions, the Offer to Purchase will immediately become a legally binding document and the Purchaser must perform as per the Offer to Purchase.

An example can be as follows:

  1. The Seller and Purchaser enter into an Offer to Purchase.
  2. The sale is subject to the Purchaser selling his or her current property within 90 days. This is the suspensive condition.
  3. The Seller will have to wait for the Purchaser to sell his or her property within 90 days for the contract to be binding or for the contract to lapse should the property not be sold.
  4. The “continued marketing” clause allows the Seller to market his property while waiting for the Purchaser’s suspensive condition to be fulfilled or to lapse.
  5. Should the Seller receive a similar unconditional offer or another more favourable unconditional offer (depending on the wording of the clause), and the seller wishes to accept this other offer, the Seller has to give 72 hours written notice to the Purchaser within which time the Purchaser will have to decide whether to waive the suspensive conditions.
  6. Should the Purchaser waive the suspensive conditions, the offer will be binding and will the Purchaser have to make payments and deliver guarantees as described in the Offer to Purchase as if it was an unconditional offer. Should the Purchaser not be able to fulfil the suspensive conditions within 72 hours, the offer will lapse.
  7. If the first offer lapses, then the second unconditional offer will become the binding offer.

Sellers should be alive to Purchasers who do not have the financial means to make unconditional offers. In some cases the Seller and Purchaser are equally uneducated in the workings of property transactions to make and accept such offers.

Sellers must also be aware that there are other aspects, notably the wording of the “72 hours” clause, that may occur.. 

Van Deventers & Van Deventers Incorporated - Property Conveyancers Johannesburg

It is recommended that Sellers appoint a legal professional to assist them with their property transactions who will be able to give them the necessary assistance and guidance.

Contact us for professional legal advice

 

 

Comments are closed for this post, but if you have spotted an error or have additional info that you think should be in this post, feel free to contact us.


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