We all know the best way to secure the commitment of a Purchaser is to provide for a deposit in an agreement of sale.
However, not all Purchasers are able or are willing to pay a deposit.
What every Purchaser should understand is that there are transfer and, in many cases, bond costs to be paid.
The fact is that when an Offer is accepted, one does not know for certain what these costs are going to be – it is only further into the process that these costs can be accurately determined.
For example, if there is an Exclusive Use Area a separate Notarial Deed of Cession of the Exclusive Use Area will also need to be drafted, executed, and registered. Such a Notarial Deed attracts additional costs. Sometimes the Conveyancers will need to make a provision in the pro-forma account for future levies.
Conveyancers incur different recoverable disbursements with different bonding banks because the banks use different service providers. The bond registration costs can therefore only be reasonably accurately determined once the bank which will pass the mortgage bond is determined.
Our suggestion would then be to provide for a deposit in the Offer, but which deposit can be used towards the costs later. This way the Purchaser pays the provision for the costs early in the process, which demonstrates commitment to the Seller, and at the same time secures most of the costs.
If one can do this, it would be important to add the following clause to the agreement to protect the parties:
“If the full purchase price is secured by other means, the Parties agree that the deposit can be used towards the costs of the transfer and, if applicable, the costs of registering any mortgage bond. If the transaction collapses for any reason, the deposit will continue to be a deposit and will be treated as such. The Conveyancers are irrevocably instructed and authorised to apply to SARS for a refund of any transfer duty paid and such funds will again become part of the deposit.”
Andrew Smith has 30 years of conveyancing experience, including subdivisions, township developments, sectional title developments, servitudes, usufruct transfers, general transfers, mortgage bonds, and uses his tax background to structure complicated transactions in the most tax efficient manner.