THOUGHT OF THE WEEK Addressing the waiting time in the bond approval period
Whether as buyer or seller, the agreement in which the sale of property is recorded is likely to include a suspensive condition as well as a so-called “72 hour clause”. What is the import of these two provisions?
In short, a suspensive condition suspends full operation of the agreement and is usually used where a purchaser requires mortgage bond approval before being held liable for full performance under the agreement. In such a case the suspensive condition will provide that once bond approval is obtained, the ‘suspension is lifted’ and the agreement becomes enforceable; where approval is not obtained despite the buyer’s best efforts, the buyer is no longer bound to the undertaking to buy the property.
In order not to stall the process during the time that there is uncertainty whether or not the buyer will obtain approval, a ‘72 hour clause’ is often included in an agreement. This clause will provide that the seller may continue marketing his property until such time as the suspensive condition has been met by the first buyer. A seller may therefore, whilst the first buyer is applying for bond approval, accept a bona fide competing offer from a second buyer. Should the seller wish to accept such a second offer, the seller must afford the first buyer 72 hours in which to either meet the suspensive condition (by providing proof of bond approval) or to waive the benefit thereof (which means that he binds himself to paying cash for the property). Both clauses have important consequences and whether as seller or buyer, we advise strongly that a skilled conveyancer is consulted before putting pen to paper.
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