Article by: Sulize Möller, director

It starts off as a classic ‘feel good’ movie. The potential purchaser finds their dream home. Papers are drawn up and signatures are applied. Now the suspense as everyone awaits the fufilment of the bond approval condition.

Cue the dramatic plot twist! With a sudden change of heart, the purchaser either refuses to co-operate further in the bond application process, alternatively is issued with a bond quote (approval in principle) that they refuse to accept. Quicker than you can call ‘Cut!’ the happily-ever-after has turned into a horror show.

What to do? When is the suspensive condition of bond obtainment deemed to be fulfilled? Is a purchaser obligated to accept a bond grant? Can the purchaser be forced to comply with their obligations and does the principle of fictional fulfilment still find application?

In short, the answers to the questions above are as follows:

•  The condition of bond obtainment, according the courts, is deemed to be fulfilled only when the purchaser has accepted the bond quotation (usually done by signing off of on same). It would seem that clauses in the agreement stating otherwise (i.e. that thecondition is fulfilled upon the issuing of the quotation) are rendered unenforceable.

•  No, a purchaser cannot be forced into accepting a bond quotation. In terms of the National Credit Act, a purchaser has the right to reject a quotation issued by a financial institute, if the terms thereof are not deemed favourable by the purchaser (i.e. interest rate offered ishigher than the purchaser anticipated etc.).

•  Where the purchaser refuses to co-operate in the bond application process further (i.e. refuses to submit required documents or sign relevant application forms) an application can be submitted to the High Court for the issuing of a declaratory order which will confirm that the suspensive condition has been fulfilled by the principle of fictitious fulfilment. The applicant would need to prove that the purchaser intentionally aimed to avoid fulfilment of the suspensive condition. Of course the cost and time implication of the proceedings would need to the weighed up before a decision is made to the institute action.

So how can the parties ensure a happy outcome for all? Consider the following:

−  Document expectations: In the event that the purchaser has specific requirements regarding the terms of the bond approval, (e.g. not more than a specific interest rate etc.) then such requirements should be captured in the agreement so that all parties are aware of the expectation.

−  Disclose property costs: Including current amounts payable in respect of monthly levies, rates and water costs (as may be applicable) will ensure that the purchaser is able to thoroughly consider same when making their affordability calculations.

−  Pre-approval: A pre-approval will give the purchaser a good indication of how much they will be able to qualify for in respect of a bond and also give them a good indication of how much their monthly instalment may be.

−  Seek legal advice: Obtaining legal advice before signature of an agreement will ensure that parties are duly informed of their rights and obligations and that clauses are worded appropriately so as to encapsulate the requirements of the parties before documents are signed.

The complexities surrounding the bond approval clause need not be a scripted tragedy. To discuss the terms of a potential sale or to consider action in respect of an existing sale, contact our office on 035 792 2011 to arrange a consultation with one of our experienced conveyancers.