The area of property law is of interest to many individuals and organisations. Quite often property transactions go wrong caused by the buyer, seller or unforeseen hurdles.

Challenges in property transactions

Below are some of the things that can go wrong in a property transaction.

Default by buyer

This can be through:

Failure to pay the purchase price or instalment on dates agreed in an agreement of sale.

Buyer opting to withdraw from the transaction.

Default by seller

This may be occasioned by:

The seller may no longer want to proceed with or conclude the transaction after signing of agreement of sale or even after being part paid. This may happen if the seller has found a better deal or has solved his/ her financial problems.

Seller could be stalling submitting or signing paperwork necessary to effect transfer through title or complete cession.

In the case of purchases from land developers, double selling ie sale to more than one buyer.

Fraudulent sales.

Unforeseen hurdles

These can be through for example:

Unexpected transaction costs, especially taxes such as Value Added Tax or Capital Gains Tax, which had not been factored in the purchase price.

Restrictions on passing transfer.

Property subject of a dispute e.g. over ownership, divorce or estate.

Contested sales e.g. auction sales.

Possible solutions

Some of the challenges highlighted above may be solved through solutions explained below.

Read the Agreement of Sale

To better understand your situation and options available to you read the agreement of sale. Familiarise yourself especially with:

Rights and obligations of the buyer.

Rights and obligations of the seller.

Any conditions precedent.

Any conditions attached to the property e.g. restriction in transfer.

What constitutes breach and implications of breach.

Dispute resolution mechanisms provided for in the agreement

Termination, conditions and implications thereof.

Resolving default in payments by buyer

This is a common problem where a buyer is unable to pay the purchase price within the agreed period or actually pays after the agreed period. It is always advisable for the buyer to let the seller know of the former’s predicament and ask for an extension, preferably in writing to avoid termination of the agreement of sale.

Instalment transactions present the most problems. A buyer may fail to pay an instalment on time leading to default and may fail to rectify the default when called upon to cure it. Depending on the circumstances, a seller may elect to terminate the agreement.

A buyer is advised to engage the seller, with the assistance of a legal practitioner, to negotiate a payment plan, without penalties, preferably in writing.

In the unfortunate event that the seller terminates the agreement, the buyer should take all necessary measures, through a legal practitioner, to minimise financial loss for example amounts deducted from refunds as penalties. There should be no unjustified enrichment on the part of the seller.

When buyer wants to exit the transaction

A buyer may want to exit a transaction for various reasons e.g. may have found a cheaper or more appropriate option, is unable to fund the balance of the purchase price, etc. This is normally a difficult situation unless adequately and favourably provided in the agreement of sale. Depending with your situation, you may want to negotiate with the seller for an amicable or less costly exit. Sellers do not take such withdrawal lightly and usually want to claim some compensation which can be significant.

Seller is in default

There are many factors to consider if the seller is in default.

Withdrawing from the transaction

It is worth weighing your options whether to press ahead with the transaction, regardless of the default, or withdraw from it.

Some considerations include chances of the default being rectified in time, prospects of getting a comparable property at about the same price or terms, refunds, currency risks, inflation, etc.

At times a purely financial decision might be to exit and move on.

Legal action

Depending on the dispute resolution mechanisms provided for in the agreement of sale many cases spill into the courts.

Considerations include the buyer’s chances of success, financial costs of withdrawing from the transaction, ability to fund legal costs, timeframes involved, feasibility of implementing the court order sought, currency risks, inflation, etc.

A buyer may therefore approach the court, through his / her legal practitioner, to obtain an order compelling the seller to carry out specific actions which are beneficial to the buyer such as to complete the transaction.

Double sales by land developer

It may be faster to engage the land developer and demand allocation of another property if one still wants to deal with the developer.

Unforeseen hurdles

When you experience unforeseen hurdles, consult a legal practitioner for proper advice. For unexpected transaction costs such as taxes, ask your legal advisor to assist so that you pay only what you are legally liable to unless you consent to pay for the seller, for example.

Fraudulent sales

These require swift action to salvage something. It may be advisable to pursue concurrent civil litigation and criminal prosecution of the perpetrators, an approach loosely referred to as “double kick”.

Civil route will help the buyer recover something while the criminal prosecution will put additional pressure on the perpetrator who will face jail time for their criminal enterprise.

 

Disclaimer

This simplified article is for general information purposes only and does not constitute the writer’s professional advice. 

Godknows Hofisi, LLB(UNISA), B.Acc(UZ), CA(Z), MBA(EBS,UK) is a legal practitioner / conveyancer with a local law firm, chartered accountant, insolvency practitioner, registered tax accountant, consultant in deal structuring, business management and tax and is an experienced director including as chairperson. He writes in his personal capacity. He can be contacted on +263 772 246 900 or [email protected].