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Crucial OTP Clauses for 1st-time Home Buyers

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  • March 22, 2024
Crucial OTP Clauses for 1st-time Home Buyers

PropInsights Blog 1 (MARCH)

If you’re buying your first property, part of the process is understanding the intricacies of an Offer to Purchase (OTP). Two critical components within an OTP that can significantly impact your buying process are suspensive conditions and special conditions. Real estate expert Gary Luyt, who owns three Property.CoZa franchise offices in Gauteng shares his expertise on what these terms entail and why they matter.

Suspensive conditions

Definition and purpose: Suspensive conditions are clauses within the OTP that outline specific events or criteria that must be met for the sale to proceed. Until these conditions are fulfilled, the sale remains tentative.
“Common examples include obtaining mortgage approval, satisfactory property inspections, or selling the buyer’s existing property, as well as any deposit payments”, explains Luyt.

Clarity is key: Ensure that suspensive conditions are clearly defined in the OTP to avoid ambiguity. Luyt cautions that ambiguous language can lead to misunderstandings and potential legal complications down the line.
“Much confusion may arise when an OTP does not clearly define what is expected, for example, when a clause refers to ‘days.’ Whether it is working days or consecutive calendar days must be clearly defined. Failing to do so will result in missing pivotal dates or actions,” explains Luyt.

Timelines matter: It’s essential to pay close attention to the timelines associated with suspensive conditions. “Missing deadlines can jeopardise the entire sales transaction, so make sure you work closely with your real estate agent and property attorneys to stay on track,” Luyt advises.

Negotiation leverage: If you’re a savvy buyer, you can leverage suspensive conditions to your advantage during property negotiations. “For example, if a property requires significant repairs, you can include a condition for a satisfactory inspection report, which gives you the option to renegotiate or withdraw if the repairs are extensive,” he explains.

Be realistic: While including numerous suspensive conditions for added security is tempting, Luyt recommends buyers be careful about overwhelming the seller. Balance your protection needs with the seller’s expectations to streamline the negotiation process. The most important suspensive conditions to include are:

  • How the property will be financed (either mortgage bond or cash); and
  • By when or the date when that clause must be met.

He says Property Practitioners Regulatory Authority (PPRA) regulations emphasise the importance of fully understanding and reviewing the Property Declaration as it may contain elements that could be suspensive conditions.


Home owners


Special Conditions

Customisation and flexibility: Unlike standard terms in an OTP, special conditions are tailored to address specific concerns or requirements of either party. They offer flexibility and customisation, making them invaluable tools for accommodating unique circumstances.

Some common examples of special conditions include the following:

  • Any agreement between the seller and buyer regarding items that need to be repaired on the property before the transfer occurs.
  • Any items that are either included or excluded in the sale of the property.
  • If a property inspection is also required and the parties agree to an inspection, there should be a special condition specifying who is responsible for arranging and carrying the inspection costs.

Detailed specifications: When drafting special conditions, provide detailed specifications to avoid misunderstandings. Clarity is paramount, whether outlining responsibilities for repairs or specifying deadlines for additional negotiations.

If it has been agreed that a repair needs to be done before registration, it should be clearly specified what is to be done, who is responsible for ensuring that it is done, and when it should be completed,” remarks Luyt. He adds that should anything change that prevents the expectations from being met; it should be renegotiated before the stated deadline date, as recorded under special conditions.

Legal review: Due to their customised nature, special conditions often require legal scrutiny to ensure compliance with relevant laws and regulations. Investing in professional legal advice upfront can save you from potential pitfalls in the future.

“Drafting clauses under special conditions doesn’t need to be complicated, in fact the simpler the content the better. However, seeking legal advice upfront is wise to prevent ambiguity and misunderstandings.”

Mutual agreement: Both parties must agree to special conditions that are legally binding. Luyt advises buyers to negotiate clearly and openly and focus on finding mutually beneficial solutions.

Document everything: Keep thorough records of all negotiations and agreements regarding special conditions. “Written documentation is a crucial reference point in case of disputes or misunderstandings,” remarks Luyt.

By mastering the nuances of suspensive and special conditions, first-time property buyers can navigate the complexities of an OTP with confidence and clarity.

“Your Property Professional is responsible for clearly explaining the contract and pointing out all the suspensive and special conditions in a way that all parties fully understand what is required of them.”

Luyt concludes by reminding buyers that being informed, communicating effectively and negotiating wisely are the cornerstones of a successful property purchase journey.

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