Special clauses in OTPs explained

An Offer to Purchase (OTP) can be intimidating because of the legalese, but what is even more worrying for many buyers are the special clauses. Attorney and conveyancer Khairiyah Safeda answers frequently asked questions about OTP special clauses and explains their purpose.

Q: Should we be downloading generic OTPs from online sites?

I strongly advise against downloading generic OTPs from online sites. While these templates may seem convenient, they often lack the necessary legal precision and fail to account for the unique circumstances of each property transaction.

An OTP is a legally binding document, and any errors or omissions can lead to disputes, delays, or even invalidate the agreement. It's always best to have an OTP drafted or reviewed by a qualified property lawyer or conveyancer to ensure compliance with South African law and to protect both the buyer and seller.

Q: What are the essential pieces of information that must be in an OTP?

An OTP must include the following essential information:

• Full names and details of the buyer and seller.
• Description of the property (e.g., erf number, physical address, etc.).
• Purchase price and payment terms.
• Occupancy date (when the buyer can take possession).
• Fixtures and fittings included in the sale.
• Signatures of both parties.
• Conditions of sale (e.g., bond approval, sale of another property, compliance certificates, or compliance with special clauses).
• Defects should be listed in the mandatory disclosure document.

Q: What is meant by a special clause, and is 'a conditional clause' the same thing?

A special clause is a provision added to an OTP to address specific conditions or requirements unique to the transaction. These clauses are tailored to the needs of the buyer or seller and are not part of the standard OTP template.

A conditional clause is a type of special clause that makes the agreement contingent on certain events, such as bond approval or the sale of another property.

While all conditional clauses are special clauses, not all special clauses are conditional. For example, a special clause could require the seller to repair a roof before transfer, which is not necessarily conditional but still specific to the transaction.

Q: Are special clauses verbally discussed and then included in an OTP, or can they be presented for the first time in an OTP?

While special clauses can be presented for the first time in an OTP, it is recommended that special clauses be discussed and agreed upon verbally between the parties before being included in the OTP.

Presenting a special clause for the first time in the OTP can lead to misunderstandings, rejection of the offer, or disputes. It's crucial for both parties to fully understand and agree to the terms before signing the agreement.

Q: What are examples of the more common special clauses?

Some common special clauses include:

• Bond clause: The sale is conditional on the buyer obtaining bond approval.
• Sale of another property: The buyer must first sell their existing property.
• Repair clause: The seller must repair specific defects (e.g., a leaking roof or broken geyser) before transfer.
• Occupancy clause: The buyer can move in before transfer, paying occupational rent.
• Renovation clause: The seller agrees to complete certain renovations before the transfer date.
• Building plans clause: The seller agrees to furnish the buyer with approved building plans reflecting the current physical state of the property.
• 72-hour clause: The seller gives the buyer 72 hours to pay the purchase price in full or provide proof of bond approval if a better offer is received, failing which the seller can cancel the agreement and accept the new offer.

Q: What if the seller agrees to drop the price to avoid having to comply with 'special clause' repairs or renovations? Does this have to be added to the OTP?

Yes, any agreement to drop the price in lieu of repairs or renovations must be clearly documented in the OTP. This ensures both parties are legally bound to the new terms and avoids disputes later. For example, a clause could state: "The purchase price is reduced by R50,000 in lieu of the seller's obligation to repair the roof."

Q: How long do owners have to comply with a special clause, and if they do not meet that deadline, what are the implications?

The timeframe for compliance should be clearly specified in the OTP. For example, "The seller must complete all repairs within 30 days of signing this agreement." If the seller fails to meet the deadline, the buyer may have the right to cancel the agreement, claim damages (i.e., refund of the deposit or the costs of repairing the property him/herself), or enforce specific performance through legal action. It's essential to include consequences for non-compliance in the OTP to protect both parties.

Q: Any other notable or perhaps unknowns around special clauses?

One often overlooked aspect is the importance of clarity and specificity in drafting special clauses. Vague or ambiguous clauses can lead to disputes. For example, instead of stating "the seller must fix the plumbing," specify "the seller must repair the leaking pipe in the main bathroom by [date]."

Additionally, special clauses should always align with all relevant legislation to ensure enforceability. It's also worth noting that special clauses can sometimes delay the transfer process, so parties should factor this into their timelines.

https://www.privateproperty.co.za/advice/property/articles/special-clauses-in-otps-explained/9521