What is a suspensive condition in an offer to purchase?

Almost every residential offer to purchase in South Africa is subject to a suspensive condition, and almost every buyer signs one without understanding what it does. It is the most important clause in the document, because it determines whether you have bought a house or merely offered to.

What a suspensive condition does

A suspensive condition suspends the operation of the agreement until a future, uncertain event occurs. Until the condition is fulfilled, the agreement exists but does not yet do anything. When the condition is fulfilled, the agreement becomes fully operative, and it does so as from the date of signature.

The most common is bond approval: the sale is subject to the purchaser obtaining a loan of a stated amount, from a financial institution, by a stated date. Others include the sale of the purchaser's existing property by a date, a favourable engineer's or inspection report, or the consent of a body corporate or homeowners association.

The essential feature is that nobody controls the outcome entirely. That is what makes the event uncertain, and a "condition" that depends purely on one party's whim is not really a condition at all.

What happens when it is not met

This is the part that saves people money, and it is routinely misdescribed by estate agents and by buyers.

If the condition is not fulfilled by the date, the agreement lapses. It falls away by operation of law. It does not need to be cancelled, no notice is required to end it, and there has been no breach by anybody.

The consequences follow from that:

• The deposit is refunded to the purchaser, with interest where it was invested.
• No penalty or damages are payable by either side.
• No agent's commission is earned, because commission normally depends on a valid sale.
• The seller is free to sell to somebody else, immediately.

Compare that to a cancellation for breach, where a defaulting purchaser can be liable for penalty interest, damages, wasted costs and commission. The difference between "the bond was refused" and "the purchaser pulled out" is the difference between walking away clean and being sued, and it is decided by whether a condition operated.

Our guide on what happens if the seller pulls out of a property sale deals with the other side of the same distinction.

Suspensive and resolutive are opposites

A resolutive condition works the other way round. The agreement is fully operative from the start, and it comes to an end if the stated event happens.

The label used in the document does not decide which you have; the wording does. "This agreement is subject to and conditional upon the purchaser obtaining a loan" suspends. "This agreement shall terminate if the purchaser fails to obtain a loan" resolves. The practical difference matters most for occupation, risk and rates: under a resolutive condition the parties may already be performing.

If the clause you are looking at is ambiguous, that ambiguity is worth resolving before signature rather than afterwards.

The date is the whole clause

Suspensive conditions are lost on dates more than on substance.

Count the days properly. Check whether the clause says days, business days or calendar days, and when it starts running. Fourteen days from signature is not the same as fourteen business days from acceptance.

Diarise it, personally. Do not rely on the agent or the bond originator to watch it. They are watching many, and you are watching one.

Get the extension in writing, before expiry. This is the single most common failure. Almost every agreement contains a non-variation clause requiring amendments to be in writing and signed by both parties. An agent saying "the seller is fine with another week" is not an extension. Once the date passes without fulfilment, the agreement has lapsed, and the parties cannot revive it by later agreement: what they can do is sign a fresh agreement, which is not the same thing and may have tax and timing consequences.

Watch the wording of the bond condition. "A loan of not less than R1 200 000" is not satisfied by an approval for R1 100 000. "Approval in principle" is not the same as a formal grant. And a condition satisfied by approval from "a financial institution" is not satisfied by a pre-qualification from a broker.

You must actually try

A purchaser under a bond condition has a duty to take reasonable steps to fulfil it. Sitting on an application, refusing to supply documents, or applying to one bank on unrealistic terms is not good enough.

The law goes further than that. Where a party deliberately prevents the fulfilment of a condition for their own benefit, the condition may be treated as though it had been fulfilled. A purchaser who has changed their mind and quietly sabotages their own bond application, or a seller who refuses to give the bank access for a valuation, may find that the very outcome they engineered is deemed against them.

Keep the paper trail: the application, the documents submitted, the correspondence with the originator, and the bank's written decision. If the bond is refused, the refusal letter is the document that proves the condition failed.

Waiving the condition

A condition inserted purely for the benefit of one party can usually be waived by that party, provided the waiver happens before the deadline.

A purchaser whose bond has been refused but who has since come into the money can waive the bond condition and proceed with a cash purchase. A purchaser who needs the finance cannot force the seller to wait.

Whether a condition is for one party's benefit or for both is a question of construction, and getting it wrong is expensive, so a waiver is worth a phone call to the conveyancer rather than a decision made on the basis that it seems obvious.

The other conditions worth reading

Bond approval gets the attention, but the other common conditions carry their own traps.

Sale of the purchaser's existing property. This makes your purchase depend on a transaction you do not control, and the date needs to be realistic about how long a sale and a transfer actually take. Sellers often counter with a clause allowing them to keep marketing and to require you to waive the condition within a short period if a better offer arrives.

Inspection or engineer's report. Read what counts as a satisfactory report and who decides. A condition that the report be "satisfactory to the purchaser" is close to a licence to withdraw and sellers resist it; one that turns on a defined defect threshold is enforceable and is what most agreements settle on.

Body corporate or homeowners association consent. Common in estates and sectional title schemes, and the timing is out of both parties' hands. Ask how long the association actually takes before agreeing the date.

Approval of plans or a rezoning. These run in months, not weeks, and a condition tied to a municipal process should have a date that reflects municipal reality.

In each case the discipline is identical to the bond condition: know exactly what has to happen, by when, who must do it, and what document proves it happened.

Occupation before the condition is met

A separate hazard arises where the purchaser wants to move in early, which happens most often when a lease is ending and the transfer is still weeks away.

While a suspensive condition is unfulfilled, the agreement is not yet operative. Taking occupation at that point means occupying without an operative sale behind you, and if the condition then fails there is no agreement governing your presence, your improvements or the occupational rent you have been paying. Sellers in that position sometimes discover that removing an occupier requires an eviction under the PIE Act, because a home is a home regardless of how the occupation began, and our eviction checker sets out what that involves.

The safe sequence is fulfilment first, occupation second. Where early occupation is genuinely necessary, it should be governed by a separate written occupation agreement that says what happens if the sale never becomes operative, who carries the risk of damage in the meantime, and on what basis the occupier must vacate. That is a short document and it prevents a long dispute.

Worked example

This example is illustrative. Lerato signs an offer to purchase for R1 450 000 on 3 March, subject to her obtaining a bond of not less than R1 300 000 within 21 days. She pays a R50 000 deposit into the conveyancer's trust account.

On 20 March the bank approves R1 200 000. That does not fulfil the condition, because the condition specified not less than R1 300 000.

If nothing else happens, the agreement lapses on 24 March. Lerato gets her R50 000 back with interest, owes nothing, and pays no commission. The seller can relist immediately. Nobody is in breach.

If Lerato wants to proceed, she has two routes and both must be completed before the date: she can find the shortfall and waive the condition in writing, or she and the seller can sign a written extension giving her longer to obtain the full amount.

What she must not do is let the date pass while the agent assures her it will be fine. On 25 March there is no agreement to extend, and a seller who has had a better offer in the meantime has no reason to sign a new one.