Hi

Below I’ve written what I believe is quite a detailed explanation of my problem hoping it’s enough information and would appreciate advice.

-Property in question is owned 50/50 in personal name of myself and partner.

-Zoned ‘residential 1’ property to a ‘ residential 1 including a boarding house with specific condition’. Approval was officially given by City of Joburg October 2014 and published in The Government Gazette October 2015.

-We, the sellers, signed offer to purchase on 20 February 2017.

-3 days ago received call from transferring attorneys saying while applying for rates clearance they were told there is an amount of R456 489.54 outstanding to do with engineering fees for zoning. Actual rates and water is up to date, power is prepaid.

-We have all the official zoning documents so were surprised by this.

-Talking with our town planner it’s contributions necessary for power, sewerage, etc. Vaguely remember discussing this with him years ago but was under impression if we didn’t actually increase the capacity of any of these (I.e. operated as is) contributions not necessary.

-If we want to sell house we must pay this amount to get rates clearance.

-We don't have the money to pay this. The buyer suggested she'd pay from the sales amount (I.e. the equity in the property), effectively providing bridging finance.

-Are we obliged to take finance from seller or anyone in order to pay to get clearance and sell? We'd like to cancel this agreement based on the fact we can't afford R456k.

-What if any action could the buyer take?

-Could the estate agent force us to pay commission?

-What if any damages could buyer or agent claim?

-Other information:

-Buyer paid required deposit.

-In special conditions there is two week window at beginning of May for transfer to occur.

-Occupational rent clause crossed out and initialled by all parties.

-Jurisdiction for issues is Magistrates Court in terms of S45.

-Breach clause reads as follows:

1.Should the purchaser commit any breach of the terms of this agreement and remain in such breach, after having received written notice of the breach from the seller, setting out the breach and calling for him to remedy such breach within 14 days of receipt of the notice, the seller shall have the right to cancel this agreement.

2.The seller shall in the alternative have the right to take legal action against the purchaser to compel performance of any of the terms of this agreement and in particular for recovery of the purchase price and for the due performance of all the terms and conditions of this agreement.

3.The seller shall in addition, have the right in the event of any breach of the terms of this agreement by the purchaser, to claim compensation for any damages suffered as a result of that breach.

-There is no breach clause regarding the seller.

-Commission clause reads as follows:

The seller hereby agrees to pay:

1.XXXXXX real estate represented by YYYYYYY agents commission of R112 500 (VAT not applicable) of the purchase price herein, which amount shall be paid to the agent on registration of the property into the name of the purchaser.

2.Directly to XXXXX real estate 50% of the agents commission on registration of transfer into the name of the purchaser.

Hi there and thank you for your question,

Wow, I've never heard of such a large amount being owed before.

I think that if you read your sale agreement you will find a clause which says that you are obliged to obtain a rates clearance certificate for the property so that transfer can be effected. You must keep in mind that legally you've already sold the property, all that is required now is for you to pass transfer of the property to the purchaser. Accordingly, the deal is done and you need to do what you need to in order to enable the conveyancing attorneys to pass transfer.

Q: What if any action could the buyer take? --> If you call it off now, then the purchaser will be able to sue you for an order that you pass transfer, or that the sheriff of the court be authorised to sign the transfer documents on your behalf.

Accordingly, you will need to pay that amount to the city so that you can get a rates clearance certificate. What happens after that is another story. You'll need to dispute this account with the city and ask that it be reviewed or changed. If there is a credit, the city will then give you the money back... but that might take 3 or 4 months to resolve.

Q: Are we obliged to take finance from seller or anyone in order to pay to get clearance and sell? --> You will need some sort of bridging finance to get this deal through. If you don't get finance, then you will be in breach of the sale agreement. There is no obligation on you to accept the purchaser's offer to assist with the bridging finance.

Q: Could the estate agent force us to pay commission? --> Yes, because the estate agent has done his work and has found a buyer. If the transfer doesn't go through because of a breach, the agent still claims his commission from you.

Q: What if any damages could buyer or agent claim? --> The buyer could sue you for transfer of the property. The buyer could also sue you for the "lost profit" that he could have made on the sale. The agent for his commission.

Q: There is no breach clause regarding the seller. --> Then if the seller breaches the agreement, the buyer will have to provide the seller with reasonable notice to remedy the breach, and will then be entitled to cancel the sale or sue the seller.

If there is a part of the answer which you need more advice on, or clarity please continue in this same thread instead of opening a new question.

Att. Patrick

Please remember this is a dialog if you have follow up questions please use the REPLY button and ask. If I did not answer the question you thought you were asking, please respond with the specific question you wanted answered. I hope you found my answer helpful, and you have finished asking your questions, please click on the GREEN ACCEPT button in order to mark the question as closed.

Thanks Patrick

1.The only clause mentioning rates states: 'Possession shall be given to the purchaser on registration of the property, from which date the purchaser shall be liable for and shall pay all rates, taxes and other charges in respect of the property and shall refund the seller a pro-rata share of the rates paid by the seller for any period after the said date.'

I understand though that obtaining a rates clearance is standard. Am I therefore correct in assuming the omission of a clause obligating us to obtain a rates clearance certificate has no impact?

2.Based on your answers don't think it matters but to be sure anyway: We never signed a mandate with the agent, in fact she found us and said she had a buyer, does that change the position with agents commission?

3.Would it possible to ask council to cancel zoning so we don't have to pay the R456k. Then we say to buyer that we can continue with sale but it's not zoned anymore, she told me today she only wants the property because of the zoning. She has copies of the zoning confirmation although the offer to purchase doesn't mention the zoning is necessary. Could she force us to get/keep zoning in place?

Hi again,

Your overall obligation, as seller, is to do all that is necessary in order to pass transfer. That means that you must "do what you need to do" to pass transfer. One of those things is a rates clearance certificate. If you don't get one, then the purchaser will be entitled to "put you to terms" and then breach you if you don't get one within a reasonable time period.

You don't need a written mandate with the agent. Obviously it helps! But if you don't have one the agent can still sue you for their commission.

If the zoning of the property has already been changed, then you can't undo that. Also, if the purchaser wants the property because of the zoning then by changing the zoning you'd be breaching the sale agreement... essentially, your obligation is NOT to do anything to the property pending transfer that would change the property's value.