Asked by Biancav on 15-07-2021 12:36:22
Question posted in the Property Law category relating to Gauteng

We were in the process of buying a house, we signed a OTP and applied for finance, we signed with the transfer attorneys and not the bond attorneys just yet, we wanted to cancel the deal as we had to take out personal loans which reduces our affordability, however now the seller is declining the cancellation and wants us to proceed, how do we go about getting out of this deal, do we proceed and let the bank decline us at the end before registration due to affordability, what are our options?

Posted by Att. Patrick on 15-07-2021 13:58:54

Hi there and thank you for your question,

I am a practicing attorney based in South Africa and I will assist you with your question. Please feel free to ask as many follow up questions in order to clarify your question. If you have a new question, you must please open a new thread.

Please keep in mind that our discussions is for general information purposes only. Our engagement on this website does not create an attorney-client relationship. 

Do you mind if I take a moment to review your question? I will come back to you shortly!

Att. Patrick

Posted by Att. Patrick on 15-07-2021 14:03:04

I assume that the financing application with the bank was approved? I mean, that's why the transaction is proceeding forwards and that's why the bank has appointed a bond attorney.

Why do you think that the bank will perform another affordability check on you? Because they won't... they have already processed your application; they have already looked at your finances; and they approved your loan. Isn't it a done deal now?

Surely if your financing has been approved, the sale agreement (the OTP) is now unconditional (the conditions precedent - i.e. getting financing have been fulfilled) and there isn't any scope for you getting out of the deal?

I don't think that you really have an option to get out of the deal without incurring any penalties, such as losing your deposit, and paying the transferring attorneys their wasted costs, and the bond attorneys their wasted costs, and maybe even being held liable for estate agent's commission! 

Posted by Att. Patrick on 15-07-2021 14:05:45

If you sign an OTP and the OTP is conditional upon you getting financing, and you then apply for the financing, and the financing is approved, and the OTP's conditions are now fulfilled, and the OTP is now binding, and THEN you buy a car or take out a personal loan or such like, you are really doing this at your own risk because you are now upsetting your own financial position. A court won't look kindly on you if you do this, because at the end of the day, you would have weakened your own financial position to the detriment of the seller in the OTP. Why should he suffer because you needed to take out a loan? If you have an unconditional binding OTP, the seller is legally entitled to demand that you go through with the deal.

Okay, what now happens if I am unable to pay the transfer fees and duties for the sale to commnce?

Posted by Att. Patrick on 15-07-2021 16:20:28

The transferring attorneys will send you a letter of demand calling on you to pay it, and if you don't, they will then cancel the sale and hold you liable for what I explained above.