It does happen. A buyer signs an Offer to Purchase, the seller accepts, and then - for whatever reason - the buyer wants out. The consequences depend on the circumstances, and specifically on whether the OTP's suspensive conditions have been met.
While the Suspensive Condition Is Still Open
Most OTPs include a suspensive condition: typically, that the buyer obtains bond approval within a specified number of days (usually 21 to 30).
If the buyer can't get bond approval, the suspensive condition fails. The OTP falls away and both parties are released from their obligations. The seller does not receive compensation, but equally, they're not in a worse position than before - they can relist the property.
If the buyer simply changes their mind while the suspensive condition is still open (not because they can't get finance, but because they've decided they don't want the property), the situation is more complex.
In practice, this is difficult to enforce. If the buyer genuinely cannot get bond approval, the condition fails. If the buyer is using the bond condition as an excuse to exit when they could have obtained finance, the seller may have a claim - but proving this is challenging.
Once All Conditions Are Met (Unconditional OTP)
Once bond approval is confirmed and all suspensive conditions are fulfilled, the OTP becomes an unconditional, binding contract. At this point:
If the buyer pulls out, the seller has significant legal remedies.
Specific Performance
The seller can go to court to compel the buyer to fulfil their obligations under the OTP. This means the buyer is forced to complete the purchase. In practice, if the buyer genuinely has the financial means to proceed (the bond has been approved), specific performance is a real possibility.
Damages
Alternatively, the seller can cancel the contract and sue the buyer for damages. Damages could include:
- Loss of profit (the difference between the original sale price and what the property ultimately sells for)
- Holding costs during the period the property is off the market
- Agent commission on the failed sale (if applicable)
- Legal costs
What About the Deposit?
Some OTPs require the buyer to pay a deposit (typically 10% of the purchase price) into the conveyancer's or agent's trust account as security. If the buyer defaults after the OTP becomes unconditional:
- The seller can typically claim forfeiture of the deposit
- Whether the full deposit is forfeited or the seller can only claim actual damages depends on the specific OTP wording
Deposit requirements are not universal - many OTPs in South Africa don't require a deposit.
Practical Advice for Sellers
Include a deposit clause. Consider requiring a deposit in your OTP - it provides security and signals buyer commitment.
Check the suspensive condition timeframes. Shorter bond condition periods reduce the period of uncertainty.
Get legal advice before accepting a withdrawal. If a buyer wants to exit after conditions are met, consult your attorney before agreeing to anything. You may have more rights than you realise.