How to validly extend the period for getting your home loan approved
“I’m trying to buy a house. The purchase agreement is subject
to the condition that I obtain a mortgage bond within 30 days.
My time is running out but I’m close to getting the financing
approved from my bank. I just need a few more days. Is it
possible to extend the 30 day period and if so by when must
this be done? I really don’t want to lose this house!”
Most property sale agreements contain a suspensive condition
that makes the purchase subject to the purchaser obtaining
financing within a certain period of time. To understand whether
this period of time can be extended, it is important to firstly
understand what such a condition, commonly termed a “suspensive
condition”, is.
A suspensive condition in a deed of sale suspends the operation
of the rights and duties of the parties flowing from the contract
until the fulfilment of an uncertain future event. Typically, such
fulfilment of an uncertain future event would in your case be the
approval of the mortgage bond by a financial institution. In the
event that the mortgage bond is not approved within the set period
of time, the suspensive condition would not have been met, and in
terms of our law, the contract of sale will be of no force and effect.
But, can you extend the period of the suspensive condition as you
are suggesting and if so, by when must this then be done?
In the recent High Court case of Abrinah 7804 (Pty) Ltd v Kapa Koni
Investments CC the court was faced with this exact question. The
parties concluded a deed of sale in which the purchaser was afforded
a period of 6 months to obtain a mortgage bond, which the purchaser
then failed to do. The seller subsequently addressed a letter to the
purchaser after the expiration date of the suspensive condition
providing an extension of a further 14 days to comply with the
suspensive condition. The court held that an agreement, subject to
a suspensive condition, automatically falls away when the condition
is not fulfilled by the expiration date as no contract remains.
Accordingly, nothing can be done after the expiration date and no
extension can happen after the fact as no contract exists.
In your case, extension of the expiration date is therefore possible
although it should be noted that the seller is under no obligation to
do so. Such extension must happen prior to the expiration date as
thereafter no contract will exist. If the expiration date has passed,
but the seller still wishes to continue with the sale, the only way the
situation can then be remedied is to conclude a new contract on the same
terms as the expired contract.
It is also important to read the entire contract and follow the correct
procedure to extend the suspensive condition. Some contracts may have a
clause, which determines that any extension and/or indulgence must be in
writing and signed by both parties, in order to be valid.
As a rule of thumb it is always wise to tread carefully when dealing with
a suspensive condition and ensure that all timeframes are met. If necessary,
seek the advice of your attorney to make sure that you don’t lose your
dream home because a condition was not correctly fulfilled.
SOURCE: DBM Attorneys
