BANK WON'T GIVE YOU A BOND? TRY THE 'OPTION' OPTION Until property finance is a lot easier to come by, you might consider putting in an offer to rent your dream house (or office) as an interim measure, with the option to purchase it later on. If that sort of deal suits the seller, beware of two potential pitfalls highlighted in recent Supreme Court of Appeal cases: - If the landlord goes behind your back and sells the property to another buyer, the new owner will be obliged to honour your lease, so your tenancy is protected. BUT the option to purchase part of it will fall away unless the buyer can be shown to have been aware of the option when buying. So if you get wind of a possible sale, immediately have your attorney give the purchaser notice, drawing attention to the option. The option clause should contain all the normal terms and conditions of a property sale (a full deed of sale could be annexed to the lease for this purpose). Make sure that any possible claim for agent's commission is dealt with, to avoid disputes later on. If the option clause has only the basics, you could end up fighting over its validity. That's what happened in one of the appeal cases, where the option provided for a deed of sale to be drawn up only if and when the tenant exercised the option. The landlord then tried to frustrate the sale by refusing to draw up the deed of sale, and by arguing that the terms of the prospective sale were unclear. Although the Court came to the tenant's rescue (invoking the principle of "fictional fulfilment" of the option clause), and ordered the seller to transfer the property to the tenant, it was a close call - and doubtless also an expensive one for all concerned. There are pitfalls here - avoid them by having the agreements professionally drafted! Recent Articles for August 2009; Source: www.dotnews.co.za |
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