Banks taking longer to approve bonds

~ Article from Cyberagent Newsletter, 9 April 2010 ~

With the steady increase in bond applications, the banks are now taking longer to give clients a decision: very often a considerable amount of time is spent in getting additional information and checking on statements, before a bond is granted

This, says Rob Lawrence, Rawson Finance National Manager, can lead to the expiry date by when the bond must be granted, being exceeded, which, in effect, means that the offer to purchase is no longer valid.

“The clause in the Deed of Sale, relating to the bond grant is a suspensive condition, usually with a fixed completion date. If this suspensive condition is not fulfilled, by the stipulated date, the contract is automatically invalidated,” said Lawrence. “However, in practice, when the expiry date approaches, the agent and the buyer will usually ask the seller for a time extension – which the seller in most cases will give.”

Quite often, said Lawrence, this agreement is given verbally and not recorded in writing. This, he warns, can be dangerous because in South Africa no agreement regarding property is valid unless it is in writing.

“This ruling,” said Lawrence, “has recently been emphasised yet again in the courts. In a case Rockbreakers v Rolag Property, the whole deal was eventually annulled because one later alteration to the contract had not been signed by both parties.”

It can happen, said Lawrence, that a seller, after signing, gets a better offer, the buyer comes across a property he prefers or other factors arise which make it inconvenient for one party to stay in the deal. That party can then use the fact that the time extension agreement was not put in writing to exit from the contract even though the seller has verbally agreed to the extra time.
In those few cases where the parties leave the time period for getting a bond open-ended, a really tricky situation can arise, said Lawrence.

“This should never happen because, as another recent court case has shown, it is hard to determine what amount of time can be considered reasonable for a bond application and the seller may have to wait indefinitely. As in all things related to property contracts, make sure that any amendments are in writing and are signed by all the contracted parties.”