The 72-hours clause entitles the seller to insist that all suspensive conditions in a buyer’s offer must be met within 72 hours of signing the offer to purchase.
Sellers may implement this clause if:
- They suspect that the buyers will be unable to meet the conditions.
- The sellers have received another offer that can be implemented more quickly.
Suspensive conditions
Suspensive conditions relate to the conditions that a sale has been made subject to. These could include:
The buyers having to sell their property before being able to purchase another property.
The buyers having to obtain mortgage finance to purchase the property.
If these uncertain future events do not occur, it will be as if the offer to purchase was never concluded between the parties.
OTP
A typical example of an offer to purchase could read as follows:
- The sellers may continue to market the property until all suspensive conditions contained herein have been fulfilled.
- Should the sellers receive an acceptable offer during this time, they shall have the right to call upon the purchasers by notice in writing to waive all suspensive conditions to which this offer is subject within 72 hours - excluding Saturdays, Sundays, and public holidays.
- If the purchasers fail to waive the suspensive conditions within 72 hours, the sellers shall be entitled - but not obliged - to accept the second acceptable offer. In this case, the first offer shall cease to be of any further force and effect and shall accordingly be void ab initio (from the start).
If the offer to purchase contains the 72-hour clause the sellers may continue marketing the property until the offer is no longer conditional. That is, the suspensive conditions are fulfilled or are not fulfilled within the specified period.
If the sellers receive a more acceptable offer during this time, they can notify the buyers in writing that they have 72 hours in which they either have to waive the suspensive conditions or ensure the conditions are fulfilled.
If the buyers are unable to do this, the contract will be treated as invalid from the onset and the sellers may accept the second offer.
Acceptable offers
Examples of more acceptable offers include:
- The buyer submits a cash offer.
- The buyer has a higher deposit available with a guaranteed finance source.
- The buyer doesn’t have a property to sell before buying a property.
“A more acceptable offer can also be a higher offer, so if a second buyer does offer more, the first buyer is given an opportunity to meet the current offer within the 72-hour period or walk away,” says Charlene Joubert, of Henkes Joubert Barry Inc Attorneys & Conveyancers.
“Meeting the current offer will not mean the first buyer has to match the offer of the second buyer - it will simply mean he has to waive his right to rely on any suspensive condition, in other words, he can possibly arrange to buy for cash if he does not obtain a bond and therefore sign an addendum to the agreement to waive his right to walk away if no bond is obtained.
Confusion
Confusion often arises, says Rowan Alexander, Director of Alexander Swart Property, when the second buyer, his agent or attorney, assume that as soon as they have met all the conditions for a sale, the sellers are obliged to put the first buyer to terms in line with the 72 hours clause.
However, he says this is not so. The sellers decide whether or not to implement the clause. There may be good reasons for not wanting to use the clause immediately. For example, the first buyer’s offer may be the higher of the two.
Reasonable
The 72-hours clause gives sellers a further opportunity of concluding an offer to purchase, rather than having to rely on the first offer only, which could fall through if the suspensive conditions are not fulfilled. As a consequence, they could miss out on a more acceptable offer.
“It is advisable to scrutinise the offer to purchase carefully with your attorney - whether you are the buyer or seller - so that they can ensure the conditions imposed in the contract correctly reflect your intentions,” says Joubert.
