According to section 2 of the Alienation of Land Act 68 of 1981, no alienation of land shall be of any force or effect unless it is contained in a deed of alienation, signed by the purchaser and the seller.

A deed of alienation is a synonym for an Agreement of Sale or an accepted offer to purchase. A deed of alienation always has to be in writing.

It cannot be stressed enough that when purchasing a property this document is the core of the whole transaction. Not only can it make or break a transaction, but it can also place you in a onerous situation if you do not comply with the conditions of the contract.

Should you fail to comply with a certain condition you can be held accountable for “breach of contract”. This would mean that in order to remedy the breach, the non-breaching party can cancel the contract, claim specific performance (compelling you to comply with a condition) and/or claim damages suffered from you.

We have the legal expression of “caveat emptor” meaning – buyer beware. Here are a few clauses to look out for in your next deed of alienation.

Purchase Price

A typical purchase price clause would make provision for a deposit, payable usually within 7 to 14 days from date of signature. If the deposit is not paid within the said period, it would amount to a breach on your part, and the above remedies will be applicable.

It must specifically stated how the balance of the purchase price will be secured. Either by means of cash, a bond or cash and a bond.

Risk and Ownership

Both Risk and Ownership of the property are transferred simultaneously on the date of registration of transfer. Section 19(2) of the Consumer Protection Act provides that the property to be delivered to be transferred to the purchaser remains at the supplier’s risk until the consumer has accepted delivery thereof.

Transfer Cost

It is important to scrutinize this clause as it provides who will be liable for the transfer cost. It is customary for the purchaser to pay the cost of the transfer, but the deed of alienation can provide otherwise. Section 19(2) of the Consumer Protection act provides that the cost of the transfer shall be borne by the seller, unless the contract stipulates to the contrary. If the deed of alienation does not provide that the purchaser will pay the transfer cost, the seller would have to pay those costs.

Estate Agent’s Commission

It is customary for the seller to pay estate agent’s commission, but the contract can provide otherwise. What is important to note that the estate agent’s commission clause usually contains a provision that should the deed of alienation be cancelled, as a result of a breach of contract or a default, the breaching party or the defaulting party would be liable for the estate agent’s commission.

Rouwkoop

The word “rouwkoop” is derived from the Dutch words meaning “regret” and “purchase”. In essence, it is a clause in the deed of alienation that entitles a party to that agreement to pay an agreed sum of money in order to be allowed to withdraw from the agreement. If a purchaser in a deed of alienation containing a rouwkoop clause withdraws from the agreement and pays the agreed rouwkoop amount, the purchaser will be acting in accordance with the terms of the agreement and his/her withdrawal will not amount to a breach of contract.

Occupation date and occupation interest

It has to be clearly stated when the purchaser can take occupation of the property. If the date of occupation is not the same as the date of registration, the deed of alienation has to make provision for occupational interest. Occupational interest can be seen as a form of “rental” which the purchaser pays to the seller, for taking occupation, prior to registration.

The above clauses are the first part of our two part article covering the deed of alienation. Make sure that the excitement tied with nerves do not influence you when you are presented with a deed of alienation. It is better to make sure that you fully understand each and every clause of the contract before you sign. In this case it is better to try to keep a bad thing from happening than it is to fix the bad thing once it has happened.

The Agreement of Sale and what to look out for – Part 1