The 72-hour clause: Everything you need to know
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A clause that often causes confusion in an offer to purchase agreement is the 72-hour clause, which is also sometimes called the continuous marketing clause. In a nutshell, this clause gives sellers the right to continue marketing a property if they have received an offer to purchase that is subject to suspensive conditions. The 72-hour clause is designed to speed up the process of property sales and to look after the best interests of both the seller and the buyer. The buyer is protected against making a commitment that he or she may not be able to meet, and the seller is prevented from having to put all his or her eggs in one basket.
First things first - what is a suspensive condition?
A suspensive condition is any clause within a contract which states that something has to happen in order for the contract to be legally binding. A typical suspensive condition in a real estate transaction will relate to the sale being dependent on the buyer successfully getting a home loan, or successfully selling another property or freeing up funds from another investment. Such conditions generally come with a time limit. For example, a prospective buyer may be given a window of 30 days in which to sell their existing home in order to make the funds required for the purchase of a new home available.
The specifics of the 72-hour clause
Whether a would-be buyer is trying to sell their current home or get a bond approved, this takes time, and it is during this time that the 72-hour clause can come into effect. Thanks to this clause, a seller can continue to market a property after having signed an offer to purchase agreement. If he or she receives a second offer during this time - this time perhaps without suspensive conditions - then the initial buyer can be given 72 hours to fulfil the suspensive conditions in the contract. In other words, the initial buyer will have 72 hours to secure the means to buy the property. If this cannot be done, then the signed contract will fall away and the second buyer, who may for example have cash with which to purchase the property, will sign a new contract with the seller.
Advantages for both buyers and sellers
The advantages of the 72-hour clause for sellers speak for themselves. It can prevent them from being tied to a deal that may not work out and having to say no to a far more promising buyer. However, when considered from the buyer's point of view, it means that all may not be lost if you see that the property of your dreams has an "under offer" badge on it. It also offers the buyer peace of mind and protection, because they can sign an offer to purchase without being held liable if things do not work out the way they would have hoped.
The 72-hour clause is a complicated piece of South African law, and you will need the assistance of a qualified and experienced property professional to ensure that such a clause is binding. Any mistakes related to badly worded clauses and other errors can lead to expensive litigation. Your Jawitz #RealPartner is here to help, and to make sure that every part of the property-purchase process runs smoothly. Contact us when it's time to buy or sell property.
Author: Jawitz Properties
