• These are your “get out of jail free” card.  They are useful, as long as you act in good faith at all times and do not deliberately frustrate the fulfilment of a condition, otherwise you cannot benefit from its protection.
  • They can be used when you want to close the deal now, but want to make sure of some things later, and want to walk away if you don’t like what you find.
  • They can operate in favour of the buyer or the seller, depending on what is recorded in the agreement.
  • Be reasonable about timing.  If you are the seller you won’t be keen to allow a purchaser a long time to sort out the suspensive conditions.  It means that the seller can’t sell the property to anyone else during this time, unless the agreement also contains a “72 hour” clause.  (More on that under its own heading.)
  • Suspensive conditions in favour of the purchaser only are a bit like an option for the purchase of the property.  It means that the seller is bound to sell if the  purchaser fulfils the suspensive conditions.
  • Correctly drafted, the agreement is not binding on the parties until these suspensive conditions are met, but some of the clauses might be applicable from  signature.    The agreement should be clear about which clauses are immediately binding on the parties and which will be binding only if and when the suspensive conditions are fulfilled.  Be aware of what binds the parties immediately.
  • The usual suspensive condition is a “mortgage bond clause” (ie this agreement is not binding on me until I receive mortgage finance approval).   More on the mortgage bond clause under its own heading
  • Suspensive conditions can be whatever you need them to be such as “this agreement is not binding on me until…
    • I have sold my current home and that deal is final and unconditional
    • I have received mortgage finance on terms acceptable to me for the amount of ….
    • I have completed a due diligence investigation into the property and confirmed that I am satisfied with the outcome.  (more on that under the “due diligence” heading)
  • Remember to state for whose benefit the clause is created.  If it is clear that the condition is in favour of, say, the buyer, then the buyer can waive the condition even if it is not met.  For example, the agreement is subject to  a condition in favour of the buyer only that the buyer gets mortgage finance for R10m, but approval for only R9m is granted.  The buyer can waive the benefit of the protection and confirm that R9m is enough or choose to walk away from the deal.  If the buyer waives the benefit,  and goes ahead with the deal with a mortgage of only R9m, he or she then has to pay the additional sum in cash but at least has the right to keep the deal alive.
  • State the date when the suspensive conditions are to be met, but add “which date may be extended by the parties by written agreement.”
  • Stick to these dates.  If the suspensive condition is not met on time, the agreement lapses and can’t be brought back to life by a simple addendum or the parties initialling the changed date.  The parties have to renew the agreement completely and one of them may not want to do that any longer.
  • If you want to extend the date, do this in writing by a separate agreement signed by both parties, before the lapsing of the agreement.