Bond Granted On Usual Terms And Conditions

This case concerns an estate agents claim for the commission upon the fulfillment of a suspensive condition related to loan finance.

LATEGAN AND ANOTHER v LESLIE MILDENHALL TROLLIP t/a PROPERTY SOLUTIONS (A297/10 (2011) ZAFSHC 47 (10 March 2011)

THE FACTS
This case concerns an estate agents claim for the commission upon the fulfillment of a suspensive condition related to loan finance.

The seller and purchaser entered into an agreement of sale of immovable property which was subject to the purchaser obtaining a mortgage bond. The bond clause provided that the mortgage bond was to be granted by “23 November by a registered bank upon its normal terms and conditions”.

The clause further provided that the condition was “deemed to have been fulfilled upon notification by the bank to the purchaser or his agent that the loan in question has been approved regardless of any conditions attaching to such approval….”

On 13 November the purchaser was granted a mortgage bond subject to two conditions being firstly the settlement of an existing bond of the purchaser (implying the sale of the purchasers second property) and secondly that the building of the home on the property commence within 6 months of the bond registration.

The estate agents re-submitted the bond application to the bank and the bank removed the first condition on 4 December. No addendum was entered into to extend the suspensive condition.

The purchaser thereafter cancelled the agreement on the basis that he was not granted a mortgage bond as contemplated in the agreement.

The estate agents took the view that the suspensive condition relating to loan finance had been approved and they were thus entitled to commission from the purchaser as per the agreement.

WHAT THE COURT HELD
The court held that the agreement had lapsed by 23 November, alternatively that the purchaser was entitled to cancel the agreement due to the fact that:

  • the mortgage bond was not granted as envisaged in the agreement of sale, and
  • it was not possible for the purchaser to give effect to the special condition imposed by the bank.

The suspensive condition was further not extended.

In regard to the contradictory terms of the mortgage bond clause, the Court held the special conditions imposed by the bank were not the banks “normal terms and conditions” and as such the suspensive condition was not fulfilled.

SUMMARY
The lesson to be learnt from this case is that a suspensive condition relating to loan finance may not be fulfilled in circumstances where the bank imposes additional conditions which are not considered to be within the banks normal terms and conditions.

The bond grant provided by the bank granting a loan must accordingly be carefully studied and any unusual or onerous conditions must be identified and acted upon.

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