How to extend the period for home loan approval.
10 September 2021
“I’m trying to buy a house. The purchase agreement is subject to the condition that I obtain a mortgage bond within 30 days. My time is running out but I’m close to getting the financing approved from my bank. I just need a few more days. Is it possible to extend the 30 day period and if so by when must this be done? I really don’t want to lose this house!”
Most property sale agreements contain a suspensive condition that makes the purchase subject to the purchaser obtaining financing within a certain period of time. To understand whether this period of time can be extended, it is important to firstly understand what such a condition, commonly termed a “suspensive condition”, is.
A suspensive condition in a deed of sale suspends the operation of the rights and duties of the parties flowing from the contract until the fulfilment of an uncertain future event. Typically, such fulfilment of an uncertain future event would in your case be the approval of the mortgage bond by a financial institution. In the event that the mortgage bond is not approved within the set period of time, the suspensive condition would not have been met, and in terms of our law, the contract of sale will be of no force and effect.
But, can you extend the period of the suspensive condition as you are suggesting and if so, by when must this then be done?
In the recent High Court case of Abrinah 7804 (Pty) Ltd v Kapa Koni Investments CC the court was faced with this exact question. The parties concluded a deed of sale in which the purchaser was afforded a period of 6 months to obtain a mortgage bond, which the purchaser then failed to do. The seller subsequently addressed a letter to the purchaser after the expiration date of the suspensive condition providing an extension of a further 14 days to comply with the suspensive condition. The court held that an agreement, subject to a suspensive condition, automatically falls away when the condition is not fulfilled by the expiration date as no contract remains. Accordingly, nothing can be done after the expiration date and no extension can happen after the fact as no contract exists.
In your case, extension of the expiration date is therefore possible although it should be noted that the seller is under no obligation to do so. Such extension must happen prior to the expiration date as thereafter no contract will exist. If the expiration date has passed, but the seller still wishes to continue with the sale, the only way the situation can then be remedied is to conclude a new contract on the same terms as the expired contract.
It is also important to read the entire contract and follow the correct procedure to extend the suspensive condition. Some contracts may have a clause, which determines that any extension and/or indulgence must be in writing and signed by both parties, in order to be valid.
As a rule of thumb it is always wise to tread carefully when dealing with a suspensive condition and ensure that all timeframes are met. If necessary, seek the advice of your attorney to make sure that you don’t lose your dream home because a condition was not correctly fulfilled.