Can offers to purchase be enforced?

Property professionals answer this and other relevant questions, including the pitfalls of buying a farm

Q: WE ARE thinking of buying a farm but are a little worried about any legal issues that may come about regarding land rights. What should we be aware of?

A: Buying a farm is a lot more complex than a single house. Besides the usual checks and balances of an agreement of sale, buyers and sellers should proceed with extraordinary care when entering such contracts for farmland and working farms.

There is a lot to consider when buying or selling a farm. We recently assisted in the purchase of a game farm and, following findings during our due-diligence process, we attached a four-page schedule of listed specific warranties that will apply to the successful transfer. Among the many examples are “basic” assurances that the seller is not a party to dispute with any neighbour or that there are no pending land claims registered to the property.

Buyers should check if any servitudes apply and the farm’s water rights.

Zoning rights and permits must be checked and investigation must be done to establish if the farm is under any environmental or heritage limitations.

Among the recurring disputes encountered is that farm workers’ rights of tenure are often overlooked and often not disclosed. So, you buy a farm with the intention to turn the staff houses into guest units, only to find the staff have a legal right to the property.

While a farm is a sought-after investment, it should come with a hefty checklist, accompanied by an experienced contract specialist. – PJ Veldhuizen, attorney, litigator and senior mediator at Gillan and Veldhuizen attorneys

Q: How enforceable is an offer to purchase?

A: When a written offer is accepted and signed by the seller, it immediately becomes a legal contract, binding on both parties.

This means that you cannot use such an offer as a way to “book” a property you like while you carry on looking. And you cannot simply “change your mind” about buying the property without the very real possibility of incurring a hefty financial penalty or having to pay a significant amount of money to get out of the contract.

Of course, personal, work and financial circumstances can sometimes change very unexpectedly and buyers who are quick to communicate such changes as the genuine reasons for their being unable to proceed with a purchase are likely to encounter understanding, and even sympathy, from the sellers. – Berry Everitt, chief executive of the Chas Everitt International property group

Q: I will be investing in my first rental property this year but am looking for the right location to attract good tenants. Is there anything in particular to consider when choosing such a location?

A: While rental properties in major metros may have their work cut out for them in 2022, demand in the so-called “Zoom towns” could well begin to outstrip supply in the coming year. We’ve seen an amazing aboutface in demand, thanks to Covid and working from home.

Where metros were once thriving rental centres, we’re now seeing properties in small towns – particularly on the coast – flying off the metaphorical shelves.

With commute times no longer an issue, people are clearly choosing quality of life over city proximity, and this is not expected to change soon, regardless of whether businesses return to some semblance of workplace normality in 2022. – Jacqui Savage, national rentals manager for the Rawson Property Group

Q: We are considering buying a holiday home, mainly for our personal use. However, we have been told that it may be a good idea to let it out for short-term stays. If we decide to do this, what should we know?

A: Owning a holiday let can be both personally and financially rewarding but it will only be profitable if you approach it like you would any other successful business. The first step is to do plenty of research and, once you have decided on your area and the type of property you want to buy, enlist the help of an established and reputable agency. These are the most important factors to take into account:

• Potentially more volatile property values: Although some coastal regions are thriving due to semigration, the values of properties in holiday locations are traditionally more volatile, booming in the good times and crashing when the markets are down. It’s important to buy in areas that don’t only rely on tourism but have a solid proportion of permanent residents.

• Ensure you buy in a prime location: When selecting holiday investment properties, consider factors like beach views and proximity to shops and restaurants and other tourism hot spots.

• Opt for self-contained: Holiday apartments purpose-built for short rentals with small hotel-style rooms may yield a higher rental return on purchase price in the short term, but a self-contained unit (or house) with larger rooms and a separate kitchen, bathroom and bedrooms, will generally give you better capital growth and be easier to sell down the line.

• Do your sums: It is important that your sums allow for longer vacancy periods and fluctuating occupancy levels from season to season, as well as maintenance costs, which can be higher than normal with so many different people using the property.

• Familiarise yourself with the legislation: Legislation regarding the rental sector and short-term lets has been tightened in recent years for both your, and your guests’, protection, so make sure you operate within these laws to avoid potentially costly and stressful pitfalls.

• Consider professional management: This is especially important if you don’t live in the area because there is likely be a guest or an issue that needs your attention on a regular basis. The professionals will also have a thorough knowledge of all the relevant legalities.

• Adequate cover: Ensure that you are adequately insured – with more people coming and going than in your own home, accidents and incidents are far more likely. And bear in mind that some policies include a vacancy clause – properties that are vacant for more than 60 days could introduce limitations in cover.

– Claude McKirby, co-principal for Lew Geffen Sotheby’s International Realty in Cape Town’s Southern Suburbs, False Bay and Noordhoek

There is a lot to consider when buying a holiday home to let out.

PICTURE: TSAITSAI/PIXABAY