When Property Sales Go Wrong: Breach Of Contract And The Cost Of Non-Performance

When buying or selling property – every agreement, from the offer to purchase to the financing terms – creates legally binding obligations. When one party fails to uphold those obligations, the consequences can be costly. Breach of contract in a property transaction often leads to claims for damages, legal disputes, and delays in the transfer process.

Breach of an offer to purchase

The offer to purchase forms the foundation of any property sale. Once accepted, it becomes a binding contract that both buyer and seller must honour. If a buyer withdraws without lawful reason or fails to meet their obligations (such as paying the deposit, securing finance, or proceeding with the transfer) the seller may suffer financial loss.

In such cases, the seller may claim damages, which can include estate agent's commission, conveyancing costs, and any loss in market value if the property must be resold. South African courts have repeatedly confirmed that a breach of an offer to purchase can justify these claims, provided the seller can show the loss was a direct result of the buyer's non-performance.

Breach of a bridging finance agreement

Bridging finance is often used to cover interim costs, such as municipal rates or transfer duties, before transfer proceeds are paid out. A breach of a bridging finance agreement occurs when a seller fails to use the advanced funds for their intended purpose or fails to repay the lender once the property is transferred.

When this happens, the lender (or even the buyer, if indirectly affected) may take legal action to recover the outstanding amounts. The courts generally view these breaches seriously, as they not only undermine contractual obligations but can also delay property registration or result in double payments of rates and taxes.

Remedies available

Both buyers and sellers have recourse under contract law. The available remedies include specific performance, which compels the defaulting party to carry out their contractual obligations; cancellation of the contract where the breach is material; and a claim for damages to compensate for financial losses suffered. In practice, parties often attempt to resolve disputes through negotiation or settlement before resorting to litigation. However, where significant financial harm has occurred, a civil claim may be the only effective remedy.

Conclusion

Property transactions depend on trust and compliance with contractual terms. When either party breaches those obligations, the fallout can be extensive, affecting everyone from estate agents to conveyancers. Understanding your legal rights and acting promptly can help minimise financial loss and preserve the integrity of the sale.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.