Now and again, I get asked a question as to whether an oral or verbal agreement in respect of a sale of an immovable property like a flat, a house, a piece of vacant land, is binding in law.

So what does the law say about oral / verbal sale agreements in respect of immovable properties.

Oral / verbal agreements in respect of sales of immovable properties are not binding in law. This is so because the Alienation of Land Act No. 65 of 1981 (“the Act”) provides that “no alienation of land….. shall be of any force or effect unless it is contained in a Deed of Alienation signed by the parties thereto or by their agents acting on their written authority.” The Act broadly defines land to include any unit (sectional / share-block); any right to claim transfer of land, any undivided share in land, etc. In simple terms therefore, any sale agreement in respect of an immovable property must be in writing and signed by both the seller and purchaser or their duly authorized signatories (either through a power of attorney or the necessary resolutions). The Act defines alienate in relation to land to mean “sell, exchange or donate”.

This then leads to the second question which is – What are the essentials (the terms that must be agreed upon) in order for a sale of an immovable property to be valid?

There are basically three essential items which must be agreed upon, namely,  the parties (the seller and purchaser must be clearly defined), the property that is being sold must be properly described (there cannot be any discrepancies about the property description and the size of the property) and lastly there must be an agreed purchase price. A sale agreement in respect of an immovable property which does not contain any of the essential terms is not a valid sale agreement.

What if the parties (seller and purchaser) agree on the above three essentials but it is not clear who between them has to do what to give effect to the agreement. In these circumstances, could any party argue that there is still a valid sale agreement? In the recent decision of Chavonnes Badenhorst St Clair Cooper and another vs Curro Heights Property (Pty) Ltd Supreme Court of Appeal decision delivered on 16 May 2023, the importance of agreeing to essential and non-essential terms of the sale agreement in respect of an immovable property and reducing them to writing and signed by the parties, was well elucidated.

Briefly, the facts of this case were that the parties, entered into a sale agreement in terms of which they sold each other 3 properties. The dispute arose in respect of one property when the buyer realized after the agreement had been concluded, that it only required a portion of that property (ring road portion) and not that property in its entirety. This of course would have required the subject matter property to be sub-divided. The seller on the other hand, thought it was selling the whole of that property. The agreement was silent on the following:-

• Proposed sub-division;
• Who would attend to the sub-division;
• Who would bear the costs of such a sub-division.

When it became clear that the impasse could not be resolved between the parties, the seller approached the Western Cape High Court to have the agreement declared null and void (of no legal force and effect) on the basis that the parties were not of the same mind with regards to the property being sold. The Western Cape High Court found in favour of the buyer and found that the agreement was valid. Unsatisfied with the result, the seller appealed to the Supreme Court of Appeal (“SCA”). The SCA found in favour of the seller and concluded that the agreement was null and void because the parties were not of the same mind with regards to the property being sold. Further, the material terms (rights and obligations of the parties particularly relating to the sub-division) were not reduced to writing and signed by or on behalf of the parties. The SCA confirmed that:-

• The sub-division of the property was a material term of the agreement;
• The agreement made no reference to the sub-division;
• It was not clear who between the parties would have carried the obligation to cause the sub-division, who would be liable for such costs and what would have happened if the local authority did not approve the sub-division.

So what is the lesson learnt? The parties must be clear, accurate and precise about who is concluding the agreement (the parties); the property being sold, the agreed purchase price and most importantly what the material terms of the agreement are (who carries what rights and obligations to give effect to the agreement) otherwise they run the risk of thinking there is a binding agreement when there is none. Even more importantly, oral / verbal terms in respect of a sale of an immovable property are of no force and effect in law.

Should you require property law related advice, please contact me, Sifiso Msomi on 031 575 7113 / msomi@wylie.co.za.