CANCELLING AN INSTALMENT SALE OF LAND Merry Hill (Pty) Ltd v Engelbrecht 2008 2 SA 544 (SCA) Van Niekerk v Favel 2008 3 SA 175 (SCA)
Keywords:instalment sales of land, risks arising from instalment sale transactions
Chapter II of the Alienation of Land Act 68 of 1981 (“the Act”) governs instalment sales of land (as defined in the Act) where the purchase price is payable in more than two instalments over a period longer than 12 months. The Act affords the purchaser special protection, given the risks arising from instalment sale transactions. Perhaps the biggest risk is that the owner of the land may be sequestrated prior to transfer of the property to the purchaser, after the latter has paid the owner a portion of the purchase price
by way of a deposit and/or instalments. At common law this would leave the purchaser with no more than a concurrent claim for damages against the insolvent estate, should the trustee decide to abandon the sale: Glen Anil Finance (Pty) Ltd v Joint Liquidators Glen Anil Development Corp Ltd (1981 1 SA 171 (A)). Special provision is therefore made in the Act to safeguard the purchaser’s interests in the event of the owner’s insolvency. But there are also a number of other equally serious risks, including the unexpected implementation of a payment acceleration clause, cancellation of the agreement or a claim for damages, all of which could, depending on the wording of the agreement, be triggered by an isolated (even unknown) breach of contract on the part of the purchaser.
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