Bond Approved – But Later Withdrawn: Does the Property Sale Remain Binding?

In many South African property transactions, an offer to purchase is made subject to the purchaser obtaining mortgage finance. A recurring dispute arises where a bank grants bond approval within the required period, but later withdraws that approval before transfer of the property is registered. The question is whether the agreement remains binding despite the collapse of the purchaser’s financing.

Although the legal principles governing suspensive conditions apply equally to residential and commercial property transactions, the practical consequences often depend on how the finance clause is drafted.

A suspensive condition postpones the enforceability of contractual obligations until the occurrence of an uncertain future event. While the contract comes into existence when signed, the parties’ obligations remain suspended until the condition is fulfilled.

In Mia v Verimark Holdings (Pty) Ltd (522/08) [2009] ZASCA 99; [2010] 1 All SA 280 (SCA), the Supreme Court of Appeal confirmed that a contract subject to a suspensive condition creates a valid contractual relationship, with the parties’ obligations merely suspended pending fulfilment. Once the condition is fulfilled, the contract becomes fully operative and enforceable.

Similarly, in Design and Planning Service v Kruger 1974 (1) SA 689 (T), the court held that once a suspensive condition has been fulfilled, the agreement ceases to be conditional and becomes binding. More recently, in Codevilla v Kennedy-Smith NO (494/2023) [2024] ZASCA 136; [2024] 4 All SA 637 (SCA); 2025 (2) SA 42 (SCA), the Supreme Court of Appeal reaffirmed that where a suspensive condition is not fulfilled within the stipulated period, the agreement lapses automatically and cannot be revived by later conduct. These authorities confirm that the consequences of fulfilment or non-fulfilment arise automatically by operation of law and depend strictly on the wording of the contract.

In a typical residential offer to purchase, the agreement is often subject to the purchaser obtaining a mortgage bond in a specified amount by a stated date. If written bond approval is granted within the stipulated period and in accordance with the clause, the suspensive condition is fulfilled, and the agreement becomes unconditional and binding. At that moment, the condition falls away.

South African law does not recognise automatic reinstatement of a suspensive condition simply because a bank later withdraws approval before transfer registration. Unless the agreement expressly provides that finance must remain available until transfer, or that withdrawal of funding constitutes a further condition, the later revocation of the bond does not undo fulfilment. The purchaser therefore remains obliged to perform, and failure to do so may constitute a breach of contract.

Disputes often arise because buyers and sellers assume that an “approval in principle” automatically satisfies the bond condition. Whether the suspensive condition has been fulfilled depends entirely on the wording of the clause.

Where the agreement simply requires the purchaser to “obtain a mortgage bond” by a particular date, courts will generally regard the condition as fulfilled once formal written approval is issued within the required period, even if that approval is subject to normal conditions such as property valuation, life insurance, signing loan documentation, or regulatory compliance.

However, where the clause requires the purchaser to conclude a loan agreement, secure finance, ensure that funds are actually available, or maintain the finance until registration, an approval in principle may not be sufficient. In such cases, the precise wording of the clause is decisive.

While the doctrine governing suspensive conditions is the same in residential and commercial property transactions, commercial agreements often contain more sophisticated and carefully negotiated finance clauses. Larger purchase prices, corporate purchasers, special-purpose vehicles, and multi-layered funding structures often necessitate detailed provisions regulating the availability and continuation of finance.

Commercial agreements may expressly provide that transfer is conditional upon loan drawdown, that finance must remain in force until registration, or that withdrawal of funding constitutes a resolutive condition entitling cancellation. Where such wording is included, courts will uphold the parties’ negotiated allocation of risk.

In the absence of such provisions, however, the orthodox principle applies: once a suspensive condition has been fulfilled according to its terms and within the prescribed period, the agreement becomes binding and cannot later be undone merely because the underlying financing collapses.

The decisive factor is therefore the wording of the finance clause. Purchasers and sellers should ensure that bond clauses accurately reflect their intended allocation of funding risk, particularly in commercial transactions where financing structures are often complex and the financial consequences of failure may be substantial.

Key Takeaways

·  Bond approval within the stipulated period usually fulfils the suspensive condition.

·  Withdrawal of finance afterwards does not automatically cancel the sale.

·  Failure to perform after fulfilment may constitute a breach of contract.

·  Precise wording of the finance clause determines rights and obligations.

·  Commercial transactions may require more detailed clauses to allocate funding risk.