Can I Cancel a Property Sale After Signing the Offer to Purchase? | Barter McKellar

Signing an Offer to Purchase (OTP) is a legally binding agreement between a buyer and a seller in a property transaction. But what happens if either party wants to cancel the deal after signing?

Cancelling a property sale can have serious legal and financial consequences, depending on the circumstances, reasons for cancellation and whether a cooling-off period applies.

At Barter McKellar, we specialize in property law and conveyancing, helping buyers and sellers understand their rights and obligations when dealing with property contracts. In this guide, we explain when and how a property sale can be cancelled, the risks involved and what legal options are available.

1. Is an Offer to Purchase Legally Binding?

Yes, once both the buyer and seller have signed the Offer to Purchase (OTP), it becomes a legally binding contract. This means that both parties are obligated to proceed with the transaction, subject to any conditions included in the agreement.

Key Legal Principles of an OTP

✔ The seller agrees to sell, and the buyer agrees to buy at an agreed price.
✔ The OTP contains conditions of sale, such as bond approval, suspensive clauses, and timeframes.
✔ If one party cancels the agreement without legal grounds, they may face financial penalties or legal action.

Tip: Before signing an OTP, ensure you fully understand the terms and consult a property lawyer if necessary.

2. Can a Buyer Cancel an Offer to Purchase?

A buyer can cancel an OTP, but whether they face penalties depends on:
✔ Whether the cancellation is within a cooling-off period.
✔ Whether the sale was subject to a suspensive condition.
✔ Whether they breach the contract by failing to comply with terms.

A. The Cooling-Off Period (5-Day Protection for Buyers)

Under Section 29A of the Alienation of Land Act, buyers of residential properties valued at R250,000 or less have a five-day cooling-off period in which they can cancel the sale without penalties.

However, the cooling-off period does NOT apply if:
❌ The property price is above R250,000.
❌ The sale was made through public auction.
❌ The buyer is a company, trust or legal entity instead of an individual.
❌ The buyer has previously signed an OTP for the same property.

Tip: If your purchase qualifies for the cooling-off period, cancellation must be done in writing within five business days.

B. Cancellation Due to Suspensive Conditions

A suspensive condition in an OTP means the sale is only valid if certain conditions are met.

✔ Common suspensive conditions include:

• Bond approval (if the buyer needs financing).

• Sale of an existing property (if the buyer must sell their home first).

• Compliance certificates (e.g. electrical, plumbing or gas compliance).

If a suspensive condition is not met, the OTP becomes null and void, and the buyer can cancel the agreement without penalties.

Tip: If a bond approval clause is included, and the buyer fails to secure financing, the sale can be cancelled legally.

C. What Happens If the Buyer Cancels Without a Valid Reason?

If a buyer cancels the sale for reasons not covered in the OTP, they may face:
❌ Loss of deposit (if applicable).
❌ Legal action by the seller for breach of contract.
❌ Possible liability for estate agent commission, if applicable.

Tip: If a buyer is unsure about proceeding with the purchase, they should negotiate flexible suspensive conditions in the OTP before signing.

3. Can a Seller Cancel an Offer to Purchase?

A seller can cancel an OTP, but like buyers, they must have legal grounds to do so.

A. Cancellation Due to Buyer’s Breach of Contract

A seller can cancel the sale if the buyer fails to comply with the OTP terms, such as:
✔ Not securing a home loan within the agreed period.
✔ Failing to pay the required deposit.
✔ Not signing transfer documents within the required timeframe.

Tip: The OTP usually includes a breach clause, allowing the seller to issue a written notice of breach and cancel the contract if the buyer does not rectify the issue within a set timeframe (typically 7 days).

B. Seller’s Right to Cancel Before Transfer Is Completed

In general, a seller cannot simply change their mind and cancel after signing an OTP, unless:
✔ The OTP includes a special condition allowing for cancellation.
✔ The buyer agrees to mutually cancel the agreement.
✔ The buyer fails to meet suspensive conditions (e.g., bond approval).

If a seller cancels without legal grounds, they may face:
❌ Legal claims for damages from the buyer.
❌ A lawsuit forcing them to proceed with the sale.
❌ Possible liability for estate agent commission if the agent secured a willing buyer.

Tip: If a seller wants to cancel, it’s best to negotiate an amicable settlement with the buyer to avoid legal disputes.

4. Financial Risks of Cancelling a Property Sale

Cancelling an OTP can have financial consequences for both buyers and sellers, including:

For Buyers:

✔ Loss of deposit (if they cancel without legal grounds).
✔ Potential legal claims for breach of contract.
✔ Liability for estate agent commission (if applicable).

For Sellers:

✔ Legal action from the buyer to enforce the sale.
✔ Compensation claims if the buyer suffers financial losses.
✔ Possible payment of agent commission, even if the sale doesn’t go through.

Tip: Always consult a property lawyer before attempting to cancel an OTP to understand your legal rights and risks.

5. How to Legally Cancel an Offer to Purchase

If a buyer or seller needs to cancel an OTP, the best approach is to:

✔ Review the OTP – Check the agreement for cancellation clauses and penalties.
✔ Communicate with the other party – If both parties agree, the sale can be cancelled mutually in writing.
✔ Issue a breach notice – If the other party fails to meet conditions, a formal cancellation notice can be sent.
✔ Consult a property lawyer – To ensure legal compliance and minimize risks.

Tip: Mutual cancellation agreements can prevent costly legal disputes and financial losses.

6. How Barter McKellar Can Help with Property Sales & Cancellations

At Barter McKellar, we provide expert legal services for:
✔ Drafting legally sound Offers to Purchase to protect buyers and sellers.
✔ Advising on cooling-off periods and suspensive conditions.
✔ Handling legal cancellations and breach disputes.
✔ Ensuring smooth property transfers with minimal delays.

If you need to cancel a property sale or want to understand your legal options, our team of conveyancing attorneys is here to assist.