Crucial details to look out for;
1. PARTIES
There must be at least two parties to a sale agreement i.e. the Vendor and the Purchaser.
If individuals, this must be phrased to include their personal representatives and permitted assigns.
For corporate e.g a company, this must include their successors in title and permitted assigns.
2. DESCRIPTION OF THE PROPERTY
The property subject of the sale must be adequately and correctly described. It must give details such as the title number which must tally with that on the Title document, size, and location of the property. It is also good to note the regime under which the title falls (Registered Land Act, Registration of Titles Act or Government Lands Act etc) because the Transfer instruments and procedure are not necessarily the same.
3. INTEREST
It must be indicated whether the property being sold is a Freehold estate or a Leasehold. If a Leasehold, of major interest would be the term remaining on the Title. (Banks usually do not accept as security Leasehold titles whose remaining term is of a period less than 45 years.
4. CONSIDERATION
This is the amount agreed to between the parties. Here, the mode of payment is outlined. Usually, a deposit is paid to the Vendors Advocate to hold as stakeholder (or agent) pending completion of the transaction. The deposit is usually 10% of the purchase price but can be higher depending on what the parties decide with the balance being paid in exchange either for the completion documents or a suitable professional undertaking where the same is being financed by a loan from a Bank or financial institution.
5. COMPLETION DATE
This is usually stated to provide certainty i.e. one knows exactly when the transaction is to end. It can be a fixed date or set as within a certain period of time which is usually between three to six months. But it could be longer depending on the circumstances around each transaction.
6. FAILURE TO COMPLETE
The agreement must envisage such a scenario and provide for the same expressly.
The Law Society Conditions of Sale provide that the party aggrieved may issue a 21- day notice to complete on the other provide that the party issuing the notice is itself “ABLE, READY & WILLING” to complete. Such notice must be clear on what the issuer intends to do if not complied with.
If the Vendor is at fault, the Purchaser may rescind the agreement and demand a refund of the deposit already paid or seek a court order for specific performance. If the Purchaser is at fault, the Vendor may also rescind the contract and the Purchaser will forfeit the 10% paid as deposit.
OR, depending on the agreement, the aggrieved party may start calculating interest on late completion. Thus it is always wise to place an interest clause in the Sale Agreement.
7. COMPLETION DOCUMENTS
Are the documents transferring ownership to the new owner. They mostly are given in exchange for the balance of the purchase price. It is always adviseable to list them in the agreement e.g.
a) Original Title document;
b) Duly executed Transfer;
c) Duly filled and executed Stamp Duty Form;
d) Land Rent Clearance Certificate (where applicable)
e) Rate Clearance Certificate;
f) Copy of the Vendor’s PIN Certificate and Identity Card; and
g) Three colour Passport photographs of the Vendor.
8. POSSESSION
It is always adviseable to indicate when possession of the property is to be granted i.e. before or after completion. It must be clear that it will be VACANT possession or else matters could get complicated in the event that squatters are later discovered on the premises.
9. EXECUTION
Without this part an agreement cannot be said to be a contract. It is execution that evidences the intention to create legal relations and consequently to bind oneself to the contract. Thus an individual party must sign with such signature being witnessed by an Advocate of the High Court. The Advocate usually certifies the same via his stamp and signature. Corporate bodies execute contracts by having their Company Seal affixed to the document supported by signatures of two of their directors (or one director and the company secretary). An advocate must certify this too.
TO NOTE:
Ø Where the property being sold is an apartment, one should watch out for all the above including the term on the lease as relates to the Head Title, that a Management Company will be formed & a share of which the purchaser will granted as part of his entitlement, when the Transfer of the Reversionary Interest from the Lessor to the Management Company will take place, and details as to the service charge that will be payable so that the common areas are taken care of.
IN CONCLUSION
A sale agreement like all contracts must contain the following elements to become a binding contract:
i) Offer;
ii) Acceptance;
iii) Consideration/Element of bargain;
iv) Intention to create a Legal Relationship; and
v) Capacity to contract.
Milkah Gachanja
Legal Officer -Credit
Housing Finance
Rehani House-Koinange St. Nairobi.
( : (Office) +254 20 3262259
( : (HQ mobile) +254 722 725256 , +254 733 617628
( : (Fax) +254 20 2250858
x : P.O Box 30088 – 00100, Nairobi, Kenya
Website: www.housing.co.ke
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