Sale Agreement – Land

A sale agreement is a legally binding document that clearly outlines the terms and conditions for the sale of a property between two parties. It is used to protect the interests of both the purchase and the vendor.

It constitutes the terms and conditions of sale of a property by the seller to the buyer. These terms and conditions include the amount at which it is to be sold and the future date of full payment. Being an important document in the sale transaction, it enables the process of sale to go through without any hurdles.

All the terms and conditions included in the agreement of sale must be understood thoroughly by both the parties and obeyed throughout the sale process till the time the sale deed is made. Agreement of sale is the base document on which the sale deed is drafted.

SALE AGREEMENT IN RELATION TO LAND

Buying land properly involves taking a number of processes, key among them is ensuring you the purchase do proper due diligence. In most cases, this will involve such things as going for the physical site visit, doing a land search and a company search if buying from a registered company.

Once you are done with the due diligence, you will proceed to negotiate on the price and other terms of the purchase thus forming a contract that can be enforced by the law, that is where a sale agreement comes in.

A sale agreement in relation to land is a contract for the sale of land. It is the document prepared at the time of full payment made by the buyer and preceeds the actual transfer of the property. The contract is drawn by the vendor’s advocate who must confirm the vendor’s capacity to sell.

The particulars of sale describes the particulars of the land as well as the nature of estate being sold (i.e. freehold or leasehold). A mis-description may entitle the buyer to rescind the contract and seek a refund of the deposit purchase sum paid.

If any chattels are to be included in the sale, it is good practice to have a separate list of the same which can be attached to the final form of contract as an annexture.

The particulars of sale must state distinctly or by necessary implication that which is the subject matter of the contract. The property must never be described inaccurately. In Kenya the interest sold will either be freehold or leasehold.

IMPORTANCE OF SALE AGREEMENT

The agreement acts to protect both of the purchaser and seller’s interests and to ensure that both get what they rightfully deserve without getting duped. The sales agreement fully protects the rights and interests of the buyer and the seller because if one party fails to adhere to the contract the other party can take legal action to recover the damages caused.

The sales agreement is filled in triplicate one for the vendor, one for the purchaser, one for the lawyer/ legal advisor overseeing the transaction.

Having a sale agreement also conforms to The Law of Contract that provides for written agreements in disposition of land hence it ensures legal compliance and validity to bind the parties.

It ensures enforceability in the event of fraud, default in payment, breach of terms among other reasons for failure of an agreement. Without having a written sale agreement it would be difficult to prove to the court that an agreement regarding the sale of land existed or took place.

CONTENTS TO INCLUDE IN A SALE AGREEMENT

A land sale agreement should include but not limited to:

1. Identity of both the buyer and the purchaser. This will include full names, Identity card number, phone numbers, and the address code. In most cases, these are also the details to be included in the title deed after the transfer
2. The cost of purchase, this defines the agreed amount to be paid, how it is to be paid (Instalment/cash), and when the amount is to be paid.
3. The description of the property being sold. This will include the size of the land, the title number, where the land is located, and the condition of the land.
4. Distribution of costs involved. This define who pays for the different cost involved in the process of transferring the land to the purchaser from the vendor. Some of the common costs will include stamp duty, legal fees, and title transfer costs.
5. The obligation of each party involved in the transaction. This will help outline all that is to be done by both the purchaser and the vendor.
6. Remedies for breach of the contract. To help ensure that the interest of each party is protected a sale agreement will also outline how non-performance of the agreed terms of the agreement are to be handled.

A sale agreement unlike any other contract must provide the following to be valid:

1. The contract must provide that the vendor is vested with capacity to sell as the beneficial owner of the property;
2. The price at which the property is sold at is very important and must be stated;
3. The deposit payable at the signing of the contract i.e. 10% of the purchase price for most contracts;
4. In some contracts the deposit payable may be higher i.e. 20% or more;
5. That the deposit will be held by the vendor’s advocate pending completion as a stakeholder pending completion;
6. The contract completion date i.e. when the completion documents change hands vis a vis payment of the balance of the purchase price;
7. The contract completion clause may also stipulate how the balance of the purchase sum will paid. Is it by banker’s cheque or by means of professional undertaking by the purchaser’s financiers directed at the vendor’s advocates;
8. If interest is payable on the balance of the purchase sum should there be delay in completion and the rate of such interest this should also be stipulated in the contract;
9. The rate of interest should be specified;
10. The conditions of sale must be included. Most contracts for the sale of land in Kenya are subject to the Law Society Conditions of Sale (1989) Edition so long as the conditions do not contradict the terms of the contract. Alternatively if necessary the conditions may be varied accordingly to be in conformity with the terms of the contract. 

COMPLETION OF SALE OF LAND

Completion documents must be included in the completion clause of the sale agreement and it includes the following:

1. The Original Title documents;
2. Transfer duly signed by the vendor
3. Land Rent Clearance Certificate; (For leasehold Titles only)
4. Land Rates Clearance Certificate; (For Municipal / urban properties of both a leasehold and freehold nature provided a local government authority has levied land rates on the property);
5. Relevant consents applicable to the Transfer. i.e
6. Consent of the Commissioner of Lands to leasehold interests;
7. Consent of the Land Control Boards for Agricultural land obtained in pursuance of the Land Control Act Cap 302 of the Laws of Kenya;
8. Consent of any chargee or Mortgagee having an interest in the land;
9. Consent of any statutory authority having an interest in neighbouring property (e.g KPC, KAA, KCAA,) etc;
10. Notice of withdrawal of caveat or caution if there are any third parties having an interest in the property;
11. Original Land Rent payment Receipts;
12. Original Land Rates payment Receipts;
13. PIN  of the vendor;
14. 3 coloured photographs of the vendor or vendor’s directors
15. Copy of the Vendor’s ID

SPECIAL CONDITIONS TO BE INCLUDED IN THE AGREEMENT

1. Capacity of the vendor
2. Payment of deposit
3. Payment of balance and interest on unpaid purchase price
4. Payment for chattels and fixtures
5. Possession before execution
6. Time and schedule within which the matters affecting the title must be dealt with
7. Date of completion
8. Exceptions and reservations
9. The risk and liability for insurance pending completion
10. Power of vendor to rescind the contract
11. Power of either party to serve Completion Notice
12. Make sale subject to mortgage, consents,

COMMON CLAUSES TO INCLUDE IN SALE AGREEMENTS IN KENYA INCLUDE:

1. Date and Parties to the contract
2. Recital of the property
3. Definitions and Interpretation
4. Law Society Conditions of Sale 1989 (General Conditions)
5. Agreement for Sale and interest sold
6. Purchase Price and Deposit
7. Interest on late payment
8. Completion
9. Encumbrance
10. Special Condition(s)
11. Capacity
12. Possession and Movables
13. Matters affecting the Property
14. Outgoings and Income of the property
15. Warranty
16. Survival
17. Time is of the essence
18. Assignment
19. Default
20. Non-merger
21. Stamp duty and related costs
22. Disclaimer  
23. Guarantee of title
24. Arbitration
25. Termination
26. Legal and other costs
27. General
28. Intention to be bound
29. Schedules
30. Execution