What is an off-plan contract? What is a conventional contract? COMPARISON AND CONTRAST THE CONTENTS OF AN OFF-PLAN CONTRACT AND A CONVENTIONAL CONTRACT FOR THE SALE OF LAND

 COMPARISON AND CONTRAST THE CONTENTS OF AN OFF-PLAN CONTRACT AND A CONVENTIONAL CONTRACT FOR THE SALE OF LAND

Introduction

An off-plan contract occurs where an investor invests money in a property, or a project that is yet to be completed whereas a conventional contract for the sale of land is a transaction that involves the sale of an actual land for an agreed consideration.

Legal framework

Section 23(3) of the Law of Contract Act CAP 23 Laws of Kenya, stipulates that all contracts with regard to the disposition of an interest in land must be in writing, signed, and witnessed by a person who was present during the signing of the contract.

Therefore, regardless of the nature of the Contract be it Off-plan or the Conventional Contract for Sale of Land, the law of Contract out rightly stipulates that it should be reduced to writing, signed, and witnessed by both parties.

The contrast between the contents of an off-plan contract and a conventional contract for the sale of land

The process of purchasing an off-plan property commences with the signing of three documents:

i) The Reservation Form – This is to reserve or book the unit as the buyer and effectively notify the developer not to sell the unit;

ii) The Letter of Offer – This indicates the amount of money that the developer is willing to accept in exchange for granting ownership of the off-plan property to the buyer;

iii) Sale Agreement – This is the final and binding document once the developer and the buyer have agreed on the property to be sold, the price, deposit to be paid, payment period, and the mode of payment.

The aforementioned process of commencing the purchase of an off-plan property departs from how a conventional contract for the sale of land commences as it kicks off by executing a reservation form, unlike the conventional contract which kicks off by issuance of a letter of offer. 

A tabular contrast of the variance:-

 

OFF-PLAN CONTRACT	CONVENTIONAL CONTRACT
Deposit more than 10%. Usually 25% or as per agreement	Standard Deposits of 10% purchase price
Payments of purchase price split in many installments	Two installments or pursuant to an agreement made by the parties to the Contract.
The completion period usually long enough to allow development e.g. 2 years	The completion period usually fixed at 3 months
Specified physical conditions that is the buyer can make recommendations to the developer on certain specific.	Land sold as it is
An off-plan Contract thrives on a promise to deliver the property the buyer has paid for.	A conventional contract involves a subject matter that is exchanged for a consideration

 

Similarities between an off-plan contract and a conventional contract for the sale of land.

Despite, the variance that we have established in the aforementioned analysis of the two types of Contracts being the Conventional Contract for Sale of Land and Off-plan Contract there still exists similarities as highlighted hereunder:-

                                                       I.            They subscribe to the law of Contract being, The Law of Contract Act, CAP 23 Laws of Kenya;

                                                    II.            They facilitate the purchase of a property; and

                                                 III.            They are enforceable in case of default.