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 sale agreement unlike any other contract must provide the following to be valid:
- The contract must provide that the vendor is vested with capacity to sell as the beneficial owner of the property;
- The price at which the property is sold at is very important and must be stated;
- The deposit payable at the signing of the contract i.e. 10% of the purchase price for most contracts;
- In some contracts the deposit payable may be higher i.e. 20% or more;
- That the deposit will be held by the vendor’s advocate pending completion as a stakeholder pending completion;
- The contract completion date i.e. when the completion documents change hands vis a vis payment of the balance of the purchase price;
- 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;
- 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;
- The rate of interest should be specified;
- 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.
A land sale agreement should include but not limited to:
- 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
- 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.
- 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.
- 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.
- 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.
- 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.
COMMON CLAUSES TO INCLUDE IN SALE AGREEMENTS IN KENYA INCLUDE:
- Date and Parties to the contract
- Recital of the property
- Definitions and Interpretation
- Law Society Conditions of Sale 1989 (General Conditions)
- Agreement for Sale and interest sold
- Purchase Price and Deposit
- Interest on late payment
- Completion
- Encumbrance
- Special Condition(s)
- Capacity
- Possession and Movables
- Matters affecting the Property
- Outgoings and Income of the property
- Warranty
- Survival
- Time is of the essence
- Assignment
- Default
- Non-merger
- Stamp duty and related costs
- Disclaimer
- Guarantee of title
- Arbitration
- Termination
- Legal and other costs
- General
- Intention to be bound
- Schedules
- Execution
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