An agreement for the sale and purchase of land must be in writing, must contain or clearly refer to all main terms and conditions, and must be in a form in which either one part is signed by both the seller and the buyer or, and this is the usual case, must be in two identical parts, each signed by one party and then exchanged.
It is common for the sale and purchase agreement to provide for a deposit of between 5-10% of the purchase price on exchange of agreements, where there is to be a gap between exchange and completion. The seller’s lawyers usually hold deposits, either as agents or stakeholders. If held as an agent, it means that the lawyers can deal with the monies on their client’s instructions alone, normally involving the deposit being sent to the client. If they hold it as stakeholder, they have to take concurring instructions from both the seller and the buyer before being able to deal with the money. It is therefore preferable for a buyer to require that the money is held by a stakeholder.
Because the buyer has the opportunity of conducting full title investigation or due diligence before exchanging agreements, the buyer is usually prohibited from making any objection to any matter of title after the date of exchange.
Where timing is crucial to the agreement, there may be a provision stating expressly that “time is of the essence”. This means that any breach of the time limits in the agreement will be deemed to be a repudiatory breach, subject to a claim for damages. Normally, time is not of the essence and may only be made so by one party to the agreement serving notice on the others to make time of the essence.
Where there are matters of title affecting the property, such as restrictive covenants, the seller may require reciprocal obligations from the buyer and an indemnity in respect of any liability the seller may still have following completion of the transaction.
Real estate contracts commonly incorporate standard terms published by the Law Society, in the case of commercial property usually being the current version of the Standard Commercial Property Conditions. Where incorporated, the conditions will apply unless the contract expressly provides otherwise.
Provisions relating to value added tax will be included where relevant to ensure that the agreed tax position is preserved between exchange and completion.
Contracts for sale of property subject to occupational interests such as leases will include clauses to cover ongoing management matters, and provide for apportionment of occupational income and outgoings on completion of the transfer of ownership in the property.
If the property being sold is in the course of construction, the contract for sale will incorporate provisions dealing with the obligations of the seller to construct in accordance with an agreed specification and to provide to the buyer separate deeds of warranty from the building contractor and persons such as the architect in order to safeguard the buyer against defective design or workmanship.
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