Sale and Purchase Agreement for Property


Sale and Purchase Agreement for Property Transaction

 

The procedures of sale and purchase of property are different for different common law jurisdictions. In general, a property transaction occur in different stages:

  • The buyer views the property and makes an offer (through price negotiation or an auction) to the seller.
  • The seller agrees to the price and accepts the offer. The buyer would provide a deposit.
  • The buyer would seek financing, check the title of the property and negotiate the sale and purchase agreement.
  • Completion of the property transaction and payment of the purchase price.

During stage (ii), it is common for the buyer and the seller of the property to confirm the price, acceptance of the offer and payment of deposit in writing. Depending on the jurisdiction, this can be done either through (i) a memorandum of sale or (ii) a provisional sale and purchase agreement.  

 

1. Memorandum of Sale (Not legally binding)

 

A memorandum of sale is a document that records the potential buyer’s interest in the property and the seller’s terms of sale. It serves as a “sale agreement” even though the final sale and purchase agreement has not yet been negotiated. It should be noted that the sales memo is not legally binding. Instead, it is a written confirmation that the price has been agreed upon and that both the buyer and seller want to complete the transaction. The document will include any special conditions or notes that deviate from the standard conditions of sale, including land-related planning restrictions and specific rights. A typical memorandum of sale would include:

  • Seller and buyer names and contact details
  • Details of the lawyers representing the parties
  • Property address, lease term, lease details, and special terms
  • Agreed price of the property, the deposit amount (usually 10%) and payment method
  • Details of mortgage lender (if applicable)
  • Other special terms agreed between the buyer and the seller.

 

2. Provisional Sale and Purchase Agreement (Legally binding)

 

In some jurisdictions, the buyer and seller would sign a provisional (or preliminary) sale and purchase agreement for the property to confirm the price and preliminary terms of the transaction. The buyer would then pay the initial deposit. After which the buyer and the seller would each appoint their own lawyers to negotiate the final sales and purchase agreement. Unlike a memorandum of sale, the provisional sale and purchase agreement is intended to be legally binding. Although there is no standard format, the following documents are usually provided in the Provisional Sale and Purchase Agreement:

  • Seller and buyer names and contact details
  • Details of the lawyers representing the parties
  • Property address, lease term, lease details and special terms
  • Agreed price of the property, the deposit amount (usually 10%) and payment method
  • Delivery of vacant possession and the property is sold on an “as if” basis
  • Consequence of the buyer’s and the seller’s default
  • Specific terms and conditions agreed between the buyer and the seller.

 

B. Formal Sale and Purchase Agreement

 

The formal sale and purchase agreement is usually prepared by the seller's lawyer for approval by the buyer's lawyer and should follow the terms under the memorandum of sale or the provisional sale and purchase agreement. Formal agreements have no standard format, and both parties can add in more detailed terms and conditions to cover a wider range of matters than the memorandum of sale or the provisional sale and purchase agreement. Both parties must fully agree to all these conditions before signing and completion. Formal agreements usually include the following terms or matters:

  • Buyer and seller details
  • The seller agrees to sell and the buyer agrees to purchase the property described
  • Details of the property will be set out in the formal agreement including the description of the property based on the Land Registry records
  • Purchase price and payment method
  • Date of completion
  • Furniture and fittings
  • Seller granting good title to the buyer with original title documents
  • Vacant possession on completion date with risk passed from seller to buyer
  • Default by the buyer or the seller
  • Time is of the essence
  • Property sale on an "as is" basis
Keywords:

Sale And Purchase Agreement

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