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