Agreement of sale for immovable property

Every day people buy or sell immovable properties such as residential houses, and commercial or industrial properties for business or investment.

THEY use agreements of sale to carry out these transactions. In this article, I summarise the main contents of an agreement of sale for a property.

Parties

An agreement ought to clearly state the parties ie the seller and the purchaser.

Their particulars or details should be included. These include their full names, registration numbers, addresses, email addresses, phone numbers, etc.

Where someone is acting in a representative capacity the authority thereto such as a company resolution or special powers of attorneys from a natural person should be recorded.

Preamble

A preamble gives background information or context to the transaction.

This may include facts such as that the seller is the registered / lawful owner, the purchaser has carried due diligence, the seller is desirous of selling the property and the purchaser is desirous of purchasing the property under terms and conditions agreed in the agreement.

Effective date

This is the effective date of the agreement, for example, when parties have signed the agreement or a specified date notwithstanding the date of signature.

Sale

This part is very important. It usually records the property being sold.

This property may have already been defined in the definition clause or the preamble or may be recorded in this clause or under a separate clause.

The property has to be fully and correctly described as per the title deed but also record the improvements thereon such as the number of rooms, whether walled and gated, swimming pool, etc.

Details of the improvements are necessary for ZIMRA capital gains tax assessment or the declarations filed with the Deeds Office.

This clause records the purchase price and the payment terms but the structure may differ depending on the preference of the legal practitioner drafting the agreement.

The same clause usually records what the parties’ agreement is as regards the release of the purchase price to the seller, whether all upon transfer, part before transfer or some other arrangements parties may make.

Property description

As explained above the description of the property has to be done properly concerning how it is described on the title deed of cession documents. Improvements ought to be recorded carefully.

Conditions precedent

Any conditions precedent may be included, for example, that the agreement is subject to bond cancellation, resolution of any disputes, purchaser obtaining mortgage finance, etc.

Transaction costs

Here is stated who is responsible for the costs of the transaction, for example costs of drafting the agreement of sale, capital gains tax, transfer costs such as conveyancing fees and stamp duty.

Transfer

It has to be stated when the transfer will be made, by which conveyancers and any conditions thereto. For example, whether transfer shall be made before or after payment of the full purchase price.

Occupation

Parties ought to agree when the purchaser takes occupation including for example where there could be a tenant with a valid lease.

Occupation may be upon making full payment, upon transfer, or such other time or date as parties may agree.

A seller has to be extra careful when he or she is selling the house he or she is staying in as more time may be required to arrange alternative accommodation.

Voetstoots / “as is”

This is a disclaimer meant to protect the seller against any possible claims by a purchaser in the event of patent or latent defects on the property.

Warranties by parties

The seller and purchaser may give each other warranties, for example as to the ownership of the property, full disclosure, absence of disputes, no prior valid agreements, no encumbrances, that the purchaser has the necessary finances or has made adequate arrangements, etc.

Breach

An agreement ought to provide for breach ie what constitutes breach, rectification of breach and consequences of breach that has not been rectified.

Dispute resolution

An agreement ought to record whether a dispute shall be resolved through mediation, arbitration or litigation.

Termination

Termination provision is required and usually includes circumstances when the agreement can be terminated, for example breach that has not been rectified, by mutual agreement, etcetera.

Currency of the contract

Some parties may prefer to mention the currency of the contract as protection.

Applicable laws

That the agreement shall be subject to the laws of Zimbabwe.

Domicilium citandi / address of service

These are the official addresses given by the parties for purposes of the transaction or legal processes connected thereto.

Signature page(s)

This last part provides for signature by the parties and their witnesses.

Conclusion

Agreements of sale are used every day and ought to be done properly to avoid future disputes or inconveniences.

Disclaimer

This simplified article is for general information purposes only and does not constitute the writer’s professional advice.

◆ Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), MBA(EBS, Heriot- Watt, UK) is the Managing Partner of Hofisi Partners Commercial Attorneys, chartered accountant, insolvency practitioner, registered tax accountant and advises on deals and transactions. He has extensive experience from industry and commerce and is a former World Bank staffer in the Resource Management Unit. He writes in his personal capacity. He can be contacted on +263772246900orghofisi@hofisilaw.com or gohofisi@gmail.com