Mortgages and Financing

A contract of sale includes a host of important terms and conditions depending upon mutual agreement of both the vendor and the purchaser in addition to the essential components of offer, acceptance and intention, to make the contract of sale valid and legally binding. The main terms of a contract for sale in relation to sale of a property include:

  • Details about the Vendor and the Purchaser: This includes the names, age and residing addresses of parties to the contract, their competency and bona-fide intention to enter into the contract.
  • The physical dimension of the property to be sold: The contract must contain detailed description of the property being sold such as location and total land area of the property and construction details, if any.
  • List of chattels included in the property: A list of chattels including but not limited to items like curtains, furniture, dishwasher, fridge and washing machine must be included in the contract.
  • Consideration clause: The purchase price or consideration of the property and the date of making such payment(s) are included in this clause. The consideration to be paid may usually be divided into deposit and the remaining balance. The amount of the earnest money to be received and/or paid by the parties, the consideration payment mode and the schedule to payment also forms part of this clause.
  • General covenants: This clause comprises of terms and conditions relating to:
    • loss or damage to the property prior to settlement;
    • penalties for delay in settlement;
    • obtaining licences and consent from the appropriate regulatory authority(ies);
    • transfer charges; and
    • whether the contract is subjected to financial approvals or the sale is subjected to a tenancy.
  • Passing of the Title or Ownership: The time limit during which the original title of the property should be passed to the buyer and that all the rights will accrue upon the buyer once the title gets transferred needs to be set out in the contract.
  • Warranty and Indemnity clause: This clause includes:
    • the seller’s right as the owner to sell the property;
    • warranty as to the absence of any easement or encumbrance or possessory agreement or any other legal disability; and
    • the seller’s assurance to the buyer that all statutory, maintenance and incidental charges or any subsisting loan amount relating to the property have been paid prior to the execution of the contract.
  • Easement rights: An easement gives an individual or a company, the right to use the land or property for a specific purpose. The inclusion of this clause actually restricts the use of a property. Common easements include a shared driveway between neighbours or routing of electrical mains through a property by governmental authorities. Easements registered on a Certificate of Title remains even if the land is bought and sold. It can only be removed upon mutual agreement of the easement holder and the owner of the land.
  • Cooling-off Period: Provision relating to ‘cooling off period’ enables a buyer to end the contract within a specified period without incurring large penalties.
  • Goods & Services Tax (GST): Before signing a contract of sale it is always recommended that the purchaser should check whether GST is included in the purchase price or not.
  • Execution and Registration Clause: This clause requires the parties to sign the contract. The registration of the contract and the payment of stamp duty depend upon the applicable State or Territorial law where the subject property is located.
  • Default Clause: This clause includes what actions by the parties will be construed as ‘default’, whether a default notice to be served upon the defaulting party and how the defaulting party will compensate the other party.
  • Dispute Resolution clause: This clause includes provisions whereby the parties shall have the right to resolve disputes arising out of the contract through negotiation, mediation and arbitration.
  • Enforcement Clause: This clause includes provisions as regard handling of any dispute arising out of the contract or conflict of law, law governing such enforceability, appropriate jurisdiction for submission and waiver of right to trial.

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