Understand that Agreement before you sign it: Part 2

Continued from Part 1

“The sale is subject to the Law Society Conditions of Sale (1989 Edition) in so far as they are not inconsistent with the conditions in this agreement.”

The LSK Conditions of sale (1989 Edition) are boiler plate set of conditions to aid in drafting of agreements and guide the sales and conveyancing process. They outline how critical matters are to be dealt with including:

•          Deposits

•          Completion

•          Possession

•          Apportionment

•          Interest on purchase money

•          Objections and requisitions

•          Rescission

•          Easement, Liabilities

•          Consents

•          Subdivision

•          Notices

•          etc

Default clauses

These are meant to protect the parties in case of default. In the event the vendor defaults, common practice is to return the deposit paid by the purchaser mostly with some interests guided by the market rates.

In the event of a default by the purchaser, the vendor is entitled to serve the purchaser with a 14 day notice and when the same expires, the Vendor at his sole discretion has the option of either extending the completion period or rescinding the agreement in writing.

Rescinding of an agreement: It basically means to declare a contract void—of no legal force or binding effect—from its inception and thereby restore the parties to the positions they would have occupied had no contract ever been made. In the event this happens due to failure of the purchaser to comply, then the purchaser loses the 10% deposit.

Completion

This is usually done by way of exchange of completion docs and balance between Vendor and purchaser respectively or upon successful registration of the transfer in the name of the purchaser.

Another common practice of late is signing on every page for the vendor and the purchaser just to make sure that a malicious party does not pluck out unsigned pages and replace them with unfavorable conditions or different content.

For the agreement to be valid, a Certificate to identify the vendor and purchaser, must be done by an advocate.

Another condition of late relates to simply stating who drew the agreement. “Drawn by”

Is an agreement which has not been witnessed by an advocate legal? Yes if there is a witness. However, the transfer documents must be certified by an advocate licensed to practice. Also certification of the other docs as true copies of the origin must be done by an advocate /notaries public.

Who is this notaries public? A person legally empowered to witness and certify the validity of documents and to take affidavits and depositions. Wow..and what is an affidavit? A written statement of facts voluntarily made by a person under an oath or affirmation administered by a person authorized to do so by law.

Arbitration of disputes

In the event there is a dispute between the parties over the agreement, they should issue a notice of 7 days to each other with a copy to their witnessing advocate who shall within 7 days invite both parties to a joint meeting and may arbitrate any disputes and his decision is binding and can only be reviewed by an arbitrator appointed by the two parties but in the event they cannot agree, then an arbitrator will be appointed by the Chartered institute of Arbitrators to arbitrate the dispute.

And what is power of attorney: A written document in which one person (the principal) appoints another person to act as an agent on his or her behalf, thus conferring authority on the agent to perform certain acts or functions on behalf of the principal. This means you can grant a person authority to act on your behalf and that includes the sales process. A power of attorney generally is terminated when the principal dies or becomes incompetent, but the principal can revoke the power of attorney at any time.

Enough of the agreement and the legal jargon. Next we will look at the subdivisionprocess…

Understand that agreement before you sign it: Part 1

Guest post by Samuel G. Njenga

I signed that agreement and I never really understood most of the clauses therein. This is a common issue with most land purchasers. Did you know in the unlikely event of failure to complete a land purchase transaction and in the event of failure to resolve amicably any issues that may arise, the recourse the purchaser or the seller have will be based on the content of the agreement. Let us try and understand the contents of a standard sales agreement.

The agreement must have a vendor (seller) and a purchaser and either could be an individual or a company. The agreement will not only quote the name (s) of the vendor / purchaser but also mention successors in title, assigns and personal representatives. These are parties to the agreement. Who are these? Successors in title basically mean the successive owners of the titled land. Assigns are third parties to whom the vendor / purchaser would transfer all of the rights and obligations he/she has. A personal representative is ordinarily an executor for the estate of a deceased person who left a will or the administrator of an intestate estate. Take note that all these parties are bound by the agreement you are signing.

The agreement will further mention the Land Registration (LR) number, commonly referred to as the title number of the parcel in question, its area (approximate) & tenancy (freehold or lease). In the case of a lease the agreement will quote the lease period.

The agreement will further quote the Purchase price and terms of payment. Ordinarily, a payment of 10% on execution of the agreement will be paid by the purchaser. However, this may vary depending on what the two parties have agreed. The agreement will mention the completion period and in most cases give room for extension of the period as long as the parties agree and do so in writing.

It will further list the completion documents as below (if it is an individual buying and an individual selling):

1.     Original Title in the name of the Vendor

2.     Consent necessary for transfer

3.     Duly executed transfer forms in triplicate

4.     3 Passport Photos of the Vendor

5.     Copy of Pin Number of the Vendor

6.     Copy of National ID of the Vendor

7.     Rates Clearance Certificate (In Case the tenancy of the land is leasehold)

8.     Rent Clearance Certificate (In Case the tenancy of the land is leasehold)

9.     Valuation form duly filled

In the case the vendor/purchaser is a Company, then some additional documents will be required as below:

1.     3 photos each of the 2 directors of the company executing the transfer

2.     Copies of PINS and ID copies for 2 directors executing the transfer.

3.     Copy of the registration Certificate if it’s a company.

4.     PIN Certificate of Company

There is this clause that goes like “The Property is sold with vacant possession which shall be given to the Purchasers by the Vendor against release of the full Purchase Price and apportionments (if any) to the Vendor.”

What does it mean?

Vacant possession: On completion of a sale, the seller is obliged to deliver the property with vacant possession which means clear of occupants and of any objects which are not included in the sale.

Apportionments: it refers to the allocation of property expenses such as insurance and taxes between the buyer and seller. Apportionment can also describe the division of property between tenants in common

Another clause will go like “The property is sold subject to all subsisting easements, quasi-easements and right of way if any, the acts reservation, special conditions and other matters if any attaching on the said property but otherwise free from any encumbrances.”

Let’s understand what these things mean:

Easements: The right of one party to use the property of another party. Easements are often applicable when public utility companies want the right to erect telephone poles, electricity poles or run water / sewer pipes either above or beneath private property.

Quasi easement: Similar to above but only applicable when a single owner has 2 or more adjoining plots. In this case, one or more parcels will be used to benefit the other (s). Notice how a quasi-easement becomes an easement upon the transfer of one or all of the parcels.

Right of way: It is basically the right to pass over property owned by another party. A good example would be KPLC power lines.

Special conditions: These apply especially in cases of leases. A lease is usually accompanied by special conditions which govern the lease.

Encumbrances: As earlier mentioned in another lesson, these will include restrictions, cautions, charges etc.

Take note that whenever you acquire that plot, you get it as is and consequently you inherit all of the above.

Next lesson we look at other agreement clauses including default clause, rescinding an agreement, certification of parties signing, validity of an agreement and disputes arbitration.