M-Wakili

CONTACT

FAQ

LOGIN

REGISTER

Ask a lawyer:
What are the most common mistakes to avoid when drafting a Real Estate Purchase and Sale Agreement?

Introduction

Drafting a Real Estate Purchase and Sale Agreement is a critical task that requires meticulous attention to detail to ensure that the interests of both the buyer and the seller are adequately protected. In Kenya, this process is governed by various laws and regulations, including the Constitution of Kenya, the Land Act, the Land Registration Act, and the Law of Contract Act. This document will outline the most common mistakes to avoid when drafting such agreements, referencing relevant Kenyan laws and regulations.

Table of Contents

  1. Failure to Conduct Due Diligence

  2. Inadequate Property Description

  3. Ambiguous Terms and Conditions

  4. Ignoring Legal Requirements

  5. Inadequate Payment Terms

  6. Failure to Include Contingencies

  7. Ignoring Dispute Resolution Mechanisms

  8. Lack of Proper Execution and Witnessing

  9. Conclusion

1. Failure to Conduct Due Diligence

Sources:

  • Land Registration Act, 2012

  • Land Act, 2012

Before drafting a Real Estate Purchase and Sale Agreement, it is crucial to conduct thorough due diligence on the property. This includes:

  • Title Search: Ensure that the seller has a clear and marketable title to the property. This can be done by conducting a title search at the Land Registry as per the Land Registration Act, 2012.

  • Encumbrances: Check for any encumbrances, such as mortgages, liens, or easements, that may affect the property. The Land Act, 2012, provides guidelines on how to handle encumbrances.

  • Zoning Laws: Verify that the property complies with local zoning laws and regulations.

2. Inadequate Property Description

Sources:

  • Land Registration Act, 2012

A common mistake is failing to provide an adequate description of the property. The property description should include:

  • Physical Address: The exact location of the property.

  • Land Reference Number: As registered in the Land Registry.

  • Size and Boundaries: Detailed measurements and boundaries of the property.

An inadequate property description can lead to disputes and legal challenges.

3. Ambiguous Terms and Conditions

Sources:

  • Law of Contract Act, Cap 23

Ambiguity in the terms and conditions of the agreement can lead to misunderstandings and disputes. Ensure that:

  • Price and Payment Terms: Clearly state the purchase price and the payment schedule.

  • Possession Date: Specify the date when the buyer will take possession of the property.

  • Conditions Precedent: Outline any conditions that must be met before the sale is finalized.

4. Ignoring Legal Requirements

Sources:

  • Law of Contract Act, Cap 23

  • Land Control Act, Cap 302

Ignoring legal requirements can render the agreement void or unenforceable. Key legal requirements include:

  • Written Agreement: The Law of Contract Act requires that contracts for the sale of land be in writing.

  • Consent from Land Control Board: For agricultural land, consent from the Land Control Board is mandatory as per the Land Control Act.

5. Inadequate Payment Terms

Sources:

  • Law of Contract Act, Cap 23

Inadequate payment terms can lead to financial disputes. Ensure that the agreement includes:

  • Deposit Amount: Specify the amount of deposit to be paid and the conditions under which it is refundable.

  • Payment Schedule: Outline the payment schedule, including the dates and amounts of each installment.

  • Mode of Payment: Specify the mode of payment, whether it is by cheque, bank transfer, or other means.

6. Failure to Include Contingencies

Sources:

  • Law of Contract Act, Cap 23

Contingencies protect both parties in case certain conditions are not met. Common contingencies include:

  • Financing Contingency: The sale is contingent upon the buyer obtaining financing.

  • Inspection Contingency: The sale is contingent upon the property passing a home inspection.

  • Appraisal Contingency: The sale is contingent upon the property being appraised at or above the purchase price.

7. Ignoring Dispute Resolution Mechanisms

Sources:

  • Arbitration Act, 1995

Ignoring dispute resolution mechanisms can lead to prolonged and costly legal battles. Include a clause that specifies:

  • Arbitration: Agree to resolve disputes through arbitration as per the Arbitration Act, 1995.

  • Mediation: Consider mediation as an alternative dispute resolution mechanism.

8. Lack of Proper Execution and Witnessing

Sources:

  • Law of Contract Act, Cap 23

Proper execution and witnessing of the agreement are crucial for its validity. Ensure that:

  • Signatures: Both parties sign the agreement.

  • Witnesses: The agreement is witnessed by at least two individuals who are not parties to the contract.

  • Notarization: Consider having the agreement notarized for added legal protection.

Conclusion

Drafting a Real Estate Purchase and Sale Agreement in Kenya requires careful attention to detail and adherence to legal requirements. By avoiding the common mistakes outlined above, you can ensure that the agreement is legally sound and protects the interests of both the buyer and the seller. Always consult with a qualified legal professional to review the agreement before finalizing it.

By following these guidelines and referencing the relevant Kenyan laws, you can avoid common pitfalls and ensure a smooth and legally compliant real estate transaction.

Answered by mwakili.com