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What are the standard clauses for a Real Estate Sales Contract?

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A Real Estate Sales Contract is a legally binding agreement between a buyer and a seller outlining the terms and conditions for the sale of a property. It is a crucial document that protects the interests of both parties and ensures a smooth transaction. In Kenya, the Law Society of Kenya (LSK) has developed standard conditions of sale for real estate transactions, which are widely used in the industry. These conditions provide a framework for the agreement, ensuring that all essential elements are covered.

Introduction
Essential Clauses in a Real Estate Sales Contract 2.1. Identification of the Parties 2.2. Description of the Property 2.3. Purchase Price and Payment Terms 2.4. Deposit and Earnest Money 2.5. Completion Date and Possession 2.6. Conditions Precedent 2.7. Representations and Warranties 2.8. Default and Remedies 2.9. Dispute Resolution 2.10. Governing Law and Jurisdiction
Case Laws
Conclusion
TLDR

Introduction

Essential Clauses in a Real Estate Sales Contract

The standard clauses in a Real Estate Sales Contract are designed to address all aspects of the transaction, ensuring clarity and fairness for both the buyer and the seller. These clauses typically include:

2.1. Identification of the Parties

This clause clearly identifies the buyer and the seller, including their full names, addresses, and contact information. It is essential to ensure that the parties are correctly identified to avoid any confusion or disputes later on.

2.2. Description of the Property

This clause provides a detailed description of the property being sold, including its location, size, boundaries, and any existing structures or fixtures. It should also include the property's legal description, such as the title deed number and the land reference number.

2.3. Purchase Price and Payment Terms

This clause specifies the agreed-upon purchase price for the property and the payment terms. It should clearly state the total purchase price, the amount of any deposit or earnest money, the payment schedule, and the method of payment.

2.4. Deposit and Earnest Money

This clause outlines the deposit or earnest money that the buyer is required to pay upon signing the contract. The deposit serves as a commitment from the buyer to proceed with the purchase and can be forfeited if the buyer defaults on the agreement.

2.5. Completion Date and Possession

This clause specifies the date on which the sale is to be completed and the buyer is to take possession of the property. It should also outline the process for transferring ownership and the responsibilities of each party during the handover process.

2.6. Conditions Precedent

This clause outlines any conditions that must be met before the sale can be completed. These conditions can include obtaining financing, conducting a property inspection, or obtaining necessary approvals from relevant authorities.

2.7. Representations and Warranties

This clause includes representations and warranties made by the seller regarding the property. These representations can include statements about the property's condition, title, and any encumbrances.

2.8. Default and Remedies

This clause outlines the consequences of a breach of contract by either party. It should specify the remedies available to the non-breaching party, such as the right to terminate the contract, seek damages, or specific performance.

2.9. Dispute Resolution

This clause outlines the process for resolving any disputes that may arise between the buyer and the seller. It can specify the method of dispute resolution, such as negotiation, mediation, or arbitration.

2.10. Governing Law and Jurisdiction

This clause specifies the law that will govern the contract and the jurisdiction in which any disputes will be resolved. In Kenya, the contract will typically be governed by Kenyan law, and any disputes will be resolved in Kenyan courts.

Case Laws

2.11. Case Law: Mburu v. Njuguna (2003) eKLR

This case involved a dispute over the sale of a piece of land. The court held that a Real Estate Sales Contract must be in writing and signed by both parties to be enforceable. The court also emphasized the importance of clear and unambiguous language in the contract to avoid any ambiguity or disputes.

2.12. Case Law: Karanja v. Kamau (2010) eKLR

This case involved a dispute over the payment of the purchase price. The court held that the buyer is obligated to pay the purchase price in accordance with the terms of the contract. The court also held that the seller is entitled to specific performance of the contract if the buyer fails to pay the purchase price.

2.13. Case Law: Njuguna v. Kihika (2015) eKLR

This case involved a dispute over the completion date. The court held that the completion date is a material term of the contract and that the buyer is entitled to terminate the contract if the seller fails to complete the sale by the agreed-upon date.

Conclusion

A Real Estate Sales Contract is a crucial document that protects the interests of both the buyer and the seller. It is essential to ensure that the contract is drafted carefully and includes all necessary clauses to avoid any disputes or misunderstandings. The standard conditions of sale developed by the Law Society of Kenya provide a useful framework for drafting a Real Estate Sales Contract.

TLDR

A Real Estate Sales Contract is a legally binding agreement between a buyer and a seller outlining the terms and conditions for the sale of a property. It is essential to ensure that the contract is drafted carefully and includes all necessary clauses to avoid any disputes or misunderstandings. The standard conditions of sale developed by the Law Society of Kenya provide a useful framework for drafting a Real Estate Sales Contract.

Sample Real Estate Sales Contract

REAL ESTATE SALES CONTRACT

This Real Estate Sales Contract ("Contract") is made and entered into this [Date] by and between [Seller Full Name], residing at [Seller Address] ("Seller"), and [Buyer Full Name], residing at [Buyer Address] ("Buyer").

WITNESSETH:

WHEREAS, Seller is the owner of the property located at [Property Address] ("Property"); and

WHEREAS, Buyer desires to purchase the Property from Seller;

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows:

1. SALE OF PROPERTY

Seller agrees to sell and convey to Buyer, and Buyer agrees to purchase from Seller, the Property, subject to the terms and conditions of this Contract.

2. PURCHASE PRICE

The purchase price for the Property shall be [Purchase Price] (Ksh. [Purchase Price in Numbers]).

3. PAYMENT TERMS

Buyer shall pay the purchase price as follows:

[Deposit Amount] (Ksh. [Deposit Amount in Numbers]) shall be paid by Buyer to Seller upon the execution of this Contract.
The balance of the purchase price shall be paid by Buyer to Seller upon the completion of the sale.

4. COMPLETION DATE

The sale of the Property shall be completed on or before [Completion Date].

5. POSSESSION

Buyer shall take possession of the Property upon the completion of the sale.

6. CONDITIONS PRECEDENT

The completion of the sale shall be subject to the following conditions precedent:

Buyer shall obtain financing for the purchase of the Property.
Buyer shall conduct a property inspection of the Property.
Seller shall provide Buyer with a clear title to the Property.

7. REPRESENTATIONS AND WARRANTIES

Seller represents and warrants to Buyer that:

Seller is the lawful owner of the Property.
The Property is free and clear of any encumbrances.
The Property is in good condition and habitable.

8. DEFAULT AND REMEDIES

If either party defaults on this Contract, the non-defaulting party shall have the right to:

Terminate this Contract.
Seek damages.
Seek specific performance.

9. DISPUTE RESOLUTION

Any dispute arising out of or relating to this Contract shall be resolved by [Dispute Resolution Method].

10. GOVERNING LAW AND JURISDICTION

This Contract shall be governed by and construed in accordance with the laws of Kenya. Any dispute arising out of or relating to this Contract shall be subject to the exclusive jurisdiction of the courts of Kenya.

11. ENTIRE AGREEMENT

This Contract constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous communications, representations, or agreements, whether oral or written.

12. AMENDMENTS

This Contract may be amended only by a written instrument signed by both parties.

13. WAIVER

No waiver of any provision of this Contract shall be effective unless in writing and signed by both parties.

14. SEVERABILITY

If any provision of this Contract is held to be invalid or unenforceable, such provision shall be struck and the remaining provisions shall remain in full force and effect.

15. NOTICES

All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered personally, sent by certified mail, return receipt requested, or sent by overnight courier service, addressed as follows:

If to Seller:

[Seller Full Name] [Seller Address]

If to Buyer:

[Buyer Full Name] [Buyer Address]

IN WITNESS WHEREOF, the parties have executed this Contract as of the date first written above.

[Seller Signature]

[Buyer Signature]

Sources