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What should be included in a Real Estate Finders Fee Agreement?
Introduction
A Real Estate Finder's Fee Agreement is a legal document that outlines the terms and conditions under which a finder (or intermediary) will be compensated for identifying and introducing a potential real estate transaction to a buyer or seller. This agreement is crucial in ensuring that all parties involved understand their roles, responsibilities, and the compensation structure. In Kenya, such agreements must comply with various legal provisions, including those found in the Law of Contract Act, the Land Act, and the Land Registration Act.
Table of Contents
Legal Framework
1.1 Law of Contract Act
1.2 Land Act
1.3 Land Registration Act
Key Elements of a Real Estate Finder's Fee Agreement
2.1 Identification of Parties
2.2 Description of Services
2.3 Finder's Fee
2.4 Payment Terms
2.5 Confidentiality
2.6 Term and Termination
2.7 Representations and Warranties
2.8 Dispute Resolution
2.9 Governing Law
2.10 Miscellaneous Provisions
Conclusion
1. Legal Framework
1.1 Law of Contract Act
The Law of Contract Act (Cap 23) is the primary legislation governing contracts in Kenya. It outlines the general principles of contract law, including the formation, performance, and enforcement of contracts. Key sections relevant to a Finder's Fee Agreement include:
Section 3: This section stipulates that contracts must be in writing and signed by the parties involved.
Section 10: This section outlines the essential elements of a valid contract, including offer, acceptance, consideration, and intention to create legal relations.
1.2 Land Act
The Land Act (No. 6 of 2012) governs the management and administration of land in Kenya. It includes provisions relevant to real estate transactions, such as:
Section 38: This section requires that any disposition of an interest in land must be in writing and signed by the parties.
Section 44: This section outlines the requirements for the registration of interests in land.
1.3 Land Registration Act
The Land Registration Act (No. 3 of 2012) provides for the registration of land and property transactions. Relevant sections include:
Section 14: This section mandates the registration of any instrument affecting land.
Section 26: This section outlines the conclusive evidence of proprietorship provided by a certificate of title.
2. Key Elements of a Real Estate Finder's Fee Agreement
2.1 Identification of Parties
Names and Addresses: Clearly state the full names and addresses of the parties involved, including the finder and the principal (buyer or seller).
Contact Information: Include contact details such as phone numbers and email addresses.
2.2 Description of Services
Scope of Services: Define the specific services the finder will provide, such as identifying potential properties, introducing buyers or sellers, and facilitating negotiations.
Exclusions: Specify any services that are not included in the agreement.
2.3 Finder's Fee
Amount or Percentage: Clearly state the amount or percentage of the transaction value that constitutes the finder's fee.
Conditions for Payment: Outline the conditions under which the fee will be paid, such as the successful completion of a sale or lease agreement.
2.4 Payment Terms
Payment Schedule: Specify when the finder's fee will be paid, whether in installments or as a lump sum.
Method of Payment: Indicate the method of payment, such as bank transfer, cheque, or cash.
2.5 Confidentiality
Confidential Information: Define what constitutes confidential information, including property details, financial information, and negotiation terms.
Obligations: Outline the obligations of both parties to maintain confidentiality and the consequences of a breach.
2.6 Term and Termination
Duration: Specify the duration of the agreement, including the start and end dates.
Termination Conditions: Outline the conditions under which the agreement can be terminated, such as mutual consent, breach of contract, or completion of the transaction.
2.7 Representations and Warranties
Finder's Representations: Include representations and warranties made by the finder, such as having the necessary skills and experience to perform the services.
Principal's Representations: Include representations and warranties made by the principal, such as having the legal authority to enter into the agreement.
2.8 Dispute Resolution
Negotiation: Encourage the parties to resolve disputes through negotiation.
Mediation or Arbitration: Include provisions for mediation or arbitration as alternative dispute resolution methods.
Jurisdiction: Specify the jurisdiction and venue for any legal proceedings.
2.9 Governing Law
Applicable Law: State that the agreement will be governed by the laws of Kenya.
Compliance: Ensure that the agreement complies with all relevant Kenyan laws and regulations.
2.10 Miscellaneous Provisions
Entire Agreement: Include a clause stating that the agreement constitutes the entire understanding between the parties and supersedes any prior agreements.
Amendments: Specify that any amendments to the agreement must be in writing and signed by both parties.
Severability: Include a severability clause stating that if any provision of the agreement is found to be invalid, the remaining provisions will remain in effect.
Conclusion
A well-drafted Real Estate Finder's Fee Agreement is essential for ensuring clarity and preventing disputes between the parties involved. By including the key elements outlined above and ensuring compliance with relevant Kenyan laws, parties can create a robust and enforceable agreement. Always consult with a legal professional to ensure that the agreement meets all legal requirements and adequately protects the interests of all parties involved.
Answered by mwakili.com