STEP 3: THREE CONTRACTS TO BE FAMILIAR WITH

Contract of reservation : Generally, this contract is used early in a housing development because it does not commit sellers in the case that a project cannot be completed. In such case, the developer simply returns the buyer’s deposit without interest.

Sale and purchase agreement : This contract defines the terms of transfer of ownership and is legally enforceable upon signing.

Contract of sale : This contract tends to be completed after the sale and purchase agreement is signed. If it isn’t registered at the land registry office, it does not come into legal effect if a contract is cancelled by either the seller or buyer.

Once the transfer of ownership has been completed at the Land Registry Office, an official will give the buyer a title deed and contract of land sale form (T.D.13).

The Contract of reservation is a new form of contract that real estate sellers have defined to replace sale and purchase agreement to avoid limitations in real estate sales that can entail risks to buyers.

In the housing estate business, it is a normal procedure for entrepreneurs to purchase the land in advance and then request permission from government to develop it. Once permission is granted, entrepreneurs can advertise sale openings. However, developers can avoid legal restrictions by opening units for sale even prior to purchase of the land or if already purchased but prior to receiving permission to develop it. In these cases, they use a Contract of reservation instead of a sale and purchase agreement.

When a buyer indicates willingness to buy real estate, they must pay a reservation fee for which the seller will issue a reservation receipt. This reservation contract will specify that the buyer must pay installments of the down payment and specify the conditions when sellers have permission from government to develop. Then the purchaser must sign the sale and purchase agreement that often contains conditions specifying that if the agreement is not signed, it will be considered a contract cancellation and any deposits will be forfeited.

If reservation fees or deposits have been paid but the developer does not proceed with the project or fails to receive government permission to develop, the buyer can request a refund and interest on money deposited. In this situation, transfer of ownership does not take place.

The sale and purchase law does not specify that the agreement must be in writing because if a deposit or repayment of some part of fees has been made, one can legally sue for restitution. Therefore, if an agreement is not in writing but the buyer deposits some part of the fees to the developer but does not receive transfer of the property within the agreed transfer date, the buyer can sue the seller to force transfer of the land title despite there being no written agreement.

Home buyers are obligated to pay all fees according to the terms in a purchase agreement and sellers are obligated to transfer ownership of condominiums or houses accordingly. If buyers default, the seller can cancel the agreement and has the legal right to expropriate any monies put down as deposit.

On the other hand, if the developer defaults, the home buyer can sue for title of ownership of the property or cancel the agreement and request a refund with interest of 7.5% per year from the time the money was paid.

By law, a Contract of sale must be in writing and will become effective when the purchase is registered at the Land Registry office. The title to the property is transferred when sale is registered at the Land Registry.

If a property is traded without registration, there is no legal protection and a purchaser may have to ask for refund of monies paid.

The sale and purchase agreement is also a contract of sale. The form of the sale and purchase agreement is simpler than the sale contract as for example, it specifies terms of transfer of ownership after the date of signing the contract.

Documents required : Copy of buyer’s identity card and copy of house registration certificate.