5 Essential Elements Of A Contract Of Sale
5 Essential Elements Of A Contract Of Sale: Buying Property In Zambia
The contract of sale is an essential part of the process when buying property in Zambia. The contract of sale is a formal document outlining terms and conditions by which a seller agrees to sell and a buyer agrees to buy a property described in the document. The contract is signed by both parties after a final draft is agreed upon by the parties involved and is also witnessed by third parties from both the seller and the buyer. The following are some key essential elements of a contract of sale that you should consider when drafting your document;
- Two Parties
A key requirement for any contract is that there must be at least two parties to the contract of sale. One party should be the seller with the offer to the other, the buyer. The buyer accepts the offer from the seller thereby making a valid contract between the two parties. So, the agreement is made when there is an offer from one party to another and the receiving party accepts the offer from the offering party. Two parties to a contract!
- The Offer
The second essential element of the contract of sale is that it must state exactly what the seller has offered to the buyer. This of course is what the buyer has accepted from the seller. In this article, our focus is real estate, this includes land and anything development on the land. A full description of the offered real estate is well defined in any valid title deed in Zambia.
- Transfer of Ownership Rights
In a contract of sale, ownership rights over the defined real estate are transferred from the seller to the buyer. There should therefore be a clause to this effect to transfer the ownership rights from the seller to the buyer. Transfer of ownership in real estate means “all ownership rights” of the land and anything developed on it.
- Price for the promise
The price is the consideration for the contract of sale which should be paid to the seller by the buyer. For a sale to take effect and ownership to be transferred under a valid contract of sale, a price in terms of monetary exchange should be in place. This contract price is also used for property transfer tax purposes.
If the ownership of real estate is transferred for any consideration other than money, that will not be a sale but an exchange or a gift.
- Terms and Conditions
Lastly, a contract of sale for real estate in Zambia is subject to the Law Association of Zambia (LAZ) general conditions of sale (2018*). Additional terms and conditions may be specified to suit agreed terms under which the contract is entered into by the parties involved. The terms and conditions are key in that they serve as a benchmark for how the transaction is done, who is responsible for what and most importantly, timelines as estimated.
The terms and conditions should take note of the following;
- Which party will pay property transfer tax, consent, etc?
- Who pays any outstanding liabilities on the property, e.g. property rates, council rates, water bills, etc?
- Who carries out or pays for conveyancing?
- When are transactions expected and when will should the transaction be completed?
- What happens when there are delays in scheduled payments or processes?
Having these important questions addressed in the contract of sale terms and conditions makes for a smooth transaction and avoids any potential misunderstandings later. Your property consultant or agent should be able to guide and provide you service through the entire process.
While the process is fairly simple and straight forward, it does require some time and may call for a dedicated expert hand. If you need help in buying, selling or conveyancing of real estate in Zambia, do get in touch, we’ll gladly provide help.