By Harold Ayodo
Purchasing property involves several legal steps that many first time buyers are unaware of.
The majority walk into law firms to request conveyancers (property lawyers) to draft them sale agreements to kick-start the process.
But the first document that should be drafted mainly by the lawyer of the buyer to that of the seller — is a letter of offer.
A letter of offer details out the main terms and conditions of the transaction to buy a house or plot. It is drafted before any payments are made and signed by both the buyer and seller.
A sale agreement stipulates the mutual consent of both parties and signed by them and their lawyers as witnesses.
It shows the mode of payment, period of transaction, details terms and conditions under which the sale is being made.
The letter of offer basically expresses intentions of the buyer to purchase property but is not a legal binding contract.
The intentions are spelt out clearly and simply for the seller to know exactly how the buyer wants to purchase the house or plot, and under what terms.
Unlike sale agreements that are littered with legal jargon that intimidate many people, the letter of offer is an easy read with five basic elements.
They normally include the name and address of the buyer and his/her conveyancer, address and description of the property.
The offer mainly includes the purchase price that the buyer is willing to pay, down payment, terms and conditions.
Clear stipulations
There should also be a clause that stipulates when the transaction should be completed and another that makes the letter of offer a non-binding document.
Others are the due diligence time - the period which, the lawyer of the buyer should take to perform official searches on the property.
A search is essentially an investigation of title of the property to ascertain the registered owner. Conveyancers insist on the results before drafting sale agreements.
No deposits on the home or land on sale should be paid before the seller is officially confirmed as the registered owner.
It is the responsibility of the lawyer representing the buyer to conduct the search to cushion the client from potential fraud.
Official searches establish the land reference number, registered owner, registration particulars, encumbrances and covenants.
It also shows whether the property is either freehold or leasehold to ensure whether land rent should be paid or not.
The advantage of starting off property transactions with the letter is also to allow for easy negotiations.
The seller’s lawyer can respond with alternate terms or a counter-offer without re-writing lengthy legal pages synonymous with lawyer.
A sale agreement can be drafted after the buyer has undertaken due diligence to inspect the property using professionals.
There are instances whereby terms and conditions change, especially when some aspects of the property were not disclosed to the buyer.
For instance, a registered valuer may produce a report that either lowers or shoots up the proposed price of the property.
A structural engineer may also say the house is in a worse condition than seen by the buyer. The buyer would eventually negotiate for a lower purchase price!
Open options
The buyer can also opt not to continue with the transaction before signing of the sale agreement without any recourse or punishment for breach of agreement.
Even as the letter of offer is an important primary document, some buyers who want to buy property hurriedly, instruct their lawyers to by-pass it.
But some of the buyers cannot be blamed as sellers often insist that they need the money urgently and would not undergo tedious legal processes.
The writer is an Advocate of the High Court of Kenya.
hayodo@standardmedia.co.ke
