Knowledge … Shared … Multiplies
Purchasing a property to make your home is one on the biggest financial decisions in your life. It is therefore good to have at least a basic idea of the process that should be followed to ensure that at the end of the day you get what you paid for.
Legal representation
Given the sum of money likely to be involved, I would definitely recommend that you engage a lawyer to represent you. This is even more important if you have to obtain a mortgage to purchase the property. In this case, in addition to engaging with the owner of the property, you also have to engage with the bank.
Should you have your own lawyer or share a lawyer with the owner of the property? It is not unlawful for the same lawyer to represent both you and the vendor. Neither is it unlawful for the same lawyer to represent you and the bank. However, the Legal Profession Act mandates that this should only happen if you and the vendor (or the bank) both agree to be represented by the same lawyer. Moreover, the consent to be represented by the same lawyer must be given by each of you in writing. This must be informed consent. It must be given after you have obtained independent legal advice. This means that you should obtain advice on the wisdom of joint representation from a separate lawyer.
Joint representation might be ok when you are purchasing from a close friend or family member. Outside of that, I would strongly recommend that you have your own lawyer.
Agreement for sale
The legal process of purchasing your desired property should commence with negotiation and signing of an agreement for sale. The process concludes with the recording of your deed in the Deeds and Land Registry. By recording your deed you are giving the entire world notice that you are now the owner of the property which you have purchased.
The agreement for sale is usually prepared by the vendor’s attorney. It would be then passed to your attorney for him to review. There may be some back and forth between the vendor’s attorney and your attorney about certain terms in the agreement. Your lawyer may involve you in that process of negotiating the terms. Once your attorney and the vendor’s attorney have settled the terms, the agreement would be passed to you for signing. After you sign the agreement it would be returned to the vendor for them to sign. Once both you and the vendor sign, there is a binding agreement for you to buy and for the vendor to sell the property.
There are certain basics of an agreement for sale. Your lawyer would ensure these are present in the agreement. Your name. The name of the vendor. A proper description of the property. And the price. All these would be present.
Purpose of agreement for sale
The role of the agreement for sale is to create binding obligations and rights for both you and the vendor. If you comply with the terms of the agreement and the seller refuses to sell, you can go to court to enforce the agreement. You may get an order directing the vendor to sell the property. Or you may get compensation for breach of the agreement. Likewise, if the vendor performs all his obligations and you refuse to buy, they can go to court to compel you to buy or to obtain compensation for your refusal.
Price: fixed price or per square foot price?
The price for the property is one of the most important terms in an agreement for sale. If you are purchasing land you should consider whether to state the price as a fixed price, say, $43,560.00, or as price per square foot, say, $4.00 per square foot. This could be important if a subsequent survey of the land shows that the area of land you receive is more or less than that referred to in the agreement.
For example, the land you agree to buy is described in the agreement for sale in terms of the boundaries. It is also said to be 10,890 sq. feet. If a subsequent survey shows that the area is 11,000 sq. feet then if the price in the agreement is stated as per square foot, the total price would have to be increased to $44,000.00. And if the area is shown to be 10,000 sq. ft., the price would have to be reduced to $40,000.00.
If the price in the agreement is a fixed price, then once the boundaries described in the agreement are not in question, it is arguable there would be no adjustment in the price whether a subsequent survey shows the area is greater or lesser than that in the agreement.
Deposit
A customary term in an agreement for sale is one requiring payment of a deposit. It is not a legally required term. But it is often included in agreements for sale. The deposit is an advance payment on the purchase price. More importantly, the deposit is intended to show that the purchaser means business. The usual deposit in Grenada is 10% of the purchase price. This sum is paid over to the vendor’s attorney.
Most agreements would say that the vendor’s attorney holds the deposit as a “stakeholder”. Pay attention to that word. It means that the vendor’s attorney does not hold the deposit on behalf of the vendor but on behalf of both parties. This sounds as a conflict of interest but it is accepted. It can also be helpful to you as purchaser. In case of dispute the lawyer has to hold on to the deposit until the dispute is settled by a court or other legal process. If the lawyer was not a stakeholder but was holding the money only for the vendor, they would have to hand over the deposit to the vendor. If later the dispute was settled in your favour you would have to go through the trouble of recovering the deposit from the vendor.
Closing date
It is customary in Grenada for a period of 90 days to be allowed for completing the sale. On completion of the sale you would pay the purchase price (or the remainder if you paid a deposit). And the vendor would sign and deliver up a proper deed to you.
Be very careful with a reference in the agreement for sale that “time is of the essence”. This term can be a poison pill. It means that once the vendor is ready, willing and able to complete you have to be ready to deliver the price when the date for completion stipulated in the agreement arrives. If you are unable, the vendor is entitled to terminate the agreement and keep your deposit.
In the absence of those five words the vendor cannot terminate the agreement and keep your deposit, just because you can’t deliver the price on the day stipulated for closing the deal. They have to give you notice demanding that you complete the deal within a stipulated time. This stipulated time must be reasonable. It is only if you fail to come up with the price within this extended time that the vendor can terminate the agreement and keep your deposit.
The issue of the closing date should not be taken lightly. In particular if you have paid a deposit. I have friends who 15 years ago lost a deposit of $87,000.00 because the date for closing arrived and they couldn’t come up with the rest of the money to close a deal.
They had agreed to a date for closing expecting to get the money from a bank in time to close. However, the bank with its own processes, over which my friends had no control, did not come through on time.
There are also cases in which the bank is prepared to lend the money to buy land and to put down a building. Planning permission is required to construct the building. The bank in this situation would not approve the loan until you get planning permission. You have no control over how long the planning authority would take to clear your plan.
In cases as these, where availability of the money to close the deal depends on factors outside of your control, the sensible thing is to make the closing date subject to securing finance or subject to planning permission. Your lawyer should be able to insert an appropriate term in the sale agreement to protect your deposit in case you cannot meet a closing date due to factors outside of your control.
Vacant possession
Another issue that might be of importance to you is that of vacant possession. If you are buying a house to live in you would want it as soon as you buy it or shortly thereafter. This must be clear in the agreement. In this way the vendor would know that they have to do what has to be done to give you vacant possession on closing of the deal or whenever. This may involve moving out their stuff, or giving notice to tenants to vacate the property.
Land & what else? Put it in an inventory
Under Grenadian law land is considered to be the earth and anything attached to it. Hence if you are purchasing land with concrete buildings on it, it is not necessary to specifically mention in the agreement for sale that you are also purchasing the buildings. On the other hand moveable property, also referred to as chattels, do not come with the land.
But you may want to purchase the house together all the furniture, the fridge, the TV and the books in the library. In this case you need to specify in the agreement for sale exactly what comes with the house. This can be done by including a schedule to the agreement listing all the moveable property that comes with the house. This would, for example, avoid dispute later over the painting in the living room which you thought was coming with the property but which the vendor had no intention to part with.
This article is for general information purposes only. Its contents do not constitute legal advice. Before you act on any matter in this article, seek advice from an attorney-at-law.
Joseph Ewart Layne is the CEO of JEL Professional Solutions. He is a graduate of Hugh Wooding Law School, holding the LEC with Merit; he holds a LLB (Honours) and a LLM (with Merit) (Corporate & Commercial Law) from London University and a LLM (Legislative Drafting) from UWI, St. Augustine. He also holds a BSc. (First Class Honours) in Applied Accounting from Oxford Brookes University and is an ACCA Affiliate.
JEL Diaspora Management which is owned by JEL Professional Solutions offers an attorney-client management service including recommending and engaging attorneys on behalf of clients and managing the attorney-client relationship. Other services offered by JEL Diaspora Management can be viewed on the Services page.