Purchase and Sale Agreement: Everything You Need to Know
When buying or selling a property, a common thing to do is to sign a sale agreement. By private written agreement, the seller and the buyer of the property seal their agreement of sale. In this article, you will find everything you need to know about a sale agreement, the terms, clauses and commitments:
Should you Sign a Purchase and Sale Agreement?
Unlike the notarial act, the purchase and sale agreement is not necessary to formalize a real estate deal. But usually, the old and new owners prefer to go through this step. Why ? Because the purchase and sale agreement is a written proof of their arrangement. It is considered final and commits both parties to conclude the sale under specific conditions.
This pre-contract is a protection in case one of the parties changes their decision before meeting the notary.
Conditions and Clauses of the Purchase and Sale Agreement
In practice, signing an agreement involves two conditions. The first is that the seller and the buyer must have the legal capacity to sell and respectively to buy the property. The second is that the property and the price must be determined.
Then, some elements are compulsory in a purchase and sale agreement:
- The names and addresses of the parties
- The exact designation of the property
- The sale price
- The payment terms
It is also common to include a suspensive condition, which suspend the effects of the agreement until they are all fulfilled. The most known suspensive condition is the bank loan granting. In this case, there is a delay, which prevents the seller from waiting forever.
In addition, a penalty clause allows one of the parties to terminate the purchase and sale agreement, by paying a lump-sum compensation. The amount is often set at 10% of the selling price.
Finally, the parties may include the name of the notary who will formalize the transaction and set a time limit. Moreover, even if the buyer is usually in charge of paying the notary fees, it is better to specify it in the agreement. And in the case of the two parties not agreeing on the choice of the notary, the one paying for the costs may pick the notary they want.
Furthermore, it is preferable to register the purchase and sale agreement with the AED (Registration and Domains Administration) within three months after signing it. Even though this registration has a fee, it is not mandatory and allows to secure the agreement.
What Are The Commitments?
A purchase and sale agreement is a definitive and binding contract, which has real legal effects. In the event of non-compliance by one of the parties, the other can therefore appeal to court to assert their rights. Whether it is a fault or a negligence, the party at fault may then pay a compensation - or an amount equal to the damage, if no compensation has been fixed in the agreement.
Finally, you must know that unless it is stated differently in the agreement, this one constitutes sale and amounts to a true sale once the private written agreement is signed. You have to be cautious before signing a purchase and sale agreement!