Phuket Property: Sale and purchase agreements – what is important to know?
PHUKET: A property buyer or seller scrutinizing sales documentation may wonder what provisions should be part of a sales contract.
A sales agreement typically starts with a description of the parties who wish to enter into the agreement supported by passport copies or company documentation providing full details of the parties. A preamble or recitals may follow setting forth specific facts which form a basis or reason for the transaction contemplated under the agreement.
Certainly a precise description of the property should be contained in the agreement providing the parties with a clear understanding of what this transaction is all about. Such description should be accompanied by relevant documentation pertaining to the property and attached to the agreement such as title deed, house registration, construction permit or other relevant documents.
In case that furniture or equipment would come with the property, then a detailed itemization of such should also be enclosed to the agreement.
Maybe the most important part of the agreement is the terms of payment. The terms of payment should stipulate the total purchase price, set out the installments payable, and respective due dates. In case of sale of a completed property a deposit may be payable on signing of the agreement; the balance on title transfer.
However, a wary buyer may withhold full payment until title transfer at the land office. Off-plan transactions typically provide for payment in accordance construction progress with a final payment due either on delivery or transfer of the property to the buyer.
Furthermore, the method of payment such as bank transfer or cheque payment may be agreed. In case of a bank transfer, the bank account of the seller should be provided in the agreement for clarification purpose. A seller may further promise that he or she shall collect official documentation from its bank upon receipt of payment and provide them to the buyer along with proper receipts.
Furthermore, a seller may be required to provide comprehensive contractual warranties and representations in favor of its buyer. Such typically include the seller’s valid title to a property free and clear of encumbrances or any other third party rightas well as unrestricted access.
A seller may further warrant that no litigation or investigation in the property is pending before any court or government agency. A seller should further warrant that no management fees, utility expense and property taxes levied against the property are outstanding.
Another important point is the closing costs, such as the parties’ tax and fee liabilities incurring in connection with the registration of title transfer at the land office. In general, sellers should pay all taxes; transfer fees may be split between the parties, however, this is subject to negotiation.
Last, but not least, a fair and balanced default provision should be agreed on, which provides reasonable notice periods and an effective default remedy. For the case that a dispute would occur, a dispute resolution mechanism should be described in the agreement.
Apart from this, further miscellaneous provisions may be agreed on depending on the parties’ individual requirements and the specifics of a transaction.
As always, before signing any sales documentation and/or making payments, either party should seek professional advice to ensure that the parties’ interests will be sufficiently protected.
This article has been written by International Law Office Patong Beach Co., Ltd., a Phuket based law firm, for informational purposes only. In case of inquiries, please contact Michael Greth michael@ilo-phuket.com or phone 076-22219-(1-5).
— International Law Office Patong
