Sale and purchase are a contractual relation under which a party called “seller” agrees to transfer the right of ownership or the right over the property to the other party called “buyer” who agrees to pay the sale-purchase price as consideration. What should be written in a contract for sale and purchase of immovable property? This article will discuss the items or points to be included in the contract.
The contract should include identity and information of the seller and buyer who are the parties to the contract.
2. Description of the immovable property
It is important that the contract provides the detailed information of the immovable property which is the object of the sale-purchase contract. The immovable property can be building or construction on the land or vacant land. The location and title deed or certificate of ownership are also stated in the contract to ensure that the immovable property mentioned in the contract is the one the parties agreed for the sale-purchase transaction.
3. Sale-purchase price
The parties should decide and state the sale-purchase price in the currency as agreed in the contract. It is important to clearly decide whether the purchase price also covers all applicable taxes and all registration fees and expenses, such as legal service fees, arising from or in relations to the sale-purchase transaction under the contract. The parties should clarify if the price mentioned in the contract only covers the price of the sold immovable property while the parties have other arrangements or agreements on the payment of the applicable taxes and related expenses as mentioned above. For instance, the parties can agree that the buyer is responsible for paying tax applicable to ownership transfer while the seller is responsible for the payment of registration fees and other charges in relation to the registration process for ownership transfer.
4. Payment of sale-purchase
Because registration of ownership transfer takes longer period (approximately more than one month), the parties in most cases agree to payment and receipt of the sale-purchase price into 2 stages or even more stages, depending on the parties’ agreement. In the first stage, the buyer is required to pay partial amount (for example 30% or 50%) of the total sale-purchase price to the seller on the date the parties sign the sale-purchase contract and execute other documents as required for the registration of ownership transfer. In the second stage, the buyer is required to pay the remaining amount of the sale-purchase price to the seller after the registration of ownership is finished. This arrangement is a means of risk mitigation.
In practice, there are cases where the buyer deposits some money with the seller before the parties sign the sale-purchase contract. This deposited amount is included as part of purchase price to be paid by the buyer in the first stage purchase price payment. For example, the total purchase price of a land is $100,000. The buyer deposits $5,000 and is required to pay $30,000 to the seller when both parties sign the contract. Accordingly, as buyer already paid the deposit of $5,000, he or she only needs to pay $25,000 to the seller on the date of signing of the contract.
5. Registration of ownership transfer
The payment of the sale-purchase price is the main obligation of the buyer while ownership transfer over the property is the main obligation of the seller. The parties can agree to fix the period for completion of the registration of ownership transfer. However, there are also cases where the parties do not set the period requiring the completion of the said registration because to some extent the registration of ownership transfer is under the responsibility and management of the cadastral authority, which is somehow beyond the control of the parties.
Anyway, it is up to the agreement of the parties to decide the time frame for registration of ownership transfer to avoid unjust delay in registration of ownership transfer.
6. Handover of the immovable property
The contract may include the process and date when the immovable property is handed over to the buyer. Most of the cases, the seller agrees to hand over the immovable property to the buyer after the buyer has fully paid the sale-purchase price.
Other than the items and points mentioned above, the parties can include other matters, obligations, warranties, undertakings or arrangement in their contract to ensure that their rights are protected. Please note that under the Civil Code of Cambodia, Article 336 (2), the sale-purchase contract for the immovable property is required to be executed in the form of notarized document. This text only discusses the content of contract while it does not discuss the form required for the contract for sale-purchase of immovable property.
This text is not legal advice or opinion.
(Read relevant article What should be included in a contract?)