Sale and Purchase Agreement

Once your offer has been accepted by the vendor, you should proceed as quickly as possible with the formal sales contract. Until this document has been signed by all parties, and you have put down your deposit, there is nothing to stop the vendor from walking away from the deal. Though gazumping is rare in Bermuda, you should be aware it could happen.

Your first step is to select a lawyer to act for you in the transaction. As the buyer, you can choose the lawyer you want to convey the title of the property. Your lawyer will also help negotiate the sales contract and advise you on the transaction. There are a number of good conveyancing lawyers on the island but if you need help finding one, My-Bermuda-House will be pleased to assist.

In Bermuda, the sales contract is formally known as the Sale and Purchase Agreement, and in most cases it is based on a standard Bermuda Bar Association Agreement. If My-Bermuda-House is the real estate agent, we will prepare an initial draft which we will forward to both parties' lawyers for further action. Ultimately, however, responsibility for preparing the document lies with the vendor's lawyer. He will prepare and forward a draft document to your lawyer for comment. This draft will include details about both the seller and the buyer, will describe the property to be conveyed and will list the general and special conditions that the vendor wishes to attach to the transaction.

The draft contract will also contain a legal description and lot plan of the property, which are required for your lawyer to conduct a title search. A titile search will reveal, for example, planning consents granted for the property or any easements or other clouds on the title and will demonstrate that a continuous chain of ownership exists. Typically, your lawyer will also undertake a search at the Registry General and the Supreme Court to confirm that there are no outstanding mortgages or judgments against the vendor or any predecessor in title.

You will want to consider with your lawyer whether there are any special conditions that you wish to attach to the Sale and Purchase Agreement. For example, a sales contract in Bermuda typically contains a clause to the effect that the purchaser has satisfied himself as to the condition of the property. Property sales in Bermuda are on a Caveat Emptor basis. So you may wish to stipulate that a structural survey be undertaken by a qualified professional as a special condition in the sales agreement. Among the most common special conditions included in Sale and Purchase Agreements are:

• Financing: most buyers require a mortgage from their bank to purchase a home. If so, you will probably need fourteen (14) days to confirm that your bank will lend you the money you need to purchase the property in question - even if you have been pre-approved. Be sure to inform the bank of the closing date specified in the Sale and Purchase Agreement.
• Structural Survey: although quite rare in Bermuda, the requirement for a structural survey is a prudent step in older properties that have not been rewired or replumbed for many years, where termite damage is evident, or where the site may be steeply sloped.
• Boundary Survey: it is becoming very common to ask the vendor to restake the property to confirm that there are no encroachments on the property.
• License: For non-Bermudians, the issue of a license to acquire the property by the Minister of Labour, Home Affairs and Public Safety is an essential condition to completion. It is not uncommon for the grant of a license to take between 4 and 6 months, so specifying this condition will impact the closing date.

When the terms and special conditions have been agreed between the two lawyers, the contract is ready for execution. The normal process is for the purchaser to sign first followed by the seller and finally the agent. At this time, you are required to pay a deposit, normally 10% of the purchase price. This money is yours and kept by the real estate agent or the vendor's lawyer in a segregated account until the purchase is completed or cancelled. Once the deposit is paid, the property is effectively off the market.

Following the contract signing, both purchaser and vendor are obliged to act in good faith to satisfy all general and special conditions stated in the contract that apply to him/her. If a condition cannot be met by either party, it must be renegotiated or the contract will be rescinded and the sale cancelled. In the event this occurs, you will be entitled to your deposit back. Assuming all conditions are met, the Sale and Purchase Agreement is said to become "enforceable" on the parties, meaning that it is now a binding contract between you and the seller. At this point, your deposit becomes non-refundable and is paid to the seller in the event of purchaser default.

At signing, your lawyer will also notify the Department of Planning, which will conduct its own review to determine whether any illegal development has taken place on the property. This review should always take place prior to closing. Should the Department uncover any illegal development or title defect, you may rescind the contract and recover your deposit.