Sale and Purchase Agreement

As the seller, you can choose the lawyer you want to act for you in the transaction. Your lawyer will draft the sales contract and advise you on the transaction. There are a number of good conveyancing lawyers on ths 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. Once the deal is agreed, My-Bermuda-House, as the real estate agent, will prepare an initial draft contract which we will forward to both parties' lawyers for further action. Ultimately, however, responsibility for preparing the document lies with your lawyer. He/she will prepare and forward a draft document to the buyer's 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 you wish to attach to the transaction.

The draft contract will also contain a legal description and plot plan of the property, which are required for the buyer's lawyer to conduct a title search. A title 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, the buyer's 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 you 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 stipulating the personal property that is included in the sale. 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, the buyer will probably need fourteen (14) days to confirm that his/her bank will lend money for the purchase in question - even if they have been pre-approved. Be sure that the buyer informs the bank of the closing date specified in the Sale and Purchase Agreement.
• Structural Survey: although still relatively rare in Bermuda, buyers are starting to request structural surveys especially in respect of 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 now very common for the buyer to request that the property be restaked to confirm that there are no encroachments on the property. We would, in fact, recommend that you undertake the staking prior to listing 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.

Many of these conditions are inserted at the request of the buyer, especially as property transactions are entered into on a caveat emptor basis. However, you should recognise that the more conditions you agree to, the more complex the transaction and the greater the risk of an obstacle arising to the closing. In situations where you have more than one offer, you may want to consider the number of conditions each buyer wishes to attach to the contract as a point of differentiation.

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, the buyer is required to pay a deposit, normally 10% of the purchase price. This money is kept by the real estate agent or your 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, the buyer will be entitled to his/her deposit back. Assuming all conditions are met, the Sale and Purchase Agreement becomes enforceable on the parties, meaning that it is now a binding contract between you and the buyer. At this point, the deposit becomes non-refundable and is paid to you 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, the buyer may rescind the contract and recover his/her deposit.