The Contract
Outcomes
1. Evaluate typical forms of acquisition contract and assess their suitability for your client’s
needs.
2. Understand and explain the purpose, structure and content of a typical conditional agreement
for sale.
3. Advise your client as to how a typical conditional agreement for sale would operate in the
event of problems which may arise before completion.
Practical points to note:
Deposit- the seller is likely to insist upon a 10% deposit, paid in full and buyer is likely to request the
deposit is held by the seller’s solicitor as stakeholder. Buyer may also insist that the interest on the
deposit is paid upon completion.
Vacant possession- will be important to a buyer and will want the contract to reflect this.
VAT- must be dealt with expressly, as if the contract is silent on it, the seller may elect to charge VAT
on the purchase price and the buyer will have to pay the additional sum, so check to see if the
purchase price is inclusive of VAT.
Third-party benefits- the seller will want to deal with the buyer alone and will want a clause that
prevents the buyer from assigning the benefit of the contract to a third party.
Bankruptcy and recission- the seller will want to ensure that there is a clause that will allow them to
rescind the contract if the buyer becomes bankrupt and allows the seller to quickly enter into another
sale agreement.
Planning permission- where there has already been planning permission granted, the buyer will
benefit from this. However, the copyright of the plans and specifications remain with the architect and
thus the buyer will want the contract to provide for the assignment of those plans.
If the land is sold without planning permission and the seller is aware that the buyer has an intention
of obtaining planning permission, the buyer may want to ensure that it is agreement that an overage
payment will be made to him to ensure that the value increase in the property is reflected to the seller
in the future.
Right to rescind if the buyer becomes insolvent
Ensure the contract provides for assigning of a licence for the use of plans and specifications-
the benefits of planning permission being automatically passed to the buyer. The buyer should ensure
the contract provides for the seller to assign him the rights and or licence to use copies
, TYPES OF CONTRACT
Conditional agreement proposed by the buyer where they do not want to lose the property to
another potential purchaser, but is anxious about the finances and is
currently not in the position to fully commit itself irrevocably to the purchase.
However, seller may be reluctant as there is no security of purchase, so
should enter if the conditional event is likely to happen
Conditional agreements may be useful when:
a) Planning permission for the site has not yet been obtained
b) Where the results of the buyer’s local search and enquiries of the
local authority have not yet been received
c) Where there is not currently vacant possession, and the buyer
requires the tenancy agreement to be terminated
d) Where the property is leasehold and the consent of the landlord is
required but that consent for assignment to the buyer has not yet
been obtained
The condition needs a degree of certainty, otherwise the whole
contract void (Lee-Parker v Izzet)
• Condition of satisfactory mortgage was too vague and thus the
court held it was void
• Obtain a mortgage that was satisfactory to the buyer was held to be
valid
• The contract should stipulate a date whereby the contract may
become unconditional and thus the conditions to be met and oblige
the party to inform the other that the contract has become
unconditional.
• Should set out what is required to be done, by whom and by when
in order for the contract to become unconditional
Upon receipt of the results, the buyer should notify the seller of 3
things: also see exemplar diagram
1. The buyer considers the results to be satisfactory- proceeds the
contract to completion
2. Considers the results unsatisfactory- contract become
unenforceable and should provide for return of deposit (subject to
appeals and independent surveyor)
3. Or the buyer may be prepared to waive the benefit of the condition
Option agreements- useful for Call option
development sites
gives the buyer the right within a specified time to serve notice upon the
landowner to transfer the property, either at the agreed price or at the
market value of the property at the time.
• The buyer can exercise this option, if they want to, or let it lapse if
the market conditions are no longer good enough for them.
• Granted for a non-returnable option fee- so the seller gets some
money even if it lapses and the buyer chooses not to follow through
with purchase
• Once the call option has been entered into- buyer has an equitable
interest in the land and must protect by registration of either Class
Outcomes
1. Evaluate typical forms of acquisition contract and assess their suitability for your client’s
needs.
2. Understand and explain the purpose, structure and content of a typical conditional agreement
for sale.
3. Advise your client as to how a typical conditional agreement for sale would operate in the
event of problems which may arise before completion.
Practical points to note:
Deposit- the seller is likely to insist upon a 10% deposit, paid in full and buyer is likely to request the
deposit is held by the seller’s solicitor as stakeholder. Buyer may also insist that the interest on the
deposit is paid upon completion.
Vacant possession- will be important to a buyer and will want the contract to reflect this.
VAT- must be dealt with expressly, as if the contract is silent on it, the seller may elect to charge VAT
on the purchase price and the buyer will have to pay the additional sum, so check to see if the
purchase price is inclusive of VAT.
Third-party benefits- the seller will want to deal with the buyer alone and will want a clause that
prevents the buyer from assigning the benefit of the contract to a third party.
Bankruptcy and recission- the seller will want to ensure that there is a clause that will allow them to
rescind the contract if the buyer becomes bankrupt and allows the seller to quickly enter into another
sale agreement.
Planning permission- where there has already been planning permission granted, the buyer will
benefit from this. However, the copyright of the plans and specifications remain with the architect and
thus the buyer will want the contract to provide for the assignment of those plans.
If the land is sold without planning permission and the seller is aware that the buyer has an intention
of obtaining planning permission, the buyer may want to ensure that it is agreement that an overage
payment will be made to him to ensure that the value increase in the property is reflected to the seller
in the future.
Right to rescind if the buyer becomes insolvent
Ensure the contract provides for assigning of a licence for the use of plans and specifications-
the benefits of planning permission being automatically passed to the buyer. The buyer should ensure
the contract provides for the seller to assign him the rights and or licence to use copies
, TYPES OF CONTRACT
Conditional agreement proposed by the buyer where they do not want to lose the property to
another potential purchaser, but is anxious about the finances and is
currently not in the position to fully commit itself irrevocably to the purchase.
However, seller may be reluctant as there is no security of purchase, so
should enter if the conditional event is likely to happen
Conditional agreements may be useful when:
a) Planning permission for the site has not yet been obtained
b) Where the results of the buyer’s local search and enquiries of the
local authority have not yet been received
c) Where there is not currently vacant possession, and the buyer
requires the tenancy agreement to be terminated
d) Where the property is leasehold and the consent of the landlord is
required but that consent for assignment to the buyer has not yet
been obtained
The condition needs a degree of certainty, otherwise the whole
contract void (Lee-Parker v Izzet)
• Condition of satisfactory mortgage was too vague and thus the
court held it was void
• Obtain a mortgage that was satisfactory to the buyer was held to be
valid
• The contract should stipulate a date whereby the contract may
become unconditional and thus the conditions to be met and oblige
the party to inform the other that the contract has become
unconditional.
• Should set out what is required to be done, by whom and by when
in order for the contract to become unconditional
Upon receipt of the results, the buyer should notify the seller of 3
things: also see exemplar diagram
1. The buyer considers the results to be satisfactory- proceeds the
contract to completion
2. Considers the results unsatisfactory- contract become
unenforceable and should provide for return of deposit (subject to
appeals and independent surveyor)
3. Or the buyer may be prepared to waive the benefit of the condition
Option agreements- useful for Call option
development sites
gives the buyer the right within a specified time to serve notice upon the
landowner to transfer the property, either at the agreed price or at the
market value of the property at the time.
• The buyer can exercise this option, if they want to, or let it lapse if
the market conditions are no longer good enough for them.
• Granted for a non-returnable option fee- so the seller gets some
money even if it lapses and the buyer chooses not to follow through
with purchase
• Once the call option has been entered into- buyer has an equitable
interest in the land and must protect by registration of either Class
