After agent guidance there can be some haggling over price and then the terms and conditions are written and signed.
Such written terms and conditions should be stated as “subject to contract”. This avoids the offer becoming binding, at a time when neither party has had legal advice.
An agreement format approved by the Bermuda Bar Association is often used for land transactions. This agreement incorporates standard terms and conditions known as the “general conditions”. The agreement details additions to and deletions from those general conditions.
Use of an approved agreement allows agents and attorneys to efficiently process transactions, reducing cost and delay.
Until a binding agreement exists, there is uncertainty and either party can withdraw from a proposed transaction.
In a busy market, a buyer can be “gazumped”; this means the seller accepts an offer from another buyer, so the original buyer loses the deal. In a slower market, a seller may want to “lock in” a buyer as soon as possible.
For proper advice and to avoid conflict of interest, a seller and buyer should ideally each have separate attorneys.
The agreement is drafted by either the seller’s agent or attorney and is based on the terms and conditions of the “in principle” offer. If drafted by the agent, the seller’s attorney reviews the agreement.
The buyer’s attorney then reviews the agreement for the buyer. It is important each party is aware of their respective obligations.
The agreement includes:
- names and addresses of the seller, buyer and agent;
- details of the seller’s and buyer’s attorneys;
- an exact description of the land;
- if chattels (typically items such as stove, fridge/freezer, cook top, dishwasher, washer and dryer) are included (or not) and the condition of them;
- the deposit (typically ten per cent) and whether paid to the seller’s agent or attorney;
- the purchase price and how it is to be paid;
- sales commission (typically five per cent of the price) and who pays it;
- the closing date (typically 30 days after the date of the agreement, unless a special condition is required such as a license under the Immigration Act, for an international buyer); and
- any other special conditions such as the buyer receiving a satisfactory mortgage offer, a surveyor staking the land and/or a license under the Immigration Act (for an international buyer). If the special condition is not met the agreement may be terminated and the deposit returned to the buyer.
General conditions specify the steps each party is to take after the agreement becomes binding. For example, the buyer’s attorney will inspect deeds and arrange searches with the land title registration office and the planning department.
The buyer’s attorney also prepares the land transfer document, arranges discharge of any mortgage over the land and pays the net purchase price to the vendor’s attorney at closing.
Additionally, general conditions specify what happens and who is liable, if for example a party does not comply with contracted obligations. This can result in a buyer losing a deposit, or a seller being ordered to close by a court.
After the parties, their agents and attorneys agree wording, signature versions of the agreement are prepared.
The agreement becomes a legally enforceable contract only after two conditions are met — the seller and buyer both sign it, and the deposit is paid to the appropriate party (known as “stakeholder”). There is no cooling off period in Bermuda.
Often, agreement wording allows for PDF and photographed versions of signatures exchanged by email to be valid. This can avoid delay and helped during Covid-19 lockdowns and quarantines.
The agreement attracts stamp duty of $25 on the original and $1 for each duplicate.
A legally binding agreement is the first formal stage of a land transaction. Keys are not exchanged and possession of the land is not given until closing.
If you are considering entering into a land transaction, it is always advisable to seek legal advice from an attorney expert in the area.