MANY people have found themselves trapped in property transactions. Either they have been cheated or they have entered into sales and purchase agreements (SPAs) without a full understanding of what they have signed for.
An SPA is a contract between a buyer/purchaser and a seller/vendor. It can be conditional or unconditional.
Under a conditional SPA, there are conditions that must be fulfilled beforehand, before the agreement becomes unconditional.
Every transaction is different, and an experienced property lawyer will know the type of agreement to use by looking at the details and documents related to the SPA transaction.
In a conditional transaction, the deposit should not be paid directly to the seller. This is because the agreement will not come into force until all the conditions in the agreement have been met.
An example of a conditional SPA is when the property being sold has restrictions imposed upon it, where it cannot be transacted or mortgaged without the approval of a state authority.
Another instance is when a property is purchased from a developer by a person who then wants to sell it to a new buyer in the secondary market.
If the person’s (the seller) name is not yet documented as the owner of the property, the subsequent agreement between the seller and the new buyer cannot take effect until the first ownership transfer between the person and the developer has been completed.
In a conditional agreement, any deposit or other funds due from the buyer should be held by the lawyers of the buyer/seller as a trustee.
If the deposit or other funds have been paid to the real estate agency, the agency should similarly hold onto the funds and not make payment to any party, including the sales agent commission until the SPA has become unconditional.
If the conditions stipulated cannot be met within the agreed timeframe, then the agreement is null and void and any funds paid should be returned to the rightful parties.
The best way to ensure that the interests of all parties in the property transaction is protected is to appoint property lawyers to represent them.
The writer is a practising lawyer with Nazri Azmi Islinda in Bandar Sri Permaisuri, Cheras. He will be speaking on property and law at The New Straits Times Press Group’s MyRumah Property Showcase on March 9 to 11 at SACC Mall, Shah Alam - the first series of the showcase for this year. More information is available at firstname.lastname@example.org or by calling 012 6560263 (Haslan).