Warranties, declarations in property sales

On June 29, 2023, I wrote an article titled “Safeguards in agreements or contracts”.

I explained that some of the important safeguards include the following:

Correct details of the parties.

Preamble to give background or context to the agreement.

Definitions and interpretation.

Confirmation of legal capacity to act.

Currency of the agreement.

Declarations and warranties.

Defects and voet stoots.

Breach.

Termination.

Applicable laws.

Warranties in agreements of sale for immovable properties

I have been asked to write specifically on the important warranties or declarations for agreements of sale for immovable properties. Immovable properties in this case being land only or land and improvements thereon such as buildings.

Some of the key warranties and declarations I would recommend include the following:

Where an organisation such as a company or trust is involved as a seller or purchaser, all internal procedures such as approvals through resolutions have been complied with.

That the seller is the beneficial or registered owner of the property.

The seller has the original deed of transfer (“title deed”), which shall be handed over to the appointed conveyancer upon signing of the agreement or such

other time as may be stipulated in the agreement.

Where the original title deed could not be found and was replaced, a copy certified by the Registrar of Deeds is in fact being used in lieu of the original.

There are no pending legal disputes or litigation concerning the property, which may constrain or frustrate the sale or transfer of the property.

Such disputes may concern ownership of the property, divorce proceedings, etc.

There are no valid preceding agreements of sale for the same property. This assists to avoid disputes where the seller has another valid agreement of sale, which has not been cancelled.

That until the transfer is registered the seller irrevocably undertakes not to encumber or mortgage the property.

The seller has made full disclosure to the purchaser and acknowledges that the purchaser has acted on the basis of the representations by the seller. This helps the purchaser in the event of incomplete disclosure or fraudulent misrepresentation by the seller.

That the purchaser has adequate financial resources to pay for the immovable property or has made adequate arrangements for funds to pay for the property and has disclosed such arrangements to the seller. This may be useful where there is a breach in payment by the purchaser.

The purchaser has carried out their own due diligence on the property including physical verification or examination of the property, its condition, deed search, condition of title and has requested or received representations from the seller.

The purchaser declares that he or she is purchasing the property voetstoots, that is, as it stands.

That both parties had the opportunity to seek legal assistance before signing the agreement of sale.

Importance of warranties or declarations

These are safeguards to cover the period before signing of the agreement of sale or thereafter. For example, a seller may hesitate to sign where for example there is another valid preceding agreement of sale which he or she is in the process of cancelling. The purchaser may also be forced to make full disclosure or desist from possible fraudulent misrepresentation.

Warranties may also work as a checklist for reducing risk and making the transaction safe, especially for the purchaser. Post-signing of the agreement of sale, the warranties or declarations can be useful in the event of disputes.

Conclusion

At the time of signing the agreement of sale, the purchaser is usually anxious to sign the agreement, pay and obtain a transfer. This is expected. However, the legal practitioner assisting the parties ought to include safeguards in the form of warranties or declarations by the seller and the purchaser.

Disclaimer

This simplified article is for general information purposes only and does not constitute the writer’s professional advice.

Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), MBA(EBS, Heriot- Watt, UK) is the Managing Partner of Hofisi & Partners Commercial Attorneys, chartered accountant, insolvency practitioner, registered tax accountant and advises on deal and transactions./ He has extensive experience from industry and commerce and is a former World Bank staffer in the Resource Management Unit. He writes in his personal capacity./He can be contacted on +263 772 246 900 or gohofisi@gmail.com-herald