Contract of sale and Deed of assignment are both documents used in real estate-related transactions in Nigeria. Although they are both used in property transactions the difference between both documents can be derived from their distinctive features and the role, they each individually play in the acquisition of title to landed properties in Nigeria.
Once the buyer and the seller reach an understanding to enter a property transaction, they draft an agreement, which puts in place the terms and conditions based on which the transaction would take place. This document is known as Contract of Sale Agreement. It becomes clear that an agreement for sale contains a promise to transfer a property in question in future, on satisfaction of certain terms and conditions. So, this agreement itself does not create any rights or interest in the property, for the proposed buyer.
What the sales agreement creates, is a right for the purchaser to purchase the property in question on satisfaction of certain conditions. Likewise, the seller also gets the right to receive the consideration from the buyer on complying with his part of the terms and conditions. There are five stages involved in the process of acquisition of land in Nigeria, which range from the pre-contract stage to the post-completion stage. The contract of sale is executed at the second stage of a land transaction; it is evidenced in writing and is not mandated to be under seal. It is a preliminary land document executed in the transfer of ownership in the land to another from the seller to the buyer. A contract of sale takes effect after it has been exchanged between parties and it contains not only the basic requirements but goes further to include detailed terms, consideration, and future obligations of what the parties have agreed in respect of the land transaction. Some of the provisions of a contract of sale are: Full details of the parties – (name and address), particulars of the property to be transacted (location, survey plan, etc.), particulars of witnesses, purchase price of the property, payment of deposit, to whom it is to be paid, and in what capacity, balance and interest on unpaid purchase sum where the payment is to be paid in installments, the capacity of the vendor, risk and insurance, possession before completion, completion date of the transaction, provision for fixtures and fittings, specific terms, risks, etc.
Where a contract of sale has been executed between parties, an equitable right of the title is passed to the buyer as the vendor still retains legal title to the land and holds the same in trust for the buyer. A vendor cannot transact with the land contrary to the agreement in the contract and no party can rescind the contract without being held liable for a breach of contract. Features of a Contract of Sale Agreement include:
- In a contract of sale, the vendor is committed to the transaction and the purchaser has sufficient time to investigate the title before the final completion of the transaction.
- The death of either party to the transaction does not terminate the contract as personal representatives can proceed with the contract of sale.
- A contract of sale prevents last-minute withdrawal as withdrawal would amount to a breach of the contract.
- A contract of sale protects the equitable interest of the purchaser
- It crystallizes the position of the parties as terms have been expressly agreed upon.
- The vendor cannot unilaterally and subsequently increase the purchase price as the price has already been fixed in the contract.
- Payment of lesser stamp duties.
A Deed of Assignment on the other hand is a legal document that proves that the seller has transferred the absolute ownership of the property to the purchaser. Through this document, the rights and interests in property are acquired by the new owner. A sale deed usually consists of the following information:
- Details of the buyers and sellers (name, age and addresses)
- Property description (total area, details of construction, the exact address and surroundings)
- Sale amount including advance payment paid as well as the mode of payment
- Time frame when the property title will be passed to the buyer.
- Actual date of delivery of possession.
- Indemnity clause (The seller promises to pay the buyer for any damages in case of disputes about the ownership, resulting in monetary losses to the buyer)
Deed of assignment is required to be evidenced in writing; to be signed, sealed, and delivered by parties to the transaction. A deed of assignment is said to have been delivered when interest has passed to the Assignee and the interest can be passed with or without a physical handover.
Another major difference between a contract of sale and deed is that under a deed of assignment, the title of land acquired is required to be perfected upon payment of the full consideration and execution of the deed. The perfection of title involves the assignee taken the required steps to register the deed of assignment at the appropriate Land Registry. The process for the perfection of a deed of assignment involves the following three steps.
- Obtaining Governors Consent.
- Stamping of the deed of assignment, and
- Registration of the deed of assignment.
Finally, in a contract of sale, the buyer only acquires equitable interest in the property while the seller retains the legal interest in trust for the buyer. In the deed of assignment, the assignee acquires legal interest in the property, and it can serve as a good root of title to subsequent buyers while the interest of the assignor on the same property is completely extinguished.
