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 gotten from their distinctive features and the role they each exclusively play in the acquisition of title to landed properties in Nigeria.
Generally, 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.
- 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
- 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.
Deed of Assignment is the legal instrument executed between a buyer and seller upon the negotiation and completion phase of a sale of land transaction, subject to perfection. It is usually given to the buyer of the real property at the conclusion of the property transaction as the final legal document that transfers the interest of title in a land without any conditions attached, beyond the payment of the consideration price of the property. In a deed of assignment, the nomenclature of parties changes from Vendor to Assignor and Buyer to Assignee. Upon the execution of a deed of assignment between parties, there is a permanent transfer of legal title and ownership to land from the assignor to the assignee.
The importance of deed of assignment in every property transaction cannot be over-emphasized. It is quite unfortunate that many real estate investors overlook its importance especially when they buy from Land Grabbers. Without a deed of assignment, a real estate transaction is not conclusive. In fact, some investors have been duped just because they cannot proffer the deed to show the property has been sold to them other than the receipt.
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.