6Key Points Will Help You Avoid Mistakes In Real Estate Contracts

Amal Ali 23 Jun 2022

Contracts are among the most important real estate procedures that preserve the rights of all parties in the buying and selling process. Sometimes people neglect the legal aspect of the basic clauses that must be present in real estate contracts, which causes some disputes after completing the sale or purchase of the property.

If you are buying or selling real estate for the first time, you will be lacking some knowledge about the most important legal sides of buying and selling real estate. Therefore, it is always advisable to consult a real estate consultant or a real estate attorney when registering contracts.

With the increase in interest in the real estate sector in Egypt, the number of agents in this sector has increased, and it is possible that if you do not take the necessary precautions, you will be exposed to a kind of fraud. Therefore, in this article, we will help you to know the most important points related to contracts for the sale and purchase of real estate properties.

If you are interested in entering the field of real estate in Egypt, you will be interested in reading this article: 4 points that will interest you about the current Egyptian real estate market.

If you are about to buy your own home, we advise you to take a look at this article, 5 tips to consider before buying your home.

What is a contract of sale?

In the beginning, before entering into the details of the clauses that should be present in the contracts of sale, we must know what the sales contract is. The sale contract is simply one of the contracts stipulated in the law, which is concerned with the transfer of ownership of the thing sold from the seller to the buyer in return for a certain price agreed upon between the two parties to the contract and mentioned in the contract. Contracts of sale contain a set of key components without which a contract cannot be considered a contract of sale.

The main points of the sales contract are as follows:

The seller
The Buyer
The property (subject to selling)

What are the types of contracts in the Egyptian market?

After defining what a contract of sale is, we must now differentiate between the types of property or sale contracts available in the real estate sector. When you buy or sell real estate units, you will find two types of contracts available, namely, an initial contract is a customary contract between two parties, and the final contract is the contract registered by the entity entrusted with registration. In the following, we will explain the basic differences between the two contracts.

First, the preliminary sale contract: The primary purchase agreement is defined as a customary sale contract between two parties. The initial contract is considered a valid contract concluded between the seller and the buyer, but it does not have the authority of documented contracts and is not considered in the transfer of ownership. Therefore, it is always advisable to obtain a judgment on the validity of a signature of the primary contract.

You should note that there are three types of primary contracts:

A contract with a judgment on the validity and enforceability of the contract
A contract governed by the validity of its signature
Just an initial contract between two parties and didn't get any provisions

Secondly, the registered sale contract: As for the final contract, it is the contract registered by the legally competent authorities. Registered contracts guarantee the legal rights of all parties other than contracts or agreements concluded in front of witnesses only, which cause legal disputes later. Registered contracts guarantee the seller's right to receive his money included in the contract and it guarantees continuity of his receipt of installment payments. It also preserves the buyer's right by obligating the seller to deliver the unit or item sold within the agreed period.

Please note that the contract is considered registered only in two cases:

Submit a real estate registration application
File a claim for validity and enforceability of the primary sale contract

Consequently, all individuals are bound by the agreements concluded in the contract to avoid exposure to the penal sanction resulting from breaching the terms of the contract.

You can always increase your knowledge about real estate through the weekly articles on our website and in case you need real estate advice, we are happy to provide it to you.

Take a look at this article to learn about the most used real estate vocabulary Glossary For Real Estate Terms Important Words In the Egyptian Market.

What are the most common mistakes in real estate contracts?

Using an old copy of the contracts without reviewing the most recent clauses that are consistent with the status of each sale or purchase.
Failure to review the names of the parties mentioned in the contract or the presence of spelling errors in the names.
Failure to include correct dates for either delivery or installment dates.
Not being keen to provide a complete and detailed description of the property.
Leaving some items blank without completing the data.

Before you sign the contracts, we always advise you to take a set of measures first, so that you are reassured and avoid falling victim to fraud or fake sales. So you have to:

Inspect the real estate or unit on the ground, and if the unit is under construction, we advise you to deal with real estate brokers that connect you directly with the project developer.
Verify the property license and ownership through the city authority in the neighborhood in which the property is located.
Ensure that the utility license is issued (such as electricity, water, and gas), and you can review the electricity and gas receipts, which will avoid the burden of settling these services later.
Verify the ownership contract of the land on which the property is built and whether the property or plot of land is first ownership or not. If the property is not first ownership, you should consider reviewing the sequence of ownership of the property.

Know the different types of real estate units that you can invest in from this article, The Most Popular Real Estate Types & Units In The Egyptian Market

What are the important data that must be available in the real estate sale contract?

After we have clarified the most common mistakes and points to be reviewed before signing contracts, in this paragraph we will help you to collect all the points that are recommended to be included in the sales contract, which are as follows:

The full name of the buyer and seller with a copy of the national ID for both parties
A detailed statement of the sale and a statement of its area in detail and the set of facilities attached to it, including the garden, for example.
A full statement of the property's address, starting with the property or apartment number, the name of the street, and the neighborhood or area.
A statement of the price and how to pay it. It is always advised to put the actual price that was agreed upon to avoid any disputes later.
A statement of how the seller owns the property and mentions all serial contracts so that the buyer ensures the validity of the sale and the seller's responsibility for the property.
A comprehensive description of the property’s specifications in terms of the boundaries and features of the property directions and the direction of the entrance to the property and a description of any distinctive features to avoid mixing it with any other similar properties.
Mention the date of the construction permit in the case of apartments and shops.
Putting in a clause that the owner fully owns responsibility for any hidden defects defect appears on the property, whether it is a material or legal defect.

Real estate consultation will always help you avoid making mistakes while buying or selling your property. Take a look at this article on what is real estate consultancy and how you can benefit from it.

What is the order of the clauses within the real estate sale contract?

Two types of clauses can be found inside sales contracts. The first type is the basic or mandatory clauses, while the second type is the optional clauses that the parties to the contract decide whether or not to include in the contract. With a note that the optional clauses are considered necessary and important, but their absence does not prejudice the validity of the contract. As for the basic clauses, the absence of any of them leads to considering the contract to be legally invalid.

The basic provisions of a contract:

The name, profession, and national ID of both parties, the seller and the buyer
The object of sale, apartment, or property intended to be sold
The amount of money corresponding to the sale

The non-essential provisions of a contract:

Method of payment of the agreed-upon amount
The guarantees that the seller and the buyer wish to include
Penal terms in case any of the parties violates the clauses of the contract.

If you have not seen a copy of a contract of sale before, we will tell you the order in which the clauses appear. At the beginning of the contract, the basic data of both the seller and the buyer and the date of the conclusion of the contract are set. Then:

First, it begins with a preface and a brief statement of the sales process that is relevant to the contract
A clause is placed in the title deed of the selling party and if it is a first or serial ownership
An inspection clause shall be attached in which the buying party acknowledges that it has inspected the location of the property and also acknowledges that their awareness of the boundaries and areas of the residential unit that is the subject of the contract and knows its location within the project if it is under construction.
Next comes a clause on the subject of the contract, which is a clause that includes all the detailed specifications of the property, starting with the area, the floor, the facilities, and the location. In short, the property is described in a complete and comprehensive description.
Next comes the clause concerned with setting the price or the agreed-upon amount of money and stating the payment system. If the installments are agreed upon, a timetable shall be set with the specific dates upon which the installments will be paid. Which prevents any confusion or manipulation in the payment and installment process.
The last item, which is related to penalties, comes in the event of a delay in delivery by the seller or delay in payment on the part of the buyer. It is common knowledge that a grace period is set for both parties, after which penal measures are taken.

What does the term (the property has a green contract) mean?

The green contract is the highest level of ownership documentation, whether for real estate or other property. There can be no dispute over the ownership of a property whose owner has a green contract. The Real Estate publicity department is the only authority competent to issue the green contract, so there are a set of conditions that must be met in the green contract for it to be considered. The green contract has a specific shape and form, so we advise any buyer not to be deceived by the word “real estate that has a green contract” without reviewing the basic conditions that must be met.

The green contract has two main characteristics:

That the contract bears the number and date of the month of ownership
To be sealed with a distinctive lotus flower seal

In the end, as we mentioned in previous paragraphs, registered contracts are the only contracts that allow the transfer of ownership, but you have to differentiate between that the final contract is written on a green paper and that the contract is a valid green contract. We hope that this information will help you to avoid problems upon signing your contract.

The New Administrative Capital is one of the areas where everyone is currently heading to buy real estate. Therefore, you should read this article Your guide to investing in the new administrative capital of Egypt.

In Inland, the interest of our customers is always important to us, so we advise you to be careful when dealing with any real estate transactions. We advise you to increase your knowledge of the real estate sector, and you can follow the latest news about real estate projects in Egypt through our website.

For free real estate consultancy, contact us on the following number 01003366453.