There exists a confusion between use of contact of sale of land and deed of assignment in property transactions, some believe that they mean the same thing while others believe that there is little to no difference between the two. Hence, people tend to downplay the importance of having a contract of sale of land prior to the deed of assignment.
Generally, there are five stages involved in the sale of land process, they include; the pre-contract stage, contract stage, post-contract stage, completion stage and perfection stage However, the Supreme Court in International Textile Industries v Aderemi summarized these five stages into two key stages, it held that the transfer of interest in land can be broken into two key stages, they include:
- The Contract Stage
- The Conveyance Stage
The Contract of sale of land is prepared at the contract stage while the deed of assignment is prepared at the conveyance stage.
Elements of a valid contract of sale of land
Generally, by virtue of the Statute of Fraud Act 1677 all contracts relating to the transfer of interest in land must be in writing. Section 79 and 97(1) of the Property and Conveyancing Law 1959 further provides that any contract relating to the disposition of any interest in land will be void except it contains the following ingredients:
- It is in writing
- It is signed by each of the party.
Hence, there are basic elements that any contract that aims to dispose interest in land must contain. However, a contract of sale of land goes beyond the basic elements listed above, it usually includes further details on the terms and conditions agreed by the parties. Thus, the court in Terrance v Bolton held that a usual contact of sale of land includes both the basic requirements stated in the statute of fraud and it also includes the conditions of sale, which are the further terms the parties have agreed upon to bind them. Examples of other details that parties might agree to include in the contract of sale include:
- Payment of deposit;
- The purchaser taking possession before completion;
- The completion date;
- Fixtures and fittings;
- Insurance pending completion;
- Capacity of the vendor
Elements of a valid deed of assignment
A deed of assignment has been defined in United Bank for Africa Plc v Jimmy King (Nig) Ltd to mean an instrument in writing, which is signed, sealed and delivered by the parties, which is used to convey interest in land. The main purpose of a deed of assignment is that it is used as an instrument to transfer legal title from the assignor to the assignee.
A deed of assignment contains both the basic terms listed earlier in this work and also detailed description of the covenants each party agree to bind them. A standard deed of assignment contains:
- Particulars of the parties;
- Date of transfer of ownership
- Name and description of the parties (the assignor and assignee)
- Recital
- Consideration payable
- The receipt clause
- Capacity of the assignor
- Words of grant
- The parcel clause
- The testimonium
- Execution and attestation clause.
Similarities between contract of sale of land and deed of assignment
The major similarity between the contract of sale of land and deed of assignment is that both agreements are used to transfer interest in land and both of them are types of conveyancing agreements. Also, if both agreements are to be valid, they have to contain the basic requirements in the Section 4 of the Statute of Fraud Act, which states that for any interest in land to be valid it must be in writing.
Difference between contract of sale of land and deed of assignment
From the elements of both contract of sale of land and deed of assignment discussed above, it can be deduced that both agreements are different structurally both of them contain the basic clauses that should be in an agreement to transfer interest in land. However, when examining further details both contracts it can be seen that have striking differences in terms of content and purpose. Some of the key differences include:
- Interest transferred: Execution of a contract of sale of land only transfers equitable interest to the purchaser while execution of a deed of assignment transfers legal interest to the assignor. Hence, with a contract of sale of land the purchaser is only vested with equitable title while with a deed of assignment the assignee is vested with legal title.
- Stamp Duties: the issue of stamp duties is one of the reasons why property lawyers like to execute a contract of sale of land because the stamp duties paid at that stage is at a flat rate while the stamp duties paid at the deed of assignment stage is ad valorem.[1] Hence, property lawyers will prefer to calculate the price of the fixtures and fittings separately from the actual purchase price and add the fixtures and fittings into the contract of sale of land in other to pay a reduced rate on stamp duties.
- Good Root of Title: A deed of assignment is a good root of title because it fulfills all the requirement of a good root of title. A contract of sale of land however does not fulfil the requirements because it transfers only an equitable interest to the purchaser and the contract of sale of land may lose priority to a document of title with a higher interest for example the deed of assignment. The elements of a good root of title are stated in Lawson v Ajibulu which states that for a document to be said to constitute good root of title, it must:
- It must sufficiently describe the property and parties;
- It should transfer both legal and equitable interest;
- It should not be subject to a higher interest;
- The document should not have any breaks in the title devolved.
- Validity: For a contract of sale of land to be valid it is only essential that both parties sign to the terms of the agreement. However, for a deed of assignment to be valid the deed must not only be signed but it must be sealed and delivered. For deed of assignment to be valid, it most have completed all post completion procedures which are obtainment of governor’s consent, stamping and registration. Failure to do so the transaction may be termed void.
Conclusion
Both the contract of sale of land and the deed of assignment are necessary in conveyancing agreement for the transfer of interest in land. Each play their unique role in the effectiveness of a property transaction.