The conclusion of real estate transactions is formalized by signing a contract. Sometimes the transaction is based on your contract template, which was developed and agreed by your lawyers and which you know to the last letter. However, very often the contracting party may insist on using its own contract template, especially if one acts as the seller/the lessor.
Legal audit provides for a legal analysis of the contract terms, the risks associated with its conclusion, drawing up a list of recommended changes and their further agreement with the counterparty
Legal audit of contracts is the most important part of concluding a real estate transaction, since not all counterparties are bona fide and include in the contract those terms that you agreed on with them orally. If you signed a contract on certain terms, then even if you orally discussed and agreed with the counterparty on other terms, you will not be released from the responsibility for fulfilling the contract terms you effectively signed.
VigoLex advices for signing real estate contracts:
- do not sign contracts which have empty or blank fields;
- do not sign contracts that do not have annexes, while, according to the contractual text, some of the terms are set in its annexes;
- always transliterate numbers in the contract, for example, not just “15” working days, but “15 (fifteen)” working days;
- always stipulate in the contract the counterparty’s specific responsibility for non-fulfillment of certain obligations, otherwise it will be much more difficult to obtain compensation in the case of the contract violation;
- do not allow the existence of terms or clauses in the contract that do not apply to your relations or incorrectly reflect your relations with the transaction partner.
Specific terms of the contract that you should pay attention to:
Contract cost: during the audit, the first step is to check whether the contract payment terms are correctly set and whether the contract foresees prevention of inconsistent payments, for example, proceeds interest payment – in the case of renting premises in a shopping centre, or compensation for paperwork costs – in the case of a real estate purchase, etc.
Procedure of acceptance and transfer of the property: an equally important stage of the audit is checking the contract terms related to the acceptance and transfer and the inspection of the real estate condition: whether such a procedure is foreseen at all, whether it is sets that the payment is made only after the real estate inspection, what is the term for such inspection, etc.
Counterparty’s guarantees: in any real estate transaction, it is important to obtain a number of guarantees from the other party: that he/she has the right to sign this contract, that he/she confirms the absence of encumbrances, open legal proceedings, third party’s claims, etc. regarding this real estate and so on. Such guarantees should be treated as safety mechanisms.
Responsibility of the parties: firstly, in the process of a legal audit of a contract, it is important to make sure that our client is not subject to unreasonable or inconsistent fines for certain actions on its part. Secondly, it is necessary to provide the responsibility mechanisms for non-fulfilment by the counterparty of its guarantees under the contract, which were mentioned above.
VigoLex team will be happy to provide you with services for the legal analysis (audit) of terms, contracts related to real estate, drawing up a list of recommended changes to such terms and agreeing on the introduction of specific changes to the contract.
- Full analysis of the contract content.
- Analysis of contractual schemes or construction financing schemes.
- Identification of risks.
- Recommendations for changes to the contract.