When dealing with property transactions or real estate investment, in Nigeria, two common legal documents come into play: the Contract of Sale and the Deed of Assignment. Both documents serve important functions in property transactions, detailing the rights and obligations of the parties involved.
They are vital in transferring rights or interests in property, but they serve distinct purposes and operate under different legal frameworks. Understanding the differences is essential for anyone involved in real estate, business transactions, or legal matters. Below is a detailed summary of their differences.
Contract of Sale Vs. Deed of Assignment
1. Difference in Definition and Purpose of Both Land Documents
Contract of Sale: an agreement between a buyer and a seller in which the seller agrees to transfer ownership of a property or goods to the buyer for a specified price. It is often conditional, meaning the ownership transfer is subject to fulfilling specific terms or conditions, such as full payment. The contract of sale is signed during the second stage of land acquisition and serves as a written agreement, though it doesn’t need to be under seal.
Once exchanged, the contract becomes effective and outlines the detailed conditions, deposits, considerations, and future obligations agreed upon by both parties regarding the land transaction. Once both parties sign the contract, the buyer acquires an equitable right to the title, while the legal title remains with the seller.
Deed of Assignment: This is a legal document that formalizes the transfer of ownership of a property, usually land or real estate from one party (assignor) to another (assignee). It is a conclusive legal document, signifying that the legal title of ownership has been transferred to the Assignee.
2. Nature of Land Documents
Contract of Sale: It is a preliminary or executory document, as it outlines the steps leading up to the transfer of ownership. It is created at the initial stage of a transaction to bind the parties to agreed terms.
Deed of Assignment: It is a conclusive or consummatory document because it formalizes the actual transfer of ownership. It is executed at the completion of the transaction after all conditions in the contract of sale have been satisfied.
3. Difference in Legal Status
Contract of Sale: Does not by itself confer ownership to the buyer. It only binds the parties to fulfill their obligations. The legal ownership of the property remains with the seller until all conditions are met. A vendor cannot act contrary to the terms of the contract, and neither party can rescind the agreement without being held liable for breach of contract.
Deed of Assignment: Legally transfers ownership rights to the assignee. Once executed, the new owner can claim full ownership. A Deed of Assignment must be documented in writing, signed, sealed, and delivered by the parties involved in the transaction. It is considered delivered when the interest has been transferred to the Assignee, and this transfer can occur with or without a physical handover of the property.
4. Registration and Perfection Requirements
Contract of Sale: Generally, a contract of sale is usually not required to be registered with government authorities, though it can be notarized for evidentiary purposes. The contract creates a binding agreement between the buyer and the seller, and as long as both parties agree to its terms, it can be enforced in court if necessary.
Deed of Assignment: Under a Deed of Assignment, the title to the acquired land is perfected only after the full payment of consideration and the execution of the deed. The perfection of title refers to the process by which the assignee ensures the transfer of ownership is legally recognized. This involves registering the deed of assignment with the appropriate Land Registry. The steps to perfect the deed of assignment typically include:
- Obtaining Governor’s Consent: Depending on the jurisdiction, the assignee may need to obtain the consent of the local or state government before the transfer can be completed.
- Stamping of the Deed of Assignment: The deed must be stamped as a formal requirement, which is usually done to make it legally enforceable and compliant with tax regulations.
- Registration of the Deed of Assignment: Finally, the deed must be registered with the relevant Land Registry to update the official records and make the transfer of title effective.
Once these steps are completed, the assignee becomes the legal owner of the land.
5. Enforceability
Contract of Sale: A breach of the contract of sale can result in significant legal consequences, as it is a formal agreement between the buyer and the seller. However, it primarily outlines the intention to transfer property ownership and sets the terms for the transaction. It does not in itself complete the transfer of title. Instead, it sets the expectations and obligations for both parties to follow, to ensure that ownership will be exchanged once the agreed-upon conditions are met.
Deed of Assignment: Breach of a Deed of Assignment can also lead to legal actions, as it is a more definitive legal document directly related to the actual transfer of property. Unlike the contract of sale, which reflects the intent to transfer, the Deed of Assignment formally conveys the ownership of the property from the seller to the buyer. The breach of this document can result in the seller retaining the property’s legal title or the buyer being denied the rights they were promised, leading to more direct legal consequences, including potential claims for damages or specific performance.
Conclusion
Understanding the distinctions between a Contract of Sale and a Deed of Assignment is essential for anyone involved in property transactions in Nigeria. The Contract of Sale defines the terms and conditions of the sale, offering a structured framework for the transaction.
In contrast, the Deed of Assignment formalizes the transfer of ownership, ensuring the legal recognition of the change in title. Both documents are crucial for a seamless and legally sound real estate transaction. Therefore, it is important to consult legal professionals to draft and review these documents to safeguard your interests and ensure a successful property transaction.