Brief Introduction About Property Transfer Agreement
Transferring property is a major decision. It has to be carefully thought out and executed. There are legal issues involved in the transaction. To comply with the relevant laws, the best practice is to have a written contract stating that property has been transferred. It is called a property transfer agreement. It states that ownership of the property has been transferred. The parties are usually a seller and a buyer. It contains details of the seller and buyer and property and also terms such as the sale price.
Assets mean anything that you own that has a monetary value. Apart from real estate, it includes bank accounts, stocks, and personal property such as cars or furniture. These can be transferred to an individual or entity through an asset transfer agreement. It lists the names of the parties, details of assets being transferred, their price and mode of payment, and warranties by the parties.
Purpose of a Property Transfer Agreement
Also called a transfer of ownership agreement, it serves as a record of the transfer of ownership in the property. When ownership is transferred, the title in the property passes from the seller to the buyer. The agreement is evidence of this transfer. It is then entered into public records of the relevant county. If there are any errors in the record, it will indicate that there is no proper ownership.
This will affect the associated rights of the owner. Thus, the agreement is important to have a proper record of the transaction. In case of any dispute, it can be used to clarify any issues relating to the property and its ownership. The agreement can also be used by a person to transfer property to a spouse or gift it to someone he is familiar with.
Contents of the Property Transfer Agreement
A template of this agreement generally contains the following key terms:
- Names of the parties
- Description of the property
- Date of the transfer
- Transfer as-is
- Sale price
- Tax details
- Representation and warranties by the seller
- Representation and warranties by the buyer
- Governing law
- Signature of the parties
These are some common terms that are found in the agreement. Depending on the circumstances and type of transfer, relevant provisions can be added.
How to Draft a Property Transfer Agreement?
When drafting a property transfer agreement, one should know the applicable federal and state laws. For the agreement to be valid, it must comply with all these laws. For individual provisions, the following points should be considered:
- Names of the parties: This should include the names as well as the contact information of the parties. If it is a company, the clause should state its address. This is done to avoid any confusion about them.
- Description of the property: This states what property is being transferred. It can either be real estate, car, or stocks. The exact nature of the property and other details that describe it must be clearly stated.
- Transfer as-is: This term states that the buyer is purchasing the property as-is, that is, in its current condition. For example, if the property being transferred is a car, an as-is clause would mean that the buyer has inspected the car and agrees to buy it in the present condition.
- Sale price: This clause should mention the price at which the property is transferred to the buyer. It should also include other payment details- when the money has to be paid and how such payment should be made.
- Taxes: All agreements of property transfer attract certain taxes. They may vary from state to state. This provision must comply with the relevant state taxation laws.
- Representations and warranties: These are statements that indicate that the parties are in a position to enter into the contract. For example, the seller will make a representation that he is the owner of the property and has a good title over it. The buyer will represent that he has the capacity to enter into a contract.
If the property is being transferred between a buyer and seller, they can consider the following points:
Buyer: The buyer should conduct proper research about the property before going for negotiations. He should have a fair idea about his finances. This will make it easier to negotiate the price.
Seller: During initial negotiations, the seller should check the buyer’s credit score to see if he will be able to pay the amount. When discussing the price, the seller can start from a higher value. This will ensure that eventually, he does not have to settle at a much lower rate than he would have liked.
Benefits and Drawbacks of Property Transfer Agreement
- There is a definite record of the date of the transfer of ownership.
- The buyer gets a proof of his ownership of the property.
- The seller can report his tax obligations easily.
The agreement may be general for some kind of property (such as land) while it may be too specific for others (for example, stocks). For proper drafting, the services of an attorney may be required, which can be costly.
What Happens in Case of Violation?
If the agreement is violated, the defaulting party can be sued in court. If the buyer defaults, the seller can request the court to order the buyer to pay the amount. Similarly, if the seller breaches the agreement(1), the buyer can request the court to order the seller to perform his obligations under the contract or return him any money that he may have paid to the seller.
A property transfer agreement is proof of the transfer of property from one party to another. It can be of various types and include complex legalities. It is advisable to get it reviewed by an attorney to avoid any legal issues.