When acquiring a freehold property – a freestanding house on its own plot of land – it is important to follow the necessary steps and be wary of the associated pitfalls.

Though the Bermuda Bar Association has approved a standard form sales agreement that is being used by most law firms and real estate agents on the Island, it is still vital that a purchaser avoid signing anything until all negotiations concerning the transaction have been finalised. This is because there will be occasions when the standard agreement must be amended to protect the purchaser's interests.

The common practice of splitting the legal costs and government stamp duty obligations equally between the seller and the purchaser is captured in the standard agreement. Legal fees are fixed by the Bar Association, and are calculated on a sliding scale according to the value of the property.

Property attorneys can provide an early estimate of legal fees and stamp duty, which will be key in your overall financial planning.

The standard agreement may need to include a special condition requiring the seller to have the boundaries of the property surveyed by a professional land surveyor before the sale is completed. This assists the purchaser in confirming the property's size and dimensions as well as the location of its boundaries. It is important to walk the property to look out for any paths or roadways that are being used by the owners and occupiers of neighbouring properties, and to look for any obvious boundary encroachments. Be sure to mention any findings to your attorney early in the negotiations.

The purchaser might also consider a structural survey, particularly if dealing with an older house. A professional surveyor examines the house for structural integrity, termite infestation and other possible concerns. However, no survey will guarantee the discovery of defects such as the risk of future subsidence or faulty foundations that have not yet caused problems.

Further, purchasers should examine any appliances or other chattels being included as part of the sale, and log their condition. Those items should be in a similar condition on the closing date of the transaction. Remember – the prevailing rule is buyer beware!

Finally, if a mortgage is being sought, the sales agreement should allow the purchaser to walk away from the transaction should financing not be available.

Once these and other issues have been negotiated, the purchaser and seller will be ready to sign the sales agreement. With very few exceptions, this document is legally binding once it is signed by both parties, is dated and the deposit (normally 10 percent of the purchase price) is paid.

The seller's attorneys will usually hold the deposit until the transaction has completed. The value of taking proper legal advice before signing on the dotted line is therefore particularly important. If either party fails to meet their contractual obligations, they may find themselves being sued for damages and/or forced to complete the transaction.

After the agreement is signed but before the date of completion, the purchaser's attorneys will ensure that no unlawful development has been carried out at the property without the consent of the planning department. Without this safeguard, the purchaser would become liable for any such changes, even if not responsible for them. This must be initiated immediately after the agreement is signed, as a planning search takes 28 days to complete.

The purchaser's attorneys will also examine the title deeds to ensure that the seller is passing good title (ownership) to the property.

This will ensure that no one makes a claim against the purchaser's new home. If a title defect is discovered, the purchaser may withdraw from the contract and walk away with the deposit together with any accrued interest.

Where a mortgage is required, and the purchaser's attorneys are also acting for the bank, the attorneys will report to the bank that the property provides adequate security for the mortgage advance.

The purchaser's attorneys will tell the purchaser how much money is required to cover not only the purchase price less any deposit, but also their own legal fees and the stamp duty that will be incurred on the agreement, the Transfer Deed (Conveyance) and the Mortgage Deed (where one is required). This way, the purchaser is able to organise the funds well before the completion date.

The purchaser's attorneys will draft the Conveyance and arrange for it to be signed by their client.

On the day of completion the purchaser will be provided with the keys, either by the real estate agent or by the seller's attorneys. Organisation is essential – without funds, the keys are unlikely to be delivered.

The purchaser's attorneys will hand over the purchase funds. A cheque will be sent to the seller's attorneys to cover the full sale amount less the deposit, any legal fees and stamp duty that the seller may be responsible for, as well as any land tax arrears and any monies required to satisfy existing mortgages over the property.

Once these steps are complete, the purchaser can be congratulated on their successful acquisition of a new property.

Attorney Stephen Males is a member of the Property Practice Group of Appleby. Copies of Mr. Males' columns can be obtained on the Appleby website at www.applebyglobal.com. This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.