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Four days prior to closing the deal, Mr. Dotto and his wife received with astonishment a letter from the seller’s real estate broker, saying that they needed to instantly pay 18m/- in property tax arrears.
The letter stated that the seller had paid the property tax arrears for the past years, and therefore the Dottos needed to reimburse the seller before the purchase and sale agreement could be signed and the house keys handed over. It was a very nerve-racking moment, coming on the verge of completing the sale.
However, Mr. Dotto’s sister-in-law, who works as a personal assistant at a city law firm, visited the municipal council and found out that the seller in fact owed the council 9m/- in unpaid property taxes, which meant the Dottos did not really owe them any money.
The couple’s lawyer drafted a letter requiring the seller to pay the property tax arrears immediately and send proof of payment. The seller complied and the sale went through!
But if Mr. Dotto was a novice in real estate business and didn’t have a lawyer, he might have accepted the letter without questioning it and paid the money to close the deal.
Frequently, Tanzanian real estate buyers don’t contact a lawyer until a deal is completed. They sign the purchase agreement, and then take it to a lawyer who conducts an official title search, registers the title deed and handles the transfer of funds.
They know they need a lawyer to help with this; however, not many of them want to spend money on legal fees. As it turns out, retaining the right lawyer, early in the real estate buying process, can actually save you time, risk and most crucially, your hard-earned money.
According to a real estate expert, your lawyer is not an expense you should hold back on and he considers a lawyer to be an essential part of real estate buying and selling. “We think the lawyer is the person who is the most unbiased in the transaction,” he says.
According to a legal practitioner in Dar es salaam, buying a house is one of the largest financial transactions a Tanzanian makes, and it pays to ensure it is done right and that all of a buyer or seller’s legal rights and protections are adhered to.
He states that getting a lawyer to review the paperwork ahead of time can make a huge difference. A lawyer can also protect your interests when it comes to financing, he adds.
“I would put down in a purchase agreement that I want the offer conditional on the buyer getting the financing he wants as opposed to just, ‘conditional on financing,’ he explains, adding that, “For instance, if the bank offers a mortgage rate of 20 per cent as opposed to 15 per cent, you might want the ability to opt out of the deal to avoid getting stuck in a situation where financing is imposed upon you.”
A lawyer is particularly important when it comes to purchasing a property that has not yet been built. House buyers will need a lawyer’s help to decipher the purchase and sale agreement.
Particularly in large urban areas like Dar es Salaam, Arusha and Mwanza, a softening market has prompted many developers to offer sales incentives.
However, those incentives might look quite a bit different from house buyers expect once they are written into a legal document. For example, “some developers promise to give you one or two years free of maintenance,” He says.
“In agreements that we have reviewed, it doesn’t mean you’ll get two years of free maintenance, it actually means there will be a rebate against the purchase price equal to what the developer thinks the first two years of maintenance will be.
You have to look at those types of details.” House buyers can get another unpleasant surprise when their final purchase price ends up much higher than originally thought.
Developers might sell you an apartment for $350,000, for instance, but that doesn’t include the many added charges that can be added on, like warranty protection against structural defects; water meter installation, property taxes, landscaping charges, and so on.
This can add thousands of dollars to a house purchase. “If it goes to a good lawyer first, they would say, ‘Let’s put a cap on the closing costs,’ because you want to know what you’re going to pay,” explains a legal expert .
He suggests your lawyer should spend a good amount of their time on real estate deals, and should give you a written quote including disbursements and incidentals.
In most large urban regions of our country, purchasers will usually pay more than sellers given their lawyers will have to carry out more work.
When it comes to price, a financial expert says “you aren’t necessarily doing yourself any favours by choosing the lawyer with the lowest fees”.
A race to the bottom, when it’s a complicated real estate transaction or when the purchaser is buying for the first time, may not be in the purchaser’s interests.