There are two forms of written agreement you need to be aware of, namely simple contracts and deeds. This article explores executing documents in real estate.

Difference between a contract and a deed

Most commonly documents will be executed as simple contracts. A simple contract does not usually need to satisfy any formality requirements to be enforceable. Unless the law dictates otherwise in relation to a particular type of contract, a simple contract may be written, oral or a combination of both, and need not be signed to be enforceable. Typically, parties will seek to get a contract signed and it is made binding on the date that both parties intend it to come into effect, evidenced by both parties signing the agreement.  A key point here is that there is no requirement for the signature to be witnessed. It is important to note that simple contracts have a statutory "limitation period" of six years.  This means you must bring any claim for breach of that contract within 6 years of the breach taking place. 

Deeds on the other hand are required in circumstances such as transfers of property, leases and powers of attorney. They differ from a simple contract in that they require additional formality beyond just signing. Deeds must be in writing and will typically be executed in the presence of a witness, although in the case of a company a deed may be executed effectively by two directors or a director and the company secretary.  Specific wording should also be included above the signature blocks. It is also good practice to ensure that the witness is not a family member, and they must be over the age of 18.

Benefits of deed over contract

It is important to note that deeds can be advantageous even when they are not strictly required. They have a longer “limitation period” than contracts at 12 years. Deeds are also used where one party wants to remove any uncertainty as to whether valuable consideration has been given (a key ingredient for an enforceable contract).

Commercial considerations

As evidenced above, the difference between limitation periods of a simple contract and a deed is a key consideration for parties entering into agreements. Whilst a longer limitation period means a longer amount of time for a party to make a claim, it also means there is a longer period of uncertainty for the party that may be claimed against. Therefore, during negotiations, parties need to consider how they should balance the protection of being able to claim within the limitation period against the risk of being claimed against.

Does a licence need to be executed as a deed?

A licence to assign is a landlord’s permission for a tenant in occupation under a lease to assign the lease to a new incoming tenant. This permission, however, does not necessarily need to be in a formal deed, as is required by a lease. Landlords are provided with some comfort in that if the lease contains a provision that consent must be given by deed, then this is the only way in which permission to assign can be granted.

If you need assistance executing documents, please contact our property team on 01494 521301.