Attwood Marshall Lawyers Property & Commercial Lawyer Mieke Elzer identifies some of the most important special conditions to consider putting in your Contract of Sale if you are buying or selling property during the festive season.
Special conditions to protect your best interests
The importance of special conditions in a Contract of Sale when buying or selling property should never be underestimated. Leaving one out, or miswording a condition, could end up costing you a fortune to rectify, or may force you into a situation where you must proceed with a purchase that is unsuitable or risky.
The following special conditions should be considered whether you are buying or selling property this Christmas. Many of them will also apply all year round.
Extending the cooling-off period
Summer is one of the most popular times for people to buy and sell property, and for this reason our property lawyers remain on call throughout the festive season to help people with all their conveyancing and property law needs.
It’s important to be aware however that many professionals, including real estate agents, conveyancers and local councils may be operating on reduced staff or limited working hours, which could lead to delays in obtaining crucial documents or securing necessary approvals or property inspections.
For purchasers who are thinking about exchanging in-house with an agent over the Christmas break, it’s important to consider a condition that extends the cooling off period.
A cooling-off period is a period of time in which the buyer can legally terminate the sale contract and get out of the purchase if they change their mind or are unable to proceed. Where a buyer opts to terminate under the cooling-off-period, they will forfeit 0.25% of the purchase price to the Vendor. The Vendor will then have no further claim on the buyer. It is important to note that vendors do not have the same rights under the cooling-off-period and therefore it is a way for buyers to secure the purchase while not taking too much risk.
Standard five business-day cooling-off periods apply in both Queensland and New South Wales in most circumstances. At Christmas time however, we recommend stipulating a 10 or 15 business day cooling off period to allow sufficient time for the person to conduct the relevant pre-purchase enquiries and obtain advice from their lawyer before the cooling-off-period right to terminate comes to an end.
Subject to Pest & Building Inspection
It is highly advisable to obtain pest and building reports when purchasing a property. Termites can cause extensive damage costing tens of thousands of dollars to fix, which in most instances are not covered by insurance companies.
Unfortunately, some areas in Queensland and New South Wales are notorious for their high risk of termite infestations. It’s crucial to conduct thorough property inspections in these regions before making a purchase.
As for the building inspection, there are so many minor and major issues that can be flagged throughout this process, however the most important ones to watch out for are structural issues, the presence of asbestos, movement or cracks, surrounding trees and gardens that may have potential safety hazards, electrical defects, and plumbing concerns.
Inclusion of a condition that makes the contract conditional on receiving satisfactory pest and building reports means that you can go ahead and exchange the contract with the peace of mind that the property cannot be sold to anyone else, and you will have a right to rescind if the pest or building reports come back unsatisfactory.
Hot tip: a report is only as good as the person who prepared it! Make sure you engage reputable pest and building inspectors. Buyers generally have to be reasonable when determining whether a report is unsatisfactory, and this will depend on things such as the severity of the defect in relation to the age of the property and the price that has been agreed.
Subject to Finance
Although a ‘Subject to Finance’ clause is a relatively standard condition included in most Contract of Sale agreements; some buyers choose to omit this clause to make their offer more appealing to the seller. With rising interest rates and lenders tightening their belts when it comes to home loan servicing, never assume your finance will be granted, even if you have received pre-approval!
Hot tip: write to your lender or broker and ask them to confirm that the timeframes for finance and settlement are achievable before you exchange a contract with dates for when finance and settlement will be due. Setting manageable expectations with your seller and agent will tend to lead to better outcomes for all involved.
Subject to Satisfactory Searches
In New South Wales, certain council documents and title documents must be provided to the buyer before they sign the contract. The following searches and documents are considered ‘prescribed documents’ that will automatically be attached to NSW Contracts:
- Zoning Certificate
- Sewerage Diagram
- Title Certificate
- Plan of the Land
- Easements and Encumbrances
- Strata documents including by-laws, lot certificate, strata development contract or statement, strata management statement, documents relating to the community, building management statements.
- Smoke alarm and swimming pool notices.
In Queensland, the buyer is required to conduct their own searches to ensure they are satisfied with the property before the cooling-off-period expires or due dates are achieved.
When buying in Queensland, the following searches may be necessary to ensure there are no nasty surprises waiting for you in the future.
- Title Search
- Registered Plan
- Easements and Encumbrances
- Land Tax Search
- Transport and Main Roads Property Search
- Contaminated Land Register
- Pool Safety Register
- Flood Search
These are just several of the standard searches you can include in your contract, however there are many more to cover your unique situation.
An experienced property lawyer will be able to help you identify which searches you should include in your contract.
Subject to Prior Sale
For anyone selling and buying simultaneously this clause is essential. Without a ‘Subject to Prior Sale’ condition, the buyer may find themselves in breach of their purchase contract should something go wrong with their sale. This is particularly important when purchasing property in Queensland where time is of the essence in the contract.
Subject to Body Corporate Inspection Report
Many people are choosing to purchase properties in apartments or community title schemes, whether they are downsizing, or taking advantage of a low-maintenance lifestyle with access to all the amenities they desire.
A ‘Body Corporate Inspection Report’ is prepared by a professional who conducts an inspection of the body corporate’s records. This report will indicate the financial position of the body corporate, voting rights, planned or previous works, levies, sinking fund forecast, pet and other policies, dispute resolution, compliance with legislation, minutes from meetings, and more. Importantly it will indicate whether any special contributions have been raised or are likely to be raised in the future. Special contributions are financial contributions paid by owners to cover upcoming expenses. These can be quite costly, for example if it is forecasted that a replacement of all the rooves in the strata complex is required or the property is being repainted.
Getting a full picture of the community you are prepared to move into is important when deciding to buy a strata or community-titled property.
Payment of Deposit
The deposit may only be a small percentage of the property’s purchase price. however, it is still a significant amount of money if the buyer finds themselves in breach of the contract, they will forfeit their deposit. It is important to identify how much deposit is required, when it is payable, and under what terms the deposit may not be returned if the contract falls through.
Early Possession
If a seller agrees to allow the buyer to move into the property early, the contract may include a condition for a licence agreement that sets out the rights and responsibilities of each party, appropriate dates, licence fees, and also what happens if the property doesn’t settle on time, or at all.
If the buyer is taking early possession for a short period only, the details are sometimes dealt with by way of a special condition. It is important to note that moving into the property under a licence agreement or a special condition does not create the legal rights for the buyer that a residential tenancy agreement does. Should the buyer fail to complete the contract, they must vacate the property.
Pool Safety
It is mandatory for sellers to provide either a valid Pool Compliance Certificate or a valid Certificate of Non-Compliance when selling a property that has a swimming pool. If a certificate is not available at the time of exchange a special condition should be inserted specifying whether a Compliance or Non-Compliance Certificate is going to be provided.
Where a buyer agrees to purchase a property with a pool that does not comply with the current legislative standards, the buyer has three months to obtain a pool compliance certificate once they become the new owner. In Queensland, if there is no pool safety certificate provided with the contract, there should be a clause allowing time for the buyer to conduct an inspection of the pool.
Subject to FIRB Approval (applicable to foreign investors)
Foreign Investment Review Board (FIRB) Approval is required for foreign investors or temporary residents who wish to buy residential land in Australia. Including a ‘Subject to FIRB Approval’ condition in a contract covers the buyer if they do not receive approval and need to terminate the contract. It would also allow a seller to terminate if a buyer has not given notice of the approval within the appropriate timeframe outlined in the contract.
Sunset Clause
Sunset clauses are commonly used in contracts for off-the-plan property purchases. However, they may also be used in contracts where a buyer makes the property contract conditional on the sale of their existing property.
In this case, a sunset clause can provide a buyer the opportunity to pull out of a contract if something falls through with the sale of their existing property within the timeframe outlined in the sunset clause. This may also be beneficial to the seller, providing them an opportunity to put their property back on the market if the buyer is delaying the process.
Attwood Marshall Lawyers – helping you protect your best interests when buying or selling real estate
Property settlements happen at any time of the year, which is why our lawyers will continue to be on call to guide property buyers and sellers through every step of the conveyancing process over the holiday season. Our offices remain open throughout December and January, excluding the public holidays.
Attwood Marshall Lawyers has proudly helped people achieve their real estate goals for over 75 years. We offer free pre-signing advice on all Queensland contracts to help you understand if additional conditions may be beneficial.
For advice on your property matter – whether it’s about the sales contract, the searches required, the negotiation of special conditions, or understanding disclosure requirements – please contact our Property and Commercial team on 1800 621 071 any time.
Alternatively, you can make an appointment with the team instantly online now by clicking here.
