Property and Commercial Law Associate Hannah Roach lists the common mistakes she sees in residential property contracts in Queensland and how these can cost agents valuable time – and, in some cases, impact commission payments.
Even the smallest of errors in residential contracts can create major issues throughout the transaction and at settlement, delaying payments and frustrating clients.
Our Property and Commercial Law team regularly see matters that could easily have been resolved early – or entirely avoided – if the correct details had been included in the contract from the outset.
Having a property lawyer review contracts before they’re signed can prevent issues later on, keep transactions on track and help the parties settle the matter sooner. Naturally, this will also assist agents in securing their commission without the unnecessary stress.
In Queensland, the agents play a key role in preparing the Contract of Sale (most of the time, an REIQ Contract) and facilitating its execution. In New South Wales, the go-to contract used in many residential property transactions is the Contract for the Sale and Purchase of Land.
With agents playing such a key role in preparing contracts, they need to be aware of the most common mistakes made – and how to avoid them.
Although this article focuses on Queensland contracts, there are broadly similar lessons to be learned about the completion (or omission) of details in a property contract, whichever state you work in.
The most common REIQ contract mistakes that can lead to disputes or the termination of a transaction
1. Incorrect contract date:
The contract date is when both parties signed the contract, not the day the agent views it. With most contracts now signed via DocuSign, the certificate shows when the last party signed. Manually entering a later or earlier date misaligns all subsequent contract deadlines and can be costly for either party.
2. Incorrect or incomplete contact details:
Incorrect contact information for the agent or solicitor of either side can be a crucial and costly mistake for the parties involved. Time is of the essence and we don’t want requests to extend conditions or even to rescind the contract to be lost in cyberspace, leading to significant breaches of Contract.
3. Missing buyer or seller address details:
The seller’s address is required for transfer duty purposes in Queensland. When acting for a buyer, we need these details as they should be included on the electronic property transfer to align with transfer duty data. Transfer duty is audited by the state revenue offices, and omitting these details from the contract can delay the preparation of transfer documents and the buyer’s transfer duty forms, as well as lead to compliance issues.
4. Wrong property details:
Always cross-check property information to ensure it reflects the correct title search. We’ve seen buyer’s financiers value the wrong property, causing costly delays.
5. Unclear inclusions/exclusions:
Be specific about “excluded fixtures” or “included chattels.” Misunderstandings about items like curtains, appliances, or furniture can cause disputes post-settlement. Clear descriptions help prevent this.
6. Deposit details and commission arrangements:
The deposit amount and timing must be correct. If the deposit doesn’t fully cover the agent’s commission and expenses, arrangements should be made to recover the shortfall from the seller’s settlement proceeds. This includes informing the buyer’s representative that this is the case. A lot of agents now go as far to include special conditions to ensure that the outstanding commission is paid at settlement if deposit funds held are insufficient.
7. Disclosure issues
Contracts must disclose all title encumbrances, including unregistered easements and caveats. If the property has been rented in the last 12 months, rent increase history be provided before settlement, even if the contract is sold with vacant possession.
8. Compliance certificates and safety declarations:
A valid pool safety certificate must be provided at settlement for properties with a pool. If unavailable, a Notice of No Pool Safety Certificate should be included pre-signing. Contracts should also state whether compliant smoke alarms are installed – non-compliance can result in a price penalty for the seller.
9. Statutory warranties and body corporate disclosures:
Sellers should ideally obtain a Body Corporate Inspection Report or ensure they understand their Body Corporate’s records to ensure they do not breach their relevant warranties and that their Body Corporate disclosures are accurate. Failing to do so may give the buyer grounds to terminate or claim damages.
10. Unclear special conditions or settlement date:
Special conditions must be clearly and correctly drafted otherwise, enforceability can become an issue. If settlement depends on satisfying certain conditions, reference this in the Settlement Date section (e.g. “refer to Special Condition X”) instead of an explicit date.
11. Cooling-off period misunderstandings:
In Queensland, the statutory cooling-off period starts on the business day the buyer, or their solicitor receives the signed contract. There are exceptions to this rule, not limited to when the property was sold at auction or the buyer elects to waive/shorten their cooling off period.
12. Incorrect execution of the contract:
Electronic signing requires no witnesses, or initials on every page. However, signatories must be properly authorised. For example, if a company has two directors, both must sign unless otherwise allowed for. Also, if the Buyer signs the Disclosure Statement before the seller, the buyer may elect to terminate the Contract at a later date.
Commission issues that agents need to watch out for
Here are three tips that agents should do to protect their commission:
- Check the deposit amount covers your commission – if not, ensure clear arrangements are in place to recover the shortfall from the seller’s proceeds.
- Use special conditions – many agents are now inserting special conditions that require both parties to be held responsible for ensuring the full commission is paid at settlement.
- Settlement delays mean payment delays – if shortfalls in your commission are not addressed, you could end up chasing payment after settlement, which no one wants.
Conclusion
Whether you’re a buyer, a seller, or the agents or lawyers working on the deal, having accurate and complete contracts from the outset helps everyone involved in a property transaction. –For agents, a smooth path to settlement avoids unnecessary delays and can help them get their commission more efficiently.
Agents can play a crucial role in the early stages of a transaction and are in a great position to ensure that all key details are correct and complete before the contract is executed. This includes verifying purchase terms, property inclusions and exclusions, as well as any special conditions that parties must be aware of.
The law surrounding contracts and contract termination can be complex, and we regularly see cases where parties have made the wrong call when attempting to terminate a contract on their own. Such missteps can have serious consequences – not just for the buyer or seller but for the agent, whose commission may depend on how the contract is terminated. It is well established that where a Seller currently terminates a contract and forfeits the deposit, the agent may still be entitled to claim their commission. But if a termination is invalid, the agent may lose that entitlement until the matter is validly settled.
Real estate agents should also be mindful about who they refer buyers and sellers to for their legal representation. An inexperienced conveyancer may be unable to deal with complex or contentious issues during a transaction, and poor advice could put the entire deal at risk. Referring clients to qualified and experienced property lawyers helps make sure that the contract is properly prepared and everyone’s rights are protected.
Attwood Marshall Lawyers – your local property law experts
Do you need a second set of eyes on your next contract? Our property law team works closely with agents to make sure that contracts of sale are watertight, helping you get to settlement faster – and paid sooner.
Attwood Marshall Lawyers also has a dedicated litigation department with experienced lawyers who specialise in contract disputes and terminations. Careful advice and guidance will reduce and potentially avoid the backlash from termination or dispute over a contract.
Please get in touch if you have any legal questions concerning property contracts or any other documentation related to a property transaction and settlement. Contact our Property and Commercial Department Manager Taylah Lein on direct line 07 5506 8208, email tlein@attwoodmarshall.com.au or call our 24/7 phone line on 1800 621 071.
