Are you in the market to buy or sell your home or residential investment property? This is an important financial decision. The first crucial step is to ensure the contract meets your specific needs and requirements – do not assume the 'standard' contract is always appropriate for your needs.
Negotiating the terms of a contract can be challenging, particularly in the current competitive market where properties may sell before or within a few days of listing. It is still important to not be rushed into signing a contract, to take the time to understand the terms and to negotiate with the agent and other party to insert the conditions you need to protect yourself.
Our Commercial + Property team can work with you to review the draft contract, to explain its terms and recommend any changes that you need.
Contract Essentials for a Buyer
When you are buying a property, the contract must include any termination rights you need, including:
- a finance condition with sufficient time for your application to be processed. This condition provides a right to terminate if you do not obtain an approval on terms that you are happy with (for example, interest rates or repayment period);
- a building and pest condition to have the property inspected by a inspector to identify any issues. The cost of obtaining such reports could save you significant future costs for repairs or replacements for building issues (including structural issues, maintenance that has not been completed, water leaks, roofing issues etc) or pest issues (past or current pest activity including termites or wood borers etc);
- a due diligence condition so you can investigate the property
and terminate if you find any adverse results by ordering search
reports:
- to determine if all improvements constructed since 1975 have a building approval;
- to ensure the property is not listed on the contaminated land register (where there could be ongoing management costs and costs to try to remove it from the register);
- if a unit an inspection of the body corporate records to
identify:
- any building or pest issues (including combustible cladding or structural issues etc) or where there may be insufficient monies held in the body corporate accounts to cover such costs;
- any court applications; and
- any liabilities that are unpaid where there is insufficient monies to cover them.
- a subject to sale condition if you need to sell another property in order to buy. This can be drafted to give you the time you need to obtain a sale contract, for that sale to become unconditional (i.e. finance and building and pest etc being satisfied by the Buyer) and for the settlement of that sale.
Contract Essentials for a Seller
When you are selling, you need to include any pre-contractual disclosures to a buyer, otherwise the buyer may have a right to terminate and you could lose your sale including:
- if selling a unit, the buyer must receive a signed Disclosure Statement before they enter into the Contract; and
- a notice to the buyer if the property is registered on the contaminated land register or environmental management register.
It is important when selling to have the draft contract reviewed to:
- understand the nature of any conditions and rights of termination that could be exercised by a Buyer (including finance, building and pest and due diligence etc); and
- to disclose any title encumbrances including registered leases, easements or any council infrastructure (sewerage, drainage or stormwater etc).
You do not want to find out about these issues many weeks down the track, when a Buyer might exercise a right to terminate, if they could have been easily addressed upfront before the Contract is signed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
