10 Jan, 2020
Have you ever signed a contract without actually reading the fine print? While you can probably get away with it with your Netflix subscription, contracts of sale are different.
When it comes to purchasing a property, it’s vital that you understand what a contract of sale is, the effect of the contract, as well as the role you play in this type of agreement. By understanding the legal aspect of buying a house, you will reduce the risk of falling into a dispute – as well as the risk of a lengthy (and costly) litigation.
When entering a contract of sale, it’s important to take note of what kind of property you are purchasing. Consider whether it’s an established home or an ‘off-the-plan’ property, as your contractual obligations may differ.
It’s also important to take note of what state you are living in. The legislation surrounding the requirements of a contract of sale differs by state. Despite this, there may be common elements.
In NSW, requirements for ‘off-the-plan’ contracts were amended this year. Through the Conveyancing (Sale of Land) Amendment Regulation 2019, ‘off-the-plan’ specifies residential lots that have not been created at the time the contract is formed.
This section lists the details of the sale, such as the:
If you’re buying an established home then this should be stipulated in this section, along with the home’s fixtures and fittings (if these are included in the sale). If you have negotiated to buy furniture items within the home or sheds, cubby houses or other items, then these should be listed in this section.
You may also find that any exclusions or items that are not included in the sale are listed in this section. For example, the agent may state that all house fixtures and fittings are sold with the home except the custom water feature hanging in the atrium. This then means that the buyer is not selling their custom water feature and that this is not inclusive in the sale of the property.
The total cost of the property will be written in this section of the contract. It is typically listed in the ‘Price $’ allocation. The deposit amount will be written under this dollar amount along with the date of the payment and any monies that have already been paid. The balance due at settlement will also be stipulated so that the buyer knows how much they will have to pay at the time of settlement.
An agent will ask a buyer for some type of deposit at the time of signing the contract. This is typically a figure that is negotiated between the agent, who is representing the seller, and the buyer. The deposit is a sign of the buyer’s authenticity and commitment to buy to property.
This section defines the date of settlement or when the property will be transferred from the vendor to the buyer. On the settlement date, the buyer’s lender will transfer the money to the property and collect the deed for the property from the vendor’s lender. Once the settlement has been finalised the agent who was selling the property will be notified. They will then contact the buyer and let them know that they can collect the keys to the property.
If the property is currently tenanted, then ‘subject to lease’ will be written in this section. The details of the lease should then be disclosed below this statement. Tenant details, when the lease expires, the rental amount and when the rent is collected should all be included. If the buyer requires vacant possession of the property, then they must notify the vendor, who will give the tenant 60-days notice in accordance with tenancy laws.
If this section is blank, then it means the property is not leased. The buyers are then able to move into the property themselves or they can elect to lease the property.
If the property is to be paid for by a loan, then this will be stipulated in this section of the contract. Details will include the amount of the loan, the date of the approval and possibly the lender’s details.
Any conditions that apply to the sale of the property will be listed in this section. Special conditions typically refer to any clauses that could affect the sale of the property, such as loan approval or the sale of another property or business. In most cases, if there are conditions then these will be listed as ‘subject to’, which means that the sale of the property will not occur unless these conditions have to be met.
Most contracts will also have a general cooling-off period of 3 business days (72-hours), which is effective from the time of contract signing. During this time either the vendor or buyer can change their minds about selling or buying the property. If they change their minds during this time then they can elect to dissolve the contract and the sale of the property will not go ahead.
It’s vital that before signing the contract of sale, you make sure you read the document thoroughly. Ask as many questions as possible to clarify points. Check, then re-check details, such as names, addresses, and the amount of money to be exchanged. Also check the legal terms and conditions and make sure you understand everything associated. If you are positive all is in order and correct, then sign the contract of sale.
If you’re still trying to wrap your head around the concept of a Contract of Sale, don’t stress. We recommend seeking independent legal advice to help clear up any confusion that you may have.
Words by Vidya Kathirgamalingam
Looking to refinance your current home loan? Contact eChoice today, and one of our friendly brokers will help you to find the best deal.
An eChoice home loan expert will be in touch with you shortly.