Buying Residential Property | Getting the Contract right the first time
Buying a Property
Buying a Property is a big deal.
Achieving the ‘Australian Dream’ is often a feeling of autonomy, completeness, and goal in which most people will aspire to accomplishing throughout their lives. Having your own property often gives you the independence to live your way, by your rules, saying goodbye to Landlords and the occasional real estate inspection.
Having an Investment Property creates diversity in your portfolio, and gives you an asset by which you may derive income from.
For many people, buying a Property will be the biggest purchase of their life… which is why we need to get it right the first time.
The Contract
For the purposes of this article, I will only be referring to the current Queensland REIQ Contract for Houses and Residential Land (14th Ed). For queries in relation to other versions, or alternative Contract formats, please contact us directly to discuss.
So you’ve found your dream home, and you’re sitting in the Agent’s office ready to sign. An exciting moment for everyone in the room. The Agent will normally prepare the Contract of Sale based upon the offer and terms you are prepared to put forward to the Seller.
Once a real estate contract has been drafted, I would strongly suggest seeking independent legal advice with respect to the terms and conditions before proceeding.
If you choose not to seek advice on the Contract, the following are some tips that can assist you with making sure you get the Contract right the first time.
Read the Contract
This may sound obvious, but it is incredible how many people fail this first step.
I cannot stress the importance of this step enough. You are committing yourself contractually to possibly the biggest purchase of your life, so it’s important you know what’s in the document you are putting your signature on.
Is there anything you don’t understand? Has the Agent inserted Special Conditions? Can you afford the deposit that has been inserted? When the Seller returns the signed Contract, have they made any amendments? Are you buying in a trust and the agent has put your personal names in as Buyers?
These are just some of the types of questions you need to be asking.
Check for mistakes
Spelling errors, incorrect description of the Property, terms that have been omitted. These are all things Solicitors look for when they receive the house contract.
Stephen King once famously said, ‘Only God gets things right the first time’.
Errors in a real estate contract don’t only cause headaches for your solicitors, but also your Bank. Your Bank will require that the Contract be amended to reflect the correct position before advancing any money for the purchase. This can be problematic, as to amend the Contract post – execution; you will require both parties consent. This may not be easy if you have a difficult Seller.
Furthermore, even something as simple as the incorrect spelling of your name on the Contract can have Stamp Duty implications if not handled correctly, that could even have you paying double Stamp Duty on your purchase!
Speak to your Accountant
Whether you are purchasing the Property in your own name, a corporate entity, or a trust, it’s important to get advice specific to your personal needs. Whether you can afford the repayments, rates, insurances and other expenses incidental to owning a Property are all examples of questions that you should know the answer to before signing the house contract.
If you are purchasing the Property in an entity that is not you personally, it is important that this entity is correctly described on the Contract.
If you are told it’s included, include it!
Page 3 of the REIQ Contract provides a handy little section called ‘included chattels’. If the Selling Agent or the Seller agrees to leave a couch, lawnmower, dishwasher, or anything that could be considered a ‘chattel’, it is important to note it in the Contract.
Failure to do so can often lead to issues closer to Settlement, normally once you have attended your pre-settlement inspection (which you should do) and find out that the things you were told would be left, have been taken by the Seller.
There is a whole world of legal articles out there which talk about the legal difference between a ‘chattel’ and a ‘fixture’, so I won’t be discussing this here. The safest option is to just include something you have been assured will stay at the Property, in the Contract.
Give yourself some time to pay the Deposit
Unless a time frame is specified in the Contract, the initial deposit is payable by 5:00pm the day the Buyer signs the Contract. If the deposit is not cleared into the Deposit Holder’s trust account by then, you are in breach of Contract.
We often suggest that the words ‘within 2 Business Days of the Contract Date’ are inserted as a time frame for payment of the initial deposit, to ensure that the Buyer stays compliant with this term.
If a balance deposit is payable, a good time to pay this is often once the Contract has become unconditional. Again, it is important to leave yourself enough time to have the funds cleared into the account of the Deposit Holder to ensure compliance with your obligations under the Contract.
Protect yourself with Conditions
If you are obtaining Finance in any way, you need to make the Contract subject to Finance.
Don’t naively assume a ‘pre-approval’ is an approval worth relying on. Don’t trust your family members when they say they will loan you the money. Make the Contract subject to Finance.
If you’re obtaining a Building & Pest report (which you should do), the Contract should be made subject to you being satisfied with this Report.
Both conditions should have a reasonable amount of time for you to be satisfied under both conditions.
Banks will not speed up a finance approval application because you only put ‘7 days’ in the Contract, and Seller’s will not always agree to extend dates.
If you want some time to investigate matters in relation to the Property after the Contract has been signed, talk to someone about inserting a ‘Due Diligence’ clause into the Contract. That way, you will have a certain amount of time to undertake investigations in relation to the Property, and to be satisfied with these investigations, failing which you may terminate the Contract and get back your deposit (if drafted correctly).
Get a copy of the Title
The Title is your guide to many of the Contract particulars, and the Contract should reflect the details that are in the title. The Seller’s name, Lot and Plan description, Title Reference, Encumbrances – these are all Title particulars that should be correctly noted in the Contract.
If the Title has encumbrances (such as Easements), you should seek advice from a Solicitor as to the obligations under that encumbrance. Encumbrances often contain information about things you can, and cannot do with the Property, and can greatly affect a person’s decision as to whether or not they buy a particular Property – so best to get advice.
Get Insurance
Standard Term 8.1 of the ‘Terms of Contract’ provides that the Property is at the Buyers Risk from 5:00pm on the first Business day after the Contract date.
Make sure you go and see someone about insurance once you’ve signed the Contract so it is ready for when the Seller has signed.
Talk to us
Whether you are buying or selling, if you are unsure about your obligations under a real estate contract of sale, or would like to speak with someone regarding the process we strongly suggest that you make an appointment with us prior to signing your property contract.
Notwithstanding anything mentioned in this article, it is our view that you should always seek legal advice before signing a house contract of Sale.
Please call us on (07) 5441 1400 to book an appointment with Mark Bray or Jacob Corbett.
Author: Jacob Corbett
Note: This summary is provided for general information regarding the residential Contracts of Sale in Queensland, and should not be construed as Legal Advice. Should you require Legal Advice in respect of any of the matters raised above, we strongly recommend that you seek legal advice as soon as possible.
You might also be interested in
