It is very common for people to enter into Property Contracts over the weekend, without having a Lawyer go through the Contract. Property transactions can be very fast moving which can often cause pressure to enter into Contracts on less favourable terms in order to secure a Property. This can be very risky and we strongly recommend having a Property Lawyer go through a draft Contract prior to execution. Each property is unique and may require Special Conditions to be included so that the Buyer is not left in a vulnerable position. There are a number of important considerations, here are a few to think about before you sign:
1. Full Legal Name
Be sure to put your full legal name on the Contract including your middle name. The name on the Contract has to be identical to the name that is on your Driver’s Licence and Passport, used on your Finance application and the name that will be used on the Transfer that will be lodged with the Department of Natural Resources, Mines & Energy.
A spelling error or a missing middle name may seem insignificant and like an easy problem to resolve after the Contract has been signed, however it has the potential to delay the process and if not rectified could have Transfer Duty implications.
If you want the Contract to be conditional on Finance, all three fields of the Finance section of the Contract must be filled out – Finance Amount, Financier and Finance Date. If all three sections are not completed, the Contract will not be conditional on Finance and you risk losing your rights under this Condition.
Generally, the Finance Amount will be completed as ‘Sufficient to Complete’ and Financier as ‘Buyers choice’. This wording is very broad, so it gives you the ability to change financiers if you get a better deal from your mortgage broker with someone other than your current bank. It’s best to not write a specific Financier i.e. NAB, as this may limit your ability to terminate the Contract if you try another financier and have finance declined as you must take all reasonable stepsto obtain approval and that must be with the Financier you have specified.
3. Building & Pest
If you want the Contract to be conditional on a satisfactory Building and Pest Inspection, you need to complete this section of the Contract. It is best to complete this section as a period of time from Contract Date, such as ‘7 Days from Contract Date’ however you can also complete this as a specific date. Be sure to leave enough time to carry out the necessary searches and inspections and note that some searches can take longer than 7 days to come back.
In order to exercise any rights under this Condition, you must obtain a written report for the Building and Pest Inspection, though you do have the right to only obtain one of the Reports. This Clause does not allow you to terminate for any reason, you must act reasonably in terminating the Contract under this Clause. Under Clause 4 of the Contract you will also be required to provide a copy to the Seller which may service to validate whether you have acted reasonably.
4. Cooling Off
Unless the sale was by an auction or you have agreed to waive the cooling off period, the Contract will be subject to a cooling off period. During the 5 business day cooling off period, you can terminate the Contract for any reason. The cooling off period begins on the day you receive the Contract that has been signed by both parties. If you both sign the Contract over the weekend, it will commence on Monday and end on 5:00pm on Friday.
Note that the Seller must return the deposit within 14 days from the Contract being terminated, however they may deduct a termination penalty of 0.25% of the Purchase Price. For this reason, it is important to ensure that you discuss your options with your Lawyer prior to exercising any rights under the Contract.
Under Clause 8 of the REIQ Standard Conditions, risk passes to the Buyer from 5pm on the first business day after the Contract date. For this reason it is important to organise insurance cover as soon as possible after the Contract has been signed by both Parties. If you both sign the Contract over the weekend, be sure to have an insurance policy in place from 5:00pm on the following Monday.
Although this may seem like an unnecessary cost, especially if you don’t go through with the purchase, you may be liable if something were to happen to the property. It is also important to note that you may be able to terminate the policy at no cost if the policy is subject to a cooling off period.
The information in this post relates to the Queensland REIQ Contract, if the Contract is not an REIQ be sure to seek advice prior to signing.