By Paul Browning, AICWA member and licensee at Goldfields Settlements
Often we are confronted by clients who either don’t want to proceed with a property purchase or sale, want to change the terms of the deal, or want the other party to do something the contract doesn’t require them to do.
It’s at this point that we become the bearers of bad news and explain to them that they have entered into a legally binding contract that locks them in.
The whole process of buying and selling land is determined by the Contract of Sale (also called the Offer and Acceptance), so IF IT’S NOT IN THE CONTRACT, IT’S IRRELEVANT and you (or they) don’t have to do it!
So the critical point here is get your contract right and don’t agree to a contract that isn’t what you want. Don’t agree to a contract means DON’T SIGN IT!
When you’ve entered into a legally binding contract, that means both parties (ie Buyer and Seller) are entitled to rely on the other party honouring the contract. Not doing so can have massive consequences.
To find out what should be in a contract, talk to a lawyer or a settlement agent first, BEFORE you sign a contract. You’re likely to be making the biggest purchase of your life, so why wouldn’t you get specialist advice?
And if that’s not enough, when buying a house you have none of the usual protections from consumer law . All your rights and obligations are contained in the contract and there are no implied rights other than those specifically contained in the contract. For example, there’s no implied right to receive the property cleaned and ready to move in, unless it’s explicitly stated as a special condition in the contract.
A contract without additional clauses added as special conditions, or annexures, is essentially an “as is, where is” contract, which means you take the property exactly as it was on the day you made the offer, irrespective of anything else.
Some of the standard clauses from some real estate agents aren’t much better. For example the standard REIWA building inspection clause only gives buyers protections from structural defects, which we almost never see (less than one house in a thousand) but doesn’t cover expensive faults that, had the buyer known about them before signing the contract, they’d have either required the seller to fix them, offered a lower price, or not bought the house at all.
Another example is termite clauses that only give buyers protection if any termite damage is structural damage. Given a choice, most buyers would prefer the seller be required to fix any termite damage, not merely structural damage, which again, we almost never see. In my view, limiting the termite clause to structural damage renders the clause completely pointless.
It is greatly preferable for clauses and special conditions to be phrased as ‘conditions precedent’ which means they must be fulfilled before settlement. Often they are expressed as warranties or representations, which are all very nice, but you can’t hold up settlement to ensure they are fulfilled.
Holding up settlement is about the only way to insist that something is done before settlement, because you’ve got no hope after settlement, unless you take the seller to court, which is extremely costly ($10,000 to $20,000+), time consuming (months or years) and hugely stressful. Hence our preference for conditions precedent.
But buyers and sellers can’t be expected to know all this. Remember we are looking at contracts all day every day and can advise you on this. Our advice is free and simply part of our settlement service. Use it.