Buying Real Estate and Special Conditions – What Are They? What Do You Need To Know?
Melissa Patterson, Director of Argent Law, discusses the importance of having your contract reviewed by a lawyer prior to buying.
Whilst there is no legal requirement to have the contract reviewed, an experienced guiding hand can ensure you enter into the purchase with confidence, knowing what your obligations and entitlements are under the contract.
If you intend to bid at auction, you should have the contract reviewed, because as of the date of making the winning bid you will be regarded as entering into the contract and you will not be able to re-negotiate the terms of the sale afterwards.
All real estate Contracts of Sale, in all States and Territories of Australia, contain a number of standard “general” clauses that are designed to ensure the contract meets the basic legal requirements for the sale of real estate in the relevant state, so that legal title can be passed from one owner to the next.
Buying & Selling Real Estate Process
An experienced purchaser may feel they are extremely knowledgeable about the process of buying and selling real estate, purchasing a new home and they don’t require expert legal advice. However, rarely is there a situation where there aren’t special conditions included within the contract.
Sometimes the special conditions delete or amend the general conditions. Other special conditions may be inserted because there is an issue with the property that the Vendor does not want to take liability for – such as a shed has been erected on the property and the Vendor has not obtained permits. If you sign that contract you take responsibility for the illegal erection of the shed.
Buying Property Special Conditions List
Special conditions can take any shape and form. Here is a non-exhaustive list of commonly used special conditions or review our tips and traps when buying a property article which we often see when we review contracts:
Rules for the conduct of any Auction;
Acceptance of title by purchaser at the time of any early release of deposit funds to the seller (vendor); Penalties for failure to settle on the agreed date – such as the Purchaser is to pay for the legal fees of the Vendor, paying the mortgage of the Vendor and any other costs that the Vendor may incur;
Payment of the Vendor’s legal fees for the Purchaser wanting to nominate;
A prohibition on either party relying on any condition, warranty or terms that are not set out in the contract; Building inspections – which are not compulsory;
Pest inspections – also not compulsory;
Adjustments and outgoings payable on settlement – be careful about special levies raised by the Body Corporate – who pays for this? As well as payment of the Vendors land tax – is it a single holding basis?
PEXA Online Conveyancing System in Victoria
A new development in the area of property law relates to using the PEXA online conveyancing system. Gone are the days of a physical settlement; titles are now electronic and there is no exchange of cheques.
All property lawyers and conveyancers in Victoria are now legally required to operate under the PEXA electronic system, which brings together all interested parties, including State Revenue Offices expecting to be paid Stamp Duty.
PEXA has also led to a most interesting development in the field of special conditions.
It has always been the case that a purchaser who does not complete a purchase on time for any reason not provided for in the contract, will be liable to pay penalties. These penalties are usually interest charged at a specified daily rate until settlement takes place.
However, with the advent of the fast, efficient and user-friendly PEXA, it has now become common for the seller (vendor) to seek for a settlement to take place not only on a specific date, but at a specific time! Therefore, if for some reason settlement happens on the correct date, but an hour or two later than previously agreed between the parties, the purchaser may be liable for penalties imposed by the seller, even if the delay is the result of some mishap or technological disruption on the PEXA system (i.e. it is not the fault of the purchaser or their lawyer). This is not ideal as the Purchaser cannot control the two different banks involved in the transaction, the state revenue office, the land titles office or any other party that is involved!
Argent Law Approach
Accordingly, at Argent Law, we are often drawing our client’s attention to such clauses – and seeking that this special condition be deleted. Clauses are actually necessary for the successful transfer of real estate from one party to the other – that is, if it is likely (or not) that such a condition being included in the contract is likely to be a “deal-breaker” for one party or the other when negotiating a property sale contract.
This is just one of the many ways the Argent Law property team is keeping up to date with technological advances impacting on the law and negotiating on behalf of our clients where it benefits them for us to do so.
Buying a house is one of the most expensive purchase in your lifetime. Having your contract reviewed will be money well spent!