Have you purchased a property?

Don’t neglect your rights in the lead up to settlement.

Under general condition 29 of the Law Institute of Victoria or Real Estate Institute of Victoria version of the Contract of Sale (‘the LIV Contract of Sale’) you have the right to inspect the property within 7 days before settlement and you should ensure you do so!

The final inspection prior to settlement is important because it allows you to identify, if any, damage or loss that may have occurred to the property. This is provided for under general condition 31.2 of the LIV Contract of Sale as -

‘the vendor must deliver the property to the purchaser at settlement in the same condition it was in on the day of sale, except for fair wear and tear.’

The Vendor, that is the person selling the property, is responsible for any loss or damage to the property prior to settlement (general condition 31.1). If for some reason the property is not in the same condition and damage has occurred, such as hail damage due to our most recent storms or the automatic gate has stopped working, then you, as the Purchaser are protected under general condition 31 in a number of ways.

Firstly, if the damage is more than fair wear and tear but still only minor damage, whilst you cannot delay settlement (general condition 31.3) you can claim compensation from the Vendor after settlement.

General condition 31.4 further provides that you can withhold up to $5,000 from the amount due to be paid to the Vendor at settlement to allow for repairs. Withholding occurs by paying the amount to the trust account of a stakeholder to the transaction, usually your lawyer, and you as the Purchaser can be required to pay the same amount to the stakeholder. The amount will then be held until the matter is resolved between the parties after settlement and depending on what is agreed by the parties the monies held may be used to fund any repairs or returned to the party entitled once the damage has been rectified.

Firstly, if the damage is more than fair wear and tear but still only minor damage, whilst you cannot delay settlement (general condition 31.3) you can claim compensation from the Vendor after settlement.

General condition 31.4 further provides that you can withhold up to $5,000 from the amount due to be paid to the Vendor at settlement to allow for repairs. Withholding occurs by paying the amount to the trust account of a stakeholder to the transaction, usually your lawyer, and you as the Purchaser can be required to pay the same amount to the stakeholder. The amount will then be held until the matter is resolved between the parties after settlement and depending on what is agreed by the parties the monies held may be used to fund any repairs or returned to the party entitled once the damage has been rectified.

If significant damage has occurred and the property is now not fit for human occupation you can seek to rescind the Contract of Sale.

As the above general conditions seek to protect the Purchaser’s rights it is very common for all or some of these conditions to be removed from the Contract of Sale by way of the special conditions included by the Vendor in the Contract of Sale. This highlights an important reason why you should always have your Contract of Sale reviewed prior to signing to ensure your rights are protected.

Should you require further clarification, have any questions or would like your Contract of Sale reviewed by one of our property lawyers, please do not hesitate to contact our office today.

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