The Importance Of Contract Reviews & Off The Plan Purchases
Having a lawyer review a Contract of Sale of Real Estate prior to execution is one of the most important aspects of buying a property, however it is quite often overlooked.
The ultimate purpose of a review is to make the Purchaser aware of the complex content of a Contract before they become legally bound to the terms and conditions. This is particularly pertinent as Real Estate Agents are not able to offer legal advice on what is enclosed in a Contract.
Details which require perfect oversight in a Contract, include, but are not limited to:
The Particulars of Sale, such as:
- The certificate of title reference;
- Goods sold with the land;
- Contract price;
- Deposit amount and when this is payable;
- Whether GST applies;
- The date of settlement;
- Whether the Contract is subject to a current lease; and
- Whether the Contract will be subject to the Purchasers attaining loan approval.
Any Special Conditions inserted in the Contract, such as:
- Penalty interest if settlement does not occur as scheduled;
- Inspection of premises;
- Whether the Vendor is a Foreign Resident and tax will need to be paid to the Australian Taxation Office upon settlement;
- If the property is subject to Auction Conditions; and
- Whether any of the General Conditions have been amended.
Any encumbrances, covenants or easements over the property which could impact any potential renovation or development you may wish to undertake.
Any of the above points can lead to disputes between Vendors and Purchasers at any time and it is worth having these reviewed by a lawyer who can advise of same, alongside any worst-case scenario outcomes.
Off The Plan
As off-the-plan developments are becoming increasingly popular in this day and age, one of the more prevalent problems we are experiencing is issues that are unknown to Purchasers, arising out of signing off-the-plan Contracts without seeking legal advice beforehand.
An off-the-plan purchase refers to executing a Contract to acquire a piece of real estate that is not yet built. The reason that off-the-plan purchases are becoming progressively common is that there is an unwritten rule that, generally speaking, a Purchaser will be entering the property market at a lower price than if they were to buy an existing dwelling. The basis for this is that developers offer reduced prices to obtain adequate transactions to begin the development. However, Contracts for off-the-plan and large-scale developments often contain a number of Special Conditions and hidden discrepancies and risks, meaning it is vital that this document is reviewed by a legal professional prior to execution.
Some of the risks associated in off-the-plan Contracts are as follows
- The Purchaser’s ability to attain finance, noting that the Contract will not be ‘subject to finance’ and the date of settlement may be years in advance – the Purchaser’s financial position may have altered making obtaining finance impossible;
- Whether there is a defects rectification clause. Here, the Purchasers have a right to review the property once it is complete and determine whether there are any defects that need restoration by the builder/developer before settlement;
- The interest generated on the deposit being vested with the Vendor as opposed to the Purchaser;
- The Purchaser’s payment of connection fees such as water, electricity and sewerage which can amount to thousands of dollars of additional and unbudgeted for expense; and.
- The Purchaser’s inability to on-sell the property until post settlement – this can create huge issues if you can no longer settle.
The abovementioned are only some of the issues that may arise as a result of executing a Contract without having it reviewed. ONCE THE CONTRACT IS SIGNED THERE IS NO NEGOTIATION!
Therefore, if you are looking at purchasing a property anytime in the near future, by having a lawyer review the document prior to execution, you are reducing your risk of unexpected issues.If you are a prospective Purchaser and would like us to review your Contract of Sale before signing, please get in touch with one of our property law professionals today.