As we have outlined in previous articles, it is advisable for a Lawyer (preferably us) to review a Contract of Sale and advise you on all critical clauses and dates.
Importantly, the Contract will include the following:
- The property address;
- The title particulars;
- The goods to be sold with the property;
- The special conditions under the Contract;
- The purchase price;
- The deposit amount;
- The proposed Settlement Date; and
- The Vendors Statement.
Now often, the Contract will contain special conditions regarding the sale of the property, and it is important that prospective vendors and purchasers understand what those special conditions are, what they mean and what your rights and obligations are under the contract in light of the inclusion of these special conditions.
What are special conditions?
Special conditions in a property contract are additional conditions attached to the sale of the property alongside the standard form conditions normally found in a contract of sale.
Aside from general conditions, vendors or purchasers may request to insert special condition(s).
What types of special conditions are there?
Vendor’s Benefit
A vendor may request, but are not limited to, any of the following conditions:
- Unconditional Contracts; and
- Settlement period clauses.
Unconditional Contracts:
These are contracts that have no conditional clauses. This contract denotes that the Buyer must settle the property regardless of finance being approved or not or whether the property is in a condition that is deemed acceptable by the buyer. However, with this style of contract a seller must proceed with the offer they chose to accept.
Settlement Period Clauses –
The vendor sets the settlement date in the contract of sale. Property settlement periods are usually anywhere between 30 to 90 days, but this is subject to the Vendor.
Purchaser’s Benefit
Special conditions for purchaser benefit provide protection and ensure there is an “out” option if agreed conditions are not satisfied.
A purchaser may request, but are not limited to, any of the following conditions:
- Subject to finance;
- Subject to a building and pest inspection report; and
- Subject to a due diligence period for close inspection of the property.
Subject to Finance:
A purchaser may require a loan to be approved for the purchase of a property. This clause provides that any contract that a purchaser enters into may be ended if the purchaser, did everything to obtain and secure a loan approval and but could not secure one prior to the financial approval date stipulated in the contract.
However, the purchaser must do all that they can meet the contractual and financial approval obligations. Remember, it cannot be assumed that a ‘subject to finance’ clause can be used for other reasons of termination.
Building and Pest inspections:
This clause enables purchasers to undertake a building or pest inspection by an agreed date. A contract may be terminated if either report is unsatisfactory.
The entire clause must be considered and the obligations on a purchaser are to be aware of any additional conditions to this clause. Minor condition issues alone may not trigger a nullification of this clause as it may come with its own set conditions, including, but not limited to:
- Requirement of major structural defect; and/or
- Major current termite infestation.
Subject to due diligence:
This allows a purchaser to undertake inspection and searches on the property and enables the purchaser to terminate the contract for any adverse reason(s). Due diligence clauses protect the purchaser as the buyer and cover any of the following:
- Soil testing;
- Body Corporate inspections;
- Surveys;
- Council searches;
- Conveyancing searches (including building or pest inspections).
Regardless of whether you are selling or purchasing a property, it is critical that your contract is drafted correctly and identifies relevant clauses, conditions and concerns.
That’s why if you have any questions concerning the above, please don’t hesitate and contact the Arro Property team today!
