Purchasing a property can be a very exciting time, particularly after years of saving and hunting for the perfect new…
Contract terms you need to know
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Once you have found the property you want to buy, the selling agent will usually need you to make an offer covering the standard contract terms (purchase price, proposed settlement date, and contract conditions). You can make the offer one of three ways:
- a verbal offer
- an informal written offer, usually via email
- a formal written offer by presenting a signed contract to the seller – if it’s accepted and signed by the seller, it’s legally binding.
No matter how you make the offer, but especially if you make a formal written offer, you need to be aware of exactly what contract terms you are agreeing too.
We have set out below a simple explanation of common contract terms that buyers are not usually aware of.
Remember, we offer free contract reviews to buyers – contact us before you sign anything to make sure you get what you’re expecting.
Contract terms you need to know
The contract defines the “Buyer” as the party or entity as set out in the contract schedule. You need to check and confirm your details as listed in the contract – it may seem obvious, but a minor misspelling of your name or incorrectly identifying a trust company or ACN can cause a major headache when it comes time to obtain finance and settle.
You should also obtain financial and legal advice to ensure you are purchasing the property in the correct entity as well.
“Subject to finance”
By ticking the “subject to finance” box in the contract schedule, the purchase of your property is subject to you obtaining financing within the specified period of time (usually 14 days). Most contract are signed “subject to finance”, which gives you the certainty and comfort of knowing that the seller can’t sell the property to another buyer while you get confirmation from your bank or mortgage lender that you have the money you need for the purchase.
“Subject to building and pest inspection”
Similar to the “subject to finance” condition, if the “subject to building and pest inspection” box of the contract schedule is ticked, you will have a certain period of time in which to have the property inspected by a licensed building and pest inspector (the time is identified in the clause and it’s usually 14 days).
We recommend that buyers include this clause, so you have the peace of mind of knowing the property can be properly checked for problems before you commit to buying it. If you find serious issues, you can cancel the purchase, or you may be able to renegotiate a reduced purchase price to cover the cost of fixing the issues.
“Time of the essence”
This contract term is generally expressed in most contracts in Queensland. It means that, where the contract provides for things to be done by a certain date, you must do it strictly within that time period. If you fail to do that thing within the time period, you will be in breach of the contract and the seller will usually have the right to terminate.
The contract should set out when:
- any initial deposit is payable
- any balance deposit is payable
- the balance purchase is payable.
You should keep in mind that the initial deposit is usually payable when you sign the contract, and the balance purchase price is payable at settlement. If you fail to pay money when due (including the deposit) you will be in breach of the contract and the seller will generally have the right to terminate the contract.
The standard terms of contact in Queensland usually provide for the risk in a property to pass to the buyer, not from the settlement date, but from 5pm on the first business day after the date that the seller signs the contract.
This means if anything should happen to the property, you as the buyer may be responsible for it – even though the settlement is not complete.
You should insure the property from the date the contract is signed. The type of insurance you need to take out will depend on the type of property you’re purchasing.
In the fine print of most contracts in Queensland, there is a standard term which states that the contract contains the entire agreement and anything else is expressly excluded. You therefore need to ensure that the contract reflects the actual agreement you have made with the seller, and includes any representations or promises that may have been made to you to induce you to entering into the contract.
Special conditions are unusual terms not included in the standard contract terms. Where there is something unusual about your purchase, you may need to address a special condition. We strongly recommend you discuss special conditions with your conveyancer.
Want to know more? Our experienced Conveyancing Team is here to help.