For many people, buying or selling a property is the largest legal transaction they will enter into in their lives. Therefore, whether you are selling or buying, we cannot overstate the importance of having a legal professional review your Contract prior to you signing it to ensure that you are happy with its terms.
In Queensland, most residential contracts come in the form of ‘ADL’ or ‘REIQ’ Contracts. These ‘standard form’ contracts offer some basic conditions which many would be familiar with, such as the option to make the Contract subject to a Building and Pest inspection, or making the Contract subject to Finance approval.
Whilst these important conditions are relatively well known, both the ADL and REIQ Contract also have a provision for Special Conditions to be inserted.
Some of the common special conditions that we see regularly in practice, include:
Due diligence queries
Typically, due diligence conditions are inserted for the benefit of the purchaser and allow the purchaser to make further enquiries in relation to the property. If the purchaser is not satisfied with the results of their enquiries, they can usually terminate the Contract and keep their deposit.
Unless the Contract specifically states what the scope of the due diligence enquiries are, the purchaser can make any further enquiries they wish (within legal limits), including but not limited to: conducting specific searches on the property, liaising with the Council or other relevant governmental Departments, or completing surveys and other tests on the property.
Due diligence conditions are highly desirable for purchasers because it affords them protection if the results of their due diligence enquiries are less than favourable. For this reason, some vendors are hesitant to include these types of conditions on their Contracts.
The contract being subject to a prior sale
If you are purchasing a property but need funds from the sale of your current property to afford your purchase, this type of special condition could be of great benefit to you.
It may seem silly, but if you are relying on funds from your prior sale to purchase your new property and your prior sale does not settle, in most circumstances you would still be legally bound to purchase the new property regardless. Of course, if you were intending to use the proceeds from your prior sale to purchase your new property, this can cause quite the problem.
If you have a special condition in the Contract stating that the purchase is subject to your prior sale settling, if your prior sale did fall through, you could terminate the purchase Contract lawfully and keep any deposit you had paid.
Accordingly, this condition is inserted for the benefit of the purchaser and we would highly recommend this option if you are trying to sell and buy a property.Sunset clauses:
Sunset causes are a great option for a vendor who wants to keep their options open.
Typically speaking, a sunset clause allows a vendor (or their representative) to continue to advertise the property for sale. In the event that the vendor receives an offer which is more favourable to them, the vendor can then present the purchaser with the more favourable Contract. At this time, the purchaser will have a set time limit (usually of 3 business days) to either make the Contract unconditional in all respects, or terminate the Contract and keep any deposit that they have paid.
Either of these options is favourable to the vendor; either they will have an unconditional Contract on foot, or the less favourable Contract will be terminated in lieu of the more favourable Contract.
These types of conditions are of course only of benefit to the vendor until the Contract has become unconditional, meaning when the finance, building and pest conditions, and any pre-existing special conditions have already been satisfied. Once the contract is unconditional, the vendor cannot attempt to invoke a more favourable contract.
These are just some of the many special conditions that we see every day. Whether you are selling or buying your property, we want to ensure that you are happy with the terms and understand what you are entering into. Afterall, a Contract for the sale or purchase of residential property is a legally binding document!
The team at QConvey would love to assist you with any queries that you may have.
Contact Melanie Prew on 0403 430 264 for an obligation-free quote today, and quote this article to receive 10% off our professional fees!