conveyancing: top 10 contract mistakes to avoid
TRANSCRIPT
TOP 10 COMMON
CONTRACT MISTAKES
TO AVOID
PRESENTED BY
OWEN HODGE
LAWYERS
CONVEYANCING
WHAT WE’LL COVER?
1. Danger of Wrong Description of Property
2. Failure to Understand the Inclusions
3. Failure to List Encumbrances
4. Incorrect Information About the Names of the Parties
5. GST Obligations Mentioned in Ambiguous Terms
6. Vague Special Conditions
7. Confusion About Arrangement of Finances
8. Confusion About Critical Dates, Obtaining Reports and Final Inspections
9. Confusion About Cooling-off Period
10. Availing the Service of an Experienced Property Lawyer
Overview
Buying or selling a property can be an overwhelming
decision. You might be purchasing your dream
property or intending to sell off an investment which
represents your nest egg.
Drafting a contract relating to a buy or sell
transaction is not an easy job as the contract
forms the basis of transfer of property. Therefore,
it should be carefully worded and vetted.
When you are entering into a buy or sell
transaction, you should have a few pointers in
mind to avoid some very common mistakes.
• If the Property title is not correctly entered in the
contract, it might lead to a lengthy and costly legal
process later.
• A mistake in relation to entering the details of the
“Certificate of Title” or wrongly entering the street number
or house number or confusing between the two are
general mistakes committed while noting property
addresses in the contract.
• One day when sell off your property in the future, this
might pose a problem in regard to transfer of title.
• You might also have issues with possession if there is no
clear title attached to the property you are intending to
buy or sell.
1. Danger of Wrong Description of Property
2. Failure to Understand the Inclusions
• Terms of purchase or sale should be clear and unambiguous.
• While advertising a property, many real estate agents promise add-ons which needs vetting. If you have any
doubts, ask and clarify your doubts with everyone involved in the process.
• Most importantly, read and understand the contractual terms about the inclusions and exclusions from the
property that you are intending to purchase or sell.
• The valuation of a property maybe related to the
number of encumbrances listed on the property.
• Some contracts may have encumbrances which are
lifted and replaced on the property during a property
transaction.
• The contract should clearly list out the exact
encumbrances and costs involved in removing and
replacing them, to help buyer determine whether there
are any hidden costs involved.
• Listing of encumbrances in the contract and a clear
understanding about who pays off what, leads to less
confusion between the purchaser and seller during
transfer of property.
3. Failure to List Encumbrances
4. Incorrect Information About the Name of the Parties
The phrase "and/or nominee" is commonly used in
contracts when the parties are unsure about what
name they wish to have on the title.
It is often assumed that by doing this,
the name of the parties can be
amended after signing the contract.
However, the name of the parties to
a contract cannot be changed by a
simple addendum and addition of
any new parties require termination
of the existing contract, mutual
agreement for a new one and a
fresh new agreement being drawn in
place of the old one.
• The costs mentioned in the contract sometimes may not mention whether it is inclusive or exclusive of Goods and
Services Tax (“GST”) and whether Stamp Duty applied.
• Any such ambiguity might lead to an erroneous presumption about the total price of the property and incurring of out
of pocket expenses and other hidden costs.
• These costs often add up to a substantial amount and cannot be recouped.
5. GST Obligations Mentioned in Ambiguous Terms
6. Vague Special Conditions
A contract relating to a buy or sell
transaction should not contain vague
and unrealistic special conditions.
The terms and time frames mentioned
on any special conditions should be
realistic and achievable.
7. Confusion About Arrangement of Finance
The parties involved in a contract often do not
have a clear idea about the arrangement of
finances when borrowing from the banks.Be clear about your borrowing limit, the time
frames involved in getting loan approvals and
how that might impact the settlement of the
contract.
8. Confusion about Critical Date, Obtaining Report
and Final Inspection
The cooling off period, the
date of deposit due, the
settlement date and the
date for final inspection
should be mentioned in
clear terms to remove any
chance of ambiguity.
Several reports including the Pest Report,
Building Report or Survey Report may
have to be obtained from respective
authorities before the final handover of the
property occurs.
Make sure the time limits and dates for
obtaining these reports and the party’s
responsibility are clearly mentioned in the
contractual terms.
9. Confusion About the Cooling-Off Period
• Many people are not aware that in New South Wales (“NSW) if one buys residential property other than at auction,
he/she has the benefit of five business days to withdraw from the contract and is also entitled to get back the deposit
with a standard deduction.
• The terms about a cooling off period should be clearly mentioned in a contract so that people can withdraw within a
specified time period before the conclusion of the contract.
10. Availing the Service of an Experienced
Property Lawyer
• Drafting and finalising a contract relating to a buy or sell transaction requires specific knowledge and expertise.
• Since a lot of your monetary and emotional investment is at stake, it is always advisable to engage the service of an
expert lawyer to represent your interests during contractual negotiations.
How Can We Help?
The buy or sell contract in a property transaction is more than a simple conveyancing process, it is
vital that you ensure that your interests are represented by a law firm who can guide you through
all aspects of the broader transaction rather than just ‘do’ the conveyancing.
At Owen Hodge, our clients get access to a team of legal professionals who are highly
experienced in all aspects of the legal complexities involved in a contract of purchase/sale and
how to ensure that your best interests are represented in the contract.
THANK YOU
If you have any queries in relation to conveyancing and contractual
negotiations or would like to speak to one of our legal experts, please
feel free to contact our team at Owen Hodge Lawyers on 1800 770
780.
http://www.owenhodge.com.au/