What to look out for in a Contract of Sale

Contract of sale documents can be very overwhelming. Apart from the complicated terminology, there are clauses and special conditions you need to understand in order for the sale to go through smoothly. If you’re not an expert, missing an important detail is easy. Today, it’s quite common for small details to be included that have large ramifications in the future. These inclusions usually work against the buyer. We always recommend making use of a legal professional to guide you through a property sale, because knowing as much as you possibly can, will always help. In this article you’ll find some of the more important red flags to look out for when you’re going over a contract of sale, to help you stay on top of the property sale process.

Inconsistency

One of the most important things to look out for is consistency with names on the various documents involved in the sale. It’s essential that you confirm that the vendor’s name is consistent on the contract of sale, the section 32 statement and title. Differing names on either of these documents opens up the possibility that the person selling the property is a trustee in bankruptcy, a liquidator or that the property is being sold by a deceased estate.

If you find that the names on the sale documents are inconsistent, it’s recommended that you request a copy of the document which gives the seller the power to sell that property. Without that, it’s possible that the property is being transferred fraudulently and thus, illegally. If this is the case, the legal owner of the property may seek legal action and reverse the sale altogether.

Owners Corporation Minutes

Most townhouses and apartments will have an Owners Corporation. If you’re considering buying either of these types of properties, it’s recommended that you attain the notes or minutes from the last meeting. Owners Corporation meetings are very revealing about the state a townhouse or apartment complex is in. Look out for anything around the security of the complex, which might inform you about the safety of the unit you’re considering buying. If you find that security has or is soon to be upgraded, this could indicate an unsafe area. You might also be able to find out about any budget being allocated to things like repairs to the building. This might reveal that the building itself may not have been a quality build or requires repair due to wear and tear. All of these considerations will affect your decision of whether the property is a good investment or not.

Special Conditions

Special conditions are additions to a contract of sale that are very easy to miss if you’re not a property law expert. These additions are most often put in by the seller/vendor and often work to their advantage. Your property law expert will ensure that all special conditions are sound and fair, but you should check them as well. The reason it’s important to ensure that all special conditions are reasonable is that they can alter, and in some cases overwrite General Conditions. This may work to your disadvantage, because agreeing to them without a full understanding of what they entail would negate your opportunity for legal recourse.

Unfair Legal Costs

It’s common to see special conditions being put into a contract of sale, which stipulate that a buyer has to pay for a seller’s legal costs for a range of different reasons. These special conditions are highly unreasonable and are usually just a seller’s attempt to reduce their own legal costs that arose from the contract of sale. You are well within your rights to let the seller know, before signing a contract, that you have rejected those special conditions. Always consult a property law expert when it comes to any special conditions, additions or points in the contract of sale that don’t feel right or that you don’t fully understand.

Inflated penalty rates

When the contract of sale is created, it will include a penalty interest rate, which is the amount of interest the buyer needs to pay when money is due but has yet to be paid. In Victoria, the standard is 12% per annum. If the penalty interest rate (or penalty rate) on your contract is higher than that it’s recommended that you get legal advice from a professional.

Smooth selling, and buying

There are many things to look out for when it comes to a contract of sale. But if you’re aware of the points above and are making use of a property law expert who will always have your best interest at heart, then purchasing a property should be a smooth process. Remember, you are always well within your right before signing a contract to challenge any point in a contract of sale, as well as add in reasonable special conditions to make the buying and selling process work for you. More than anything, your property law expert is there to ensure that you understand everything and that you’re comfortable proceeding with the sale in the knowledge that it is fair and reasonable.

The Coulter Legal conveyancing team believes that every sale should be a smooth and enjoyable one. If you’re looking to buy or sell a property, Coulter Legal is backed by the expertise of a law firm that has supported Geelong and the broader community for more than 80 years. Our team of conveyancers provide practical, valuable and concise legal services throughout the process of buying and selling residential property across Victoria and South Australia.