Whether you are a buyer or a seller, a first-home buyer, an investor, or a seasoned household owner, there are many mistakes that people make in conveyancing. Here are a few of the most common mistakes:
- using incorrect spelling or informal names on the contract
- failing to meet contract deadlines
- failing to obtain searches (as a buyer)
- failing to include chattels/fixtures in the contract.
Incorrect spelling or use of informal names
For an agent:
- When drafting a contract, ensure you write down both the seller’s and buyer’s names correctly. Obtain copies of all parties’ government-issued identification (drivers’ licence) so you can check.
- Ensure you have a copy of the title search for the property you are selling as this will ensure you have recorded the seller’s name exactly as it is depicted on title.
- Make sure you include all parties to the settlement i.e. multiple buyers must all be correctly listed.
For a buyer or seller:
- Check that the contract has your name spelt correctly.
- If you have a middle name, use it.
- If your name is spelt incorrectly, change it.
As a buyer or seller, if your name is spelt incorrectly on a contract and you proceed with the contract, your conveyancer will need to have this amended. This can incur extra costs with some fixed-fee conveyancing agreements.
If the buyer’s name is spelt in correctly in a contract and they are obtaining finance, the financier will require the contract to be amended to ensure the name is listed correctly on the contract. Depending on how long both parties take to agree to amend the contract, your finance could be delayed by weeks as a financier cannot progress a loan agreement until the application matches what’s on the contract.
If your incorrect name happens to slip past all these parties, the property will be transferred into the name of the person on the contract. This will not be your legal name and can have significant impacts on your estate should something happen to you. To change a name once it is registered on title, an application to amend needs to be lodged with the Queensland Titles Office. This will incur further costs and can take months to be amended.
The rule is simple: spell check before you sign.
The most common deadlines or dates in a residential contract of sale are:
- cooling off
- building and Pest
- special conditions
On a standard Real Estate Institute Queensland (REIQ) contract, most of these conditions have a date within which they need to be met. This can be a certain number of days from the contract date (i.e. 14 days from contract) or have a specific date listed (i.e. 11 July 2019). A settlement date can be written in a few different ways which can be confusing to the parties of the sale.
A cooling-off period is automatically built into all REIQ residential sale contracts. You will find the disclaimer just above the execution panel on your contract. This disclaimer advises that you as a buyer have five business days, following the execution of your contract, to pull out of the contract for any reason.
A termination penalty of 0.25% of the purchase price is required to be paid by the buyer should they pull out under this condition. This is included as a protection for the seller to prevent people signing contracts and pulling out for no reason.
The cooling-off period does not apply to the seller. Once a seller signs the contract, they cannot terminate unless the purchaser is delayed in satisfying one of its conditions detailed under the contract.
Finance, building and pest, and special conditions
The date each of these conditions must be met will be listed on the contract. The most common timing for these conditions is 14 days from the contract date. Buyers should be proactive and start applications to ensure these conditions are satisfied within the specified timeframes.
A finance application with a general bank will take a minimum of seven days to be conditionally approved. However, they can take anywhere between 14 to 21 days to give formal approval. When you start looking to purchase a property, go to your financier or mortgage broker and get conditional approval. Once you are conditionally approved, the formal approval is much easier to obtain and you can become conditionally approved without a contract. The financier will advise you of the maximum amount you are conditionally approved for and you can proceed to look at purchasing houses for that amount and under.
In order to satisfy a finance condition, you need to provide your conveyancer with the following:
- a copy of the formal approval letter you received from your financier
- written advice (an email) from you advising you are happy with the offer from that financier and wish to satisfy this condition in the contract.
Your conveyancer must obtain these instructions from you in order to satisfy this condition.
Depending on the size of the property you are purchasing, a building and pest inspection generally takes between one and two hours to complete. Once you sign a contract, you need to call around to obtain quotes and book an inspection as soon as possible. You should arrange a time for an inspector to attend the property when it is suitable for the sellers to provide access to the property. Liaise with the real estate agent to arrange a suitable day and time.
Once the inspection is done, most inspectors will give you a short verbal run down of the property. They will then forward you a written report. Be patient as this takes time for them to write up (generally 24 hours following inspection).
It’s important to have this inspection done as soon as possible as issues may arise in the report that you may want to negotiate on.
If you want to negotiate under the building and pest condition on a contract, you need to provide your conveyancer with a copy of the report and detail in writing (email) exactly what the issues are and what you want the seller to do about it. Once they have that information, your conveyancer will contact the agent and the seller’s conveyancer to begin negotiations.
Negotiations can take days or even weeks to resolve and generally take one of two forms: either a price reduction or a request for repairs. If you request a price reduction this means you are willing to accept the property as is, if the seller agrees to reduce the purchase price by an agreed amount. This reduction will then be accounted for at settlement. If you request repairs be done by the seller, they need to undertake these repairs/works prior to settlement and provide you with a copy of the invoices showing the work was completed by suitably qualified tradesperson.
Once you satisfy the building and pest condition, no further negotiations take place. So, you should ensure everything is agreed in writing before your condition date under the contract.
Special conditions can take many forms. They can be for due diligence (generally when you need further information on the property because you are wanting to do something like build), or for when the seller needs to do something prior to settlement (repair something broken or replace something in the property), concurrent settlement (of your sale property) etc. There are many special conditions that can be written into a contract of sale.
You should discuss these with your conveyancer prior to signing a contract containing special conditions to ensure you are aware of their implications during the sale process.
Generally, settlement date is listed in the contract as 30 days from the date of the contract. When it comes time for your contract to settle you need to ensure you are ready.
As a buyer you need to ensure:
- Your financier is ready to provide funds.
- Any extra funds you are putting into the purchase are with your financier or conveyancer.
As a seller you need to ensure:
- Your mortgagor (if any) is ready to release your mortgage on the property.
- You are packed up as you need to be out of the property by settlement time.
- You have completed any repairs under negotiations made during the process of the contract.
What happens if you don’t meet a condition by its due date?
This is a question that not many people ask, but all parties involved with a sale contract should. As a purchaser, if you miss a deadline, you give the seller an opportunity to terminate the contract. Under REIQ contracts, a condition is not assumed satisfied simply because the due date has passed. All conditions are due by 5pm on the due date.
If the due date passes and a condition has not been satisfied, then the first email received by either party is taken to have precedence, that is, if the purchaser doesn’t satisfy the building and pest condition by 5pm on the due date, then the seller is within their rights to terminate. If you have your conveyancer send an email at 8:31am the following morning to satisfy, but they already received an email from the seller’s conveyancer terminating the contract prior to this time, the contract will be terminated. If they haven’t received any email, then your satisfaction email is taken to have precedence and the contract is still on foot or valid.
If you are still in negotiations on a condition and the due date is looming, you need to request an extension of that condition prior to 5pm on the due date. Please note that until the seller agrees in writing to that extension, at any time between 5pm on the due date and receipt of that extension agreement, the seller can terminate the contract.
This is why it is extremely important to start on contract conditions immediately after executing the contract. This allows enough time to negotiate, extend and receive a response before the due date.
As a seller, you don’t need to obtain any searches. It is the purchaser’s responsibility to obtain the searches required to complete settlement. Sometimes you may be asked to provide copies of your latest rates and water searches to assist in a quick settlement.
As a purchaser, there are a couple of standard searches that you need to obtain so your conveyancer can adequately prepare for settlement. Upon your instruction, your conveyancer will order searches. These standard searches include:
- special water meter read
- land tax clearance certificate
- body corporate (if applicable).
There are many other searches you can obtain in addition to the required searches. Depending on what you want to do with the property, you may wish to obtain further searches.
For example, if you want to dig in the yard to build a shed you will most likely need to get a sewerage and drainage search. If you are buying a property with a pool, you’ll want to do a pool register search. If you know there is development in the future that might affect you at the property, you could seek a copy of the Department of Transport and Main Roads search.
A due diligence special condition is inserted as a special condition when there are specific searches that you want to get and if the result is unsatisfactory to you as the purchaser, you may wish to terminate the contract. These generally occurs in sales where the purchaser intends to demolish and rebuild on the property.
In a standard purchase, if you don’t obtain the above standard searches, you are putting yourself at risk of having to pay outstanding fees. These searches advise what has/hasn’t been paid for each service. For example, there might be outstanding land tax payable on a property, but if you as the purchaser don’t obtain the search to find out and subsequently request this amount be paid by the seller at settlement, then you become responsible for paying this amount. This is the same for outstanding rates, water, and body corporate bills.
The general rule to determine whether an item is a fixture or a chattel is to consider the degree to which that item is affixed to the property. For example, if you must unscrew something which will damage what it is screwed into to remove the item, it is generally considered a fixture.
There is a specific section on an REIQ contract where both the buyer and seller need to write down what will be staying/leaving the property upon settlement.
If you are expecting to take anything as a seller, include it in the contract.
If you are expecting anything to stay as a purchaser, include it in the contract.
The rule is that any fixtures are required to stay with the property and any chattels are required to be taken away following settlement unless specified in the contract.
General examples of fixtures:
- pool filter
- solar panels
General examples of chattels
- washing machine
- pot plants
Remember: it all comes down to the degree of affixation. If in doubt, include it in the contract.
These are just some of the common mistakes that agents, buyers and sellers make on a contract of sale/purchase. To avoid these pitfalls, remember that the more information you put into a contract, the safer and easier the transaction will be. If you want to include special conditions, discuss it with your lawyer or conveyancer prior to signing the contract to ensure it gives you the protection you want.
Let us help you avoid these pitfalls
At Cornerstone Law Offices, we are a full-service, general practice law firm. We specialise in Family Law, but also practice in property, crime and traffic, migration and wills and estates. We pride ourselves on providing our clients with the highest quality of service to assist them in any matter they may experience in their lives. We have specialist lawyers in all areas of law, with offices in North Lakes, the Brisbane CBD, Logan and the Gold Coast. We can be contacted on 07 3806 4354 or email firstname.lastname@example.org