In this newsletter I want to explain why we offer purchase contract reviews and why I think that they are essential for anyone purchasing property.
If you need convincing – consider this. The clients who have purchased the most properties – in some cases over 100 – always get their contracts reviewed before signing. On the other hand, many first time purchasers sign contracts they haven’t properly read or understood because the estate agent (employed by and paid by the Vendor) pressured them to.
For those that need more convincing I have set out below some issues below that have emerged from recent purchase contract reviews. This isn’t an exhaustive list.
As usual, we will end the newsletter with the lighter side – a piece of nonsense from the legal world.
Fees
Increasingly Purchase Contract special conditions impose fees on Purchasers.
Fees for default are fairly standard.
However, we are seeing an increased range of fees including:
- Nomination fees;
- Fees for rescheduling Settlement;
- Fees to vary contract details or extend condition deadlines;
- Fees for licence agreements and early access; and
- Fees for late provision of adjustments and other conveyancing steps.
However, both the list of fees and the quantum of those fees continue to increase.
A recent contract included a provision that if the purchaser terminated the contract more than 14 days after the contract was signed under the pest, building or finance conditions then they would pay the purchaser 0.2% of the purchase price. On a $1 million purchase – that’s potentially $20,000 gone for not reading the special conditions properly.
Owners Corporations
The presence of an owners corporation can introduce a range of potential issues.
Some owners corporations have disputes with builders or other major building defect issues. These issues can result in very expensive special levies.
Some older owners corporations may have car parks on separate titles. Purchasers need to ensure that they get the title to the car park as well as the main title.
Smaller owners corporations may not be managed correctly. In some cases mandatory common property insurance isn’t in place among other issues.
Nominations
Victoria has a reasonably liberal nomination regime. That is, the named purchaser on the contract can nominate another party to settle the purchase. This may be because a trust or other structure wasn’t established before the contract was signed or a party couldn’t attend an auction.
However, purchase contracts can restrict the right to nominate in many ways. Additional documentation can be imposed. Time limits can be imposed. Fees for nomination are increasingly imposed.
If you do intend to nominate – you need to pay attention to these restrictions and potentially seek to have them deleted.
You also need to ensure that you don’t accidentally trigger double stamp duty by nominating at a profit, nominating after land development or nominating in the context of a parallel arrangement.
Finance Conditions
The concept of a finance condition is simple – if finance isn’t approved then the contract is terminated.
However, the devil is in the detail.
The standard finance condition requires that the purchaser make immediate application for a loan, does everything reasonable required to get the loan, isn’t in default and notifies the vendor before the deadline if they don’t get approval.
However, some vendors seek to impose further obligations such as a formal letter from the lender (not the broker) advising that the loan application has been declined. This can be problematic as some lenders don’t like issuing such letters and this also doesn’t address the situation where the loan hasn’t been declined by the deadline – but neither has approval been forthcoming.
Purchase Contract Reviews
At Lewis O’Brien & Associates we remain committed to encouraging clients to get purchase contracts reviewed before they sign.
Purchase contracts usually involve large sums of money and impose significant obligations. In addition, there is an emotional element to buying a home. We believe that an independent review from someone who regularly reviews contract is essential. It’s part of a conveyancing service designed to help purchasers through what is often unfamiliar and stressful territory.
For $165 (inc GST) (for standard Victorian Purchase Contracts) you will get:
- A zoom or phone call with me personally to review the contract and answer any questions you may have in relation to the contract; and
- Suggested special conditions to help the contract work better for you.
You can contact us by clicking HERE to start the process.
The Most Ridiculous Thing
I think we can all agree that governments are the worst economic managers. Anyone that cares to disagree needs to explain the waste within the NDIS, the Suburban Rail Link and Snowy 2.0 among other disasters
Why then is it such a popular view that the solution to almost every problem is more taxes and more regulation?
Lewis O’Brien
Your Preferred Property Lawyer