Do I need to engage a Solicitor prior to signing a Contract?
Whether you are buying or selling residential or commercial property, conveyancing transactions in Queensland can be very complex in nature. There are many practice guidelines, legislation and regulations that govern and affect a conveyancing transaction. As such, we always recommend that you seek advice from a Solicitor prior to signing a Contract to ensure that your interests are adequately protected and any matters you may be concerned about can be addressed.
A Contract of Sale is not a “one size fits all” document. The terms of a Contract can vary, depending on your individual circumstances and the nature of the transaction. There are a standard set of Contract conditions which generally apply in all transactions. However, in some circumstances, additional special conditions may be required to:
- Address particular matters of concern or issues in relation to the property;
- Provide the Buyer and/or Seller with additional rights which are not included in the standard conditions;
- Impose additional obligations on the Buyer and/or Seller which are not stated in the standard conditions; and/or
- Restrict the operation of any standard conditions that are not applicable to a particular transaction
It is crucial that any special conditions required are drafted and included prior to signing the Contract.
If you are purchasing a property, you may also require the Contract to be subject to:
- Completion of a satisfactory building and Pest inspection;
- Completion of a satisfactory Pool and/or Pool Safety Inspection; and/or
- Finance Approval condition
If you are selling a property, you should ensure that the right information is disclosed in the Contract before it is signed. In particular:
- The property description must be accurately stated (street and registered address details);
- Any interests (encumbrances) that affect and will remain on the property after settlement must be disclosed;
- If there are Tenants in the property, details of such residential or commercial tenancies affecting the property must be disclosed;
- If GST is applicable in the transaction, the relevant GST provision must be stated in the Contract;
- If the property being sold is part of a Body Corporate, a Disclosure Statement (containing accurate information and particulars) must be completed and provided to the Buyer with the Contract; and/or
- If there are any matters affecting the property which are required to be disclosed to the Buyer, such matters should be clearly stated in the Contract (or written notice should be given to the Buyer prior to signing the Contract). For example, if:
- The property is recorded on the Environmental or Contaminated Land Register;
- The property is required to have an Asbestos Register and Management Plan in place; or
- The property is affected by a proposal or decision made by a Local Authority or Department to acquire part of the property
then such matters must be disclosed to the Buyer prior to signing the Contract.
A Solicitor can assist you with all of the above matters prior to signing the Contract and also ensure that all of the terms and conditions (including critical dates and timeframes) are appropriate for your circumstances.
After the Contract is signed by all parties, you are bound by its terms and conditions and you must comply with all of your obligations and complete the transaction by the specified due dates. You cannot vary any terms or conditions without written agreement from the other party.
What else should I do before signing the Contract?
If you are selling and there is a mortgage recorded against the property being sold, we recommend that you complete the required paperwork requesting that the mortgage be discharged so that your Lender will be ready to provide the required paperwork at settlement. Lenders can take a significant amount of time to process this kind of request. If there are multiple mortgages and interests involved (including a Guarantor), a request to release such mortgages and interests may take longer to process.
If you are buying a property and require a loan to complete your purchase, we recommend that you commence applying for a loan prior to signing a Contract. It can take several weeks for a Lender to process your loan application. Obtaining pre-approval for your loan can:
- Provide you with an indication as to how much you can borrow. This will be useful to know when you are negotiating a Contract price with the Seller;
- Reduce the time taken by your Lender to issue unconditional approval for your loan once you have found the right property to purchase and after the Contract has been signed.
What is the difference between pre-approval and unconditional approval for a loan?
A pre-approval for your loan is the initial offer from your Lender advising of the maximum amount you can borrow. A pre-approval is subject to you satisfying all lending requirements, credit checks, completion of all relevant loan application documents and supporting information and the Lender obtaining a satisfactory valuation for the property being purchased.
An unconditional loan approval means that your Lender has agreed to fund a certain amount of money, your loan application has been successfully processed, you have satisfied the lending criteria and your Lender has completed all credit enquiries and completed a satisfactory valuation of the property being purchased.
If you are bidding at an Auction or if you want to sign a Contract that is not subject to obtaining finance approval to complete the transaction, you should ensure that you have unconditional finance approval in place and/or have sufficient funds to complete the transaction (including all costs associated with the purchase) prior to bidding at Auction or signing the Contract.
Please be aware that we do not provide financial or accounting advice. Whether you are purchasing or selling an investment property or a property as your principal place of residence, we suggest that you obtain your own independent financial advice.
What should I do after the Contract is signed?
If you are purchasing a property:
- Arrange for an appropriate Insurance Policy to be effected for the property. The property will be at the Buyer’s risk from 5:00 pm on the next business day after the Contract date. For this reason, you should arrange sufficient insurance cover for the property as soon as the Contract is signed.
However, the Seller has a continuing obligation (until settlement) to take reasonable care of the Property.
If the Property is damaged between the Contract Date and Settlement, you will still be obliged to complete the transaction in accordance with the terms of the Contract.
- If the Contract is subject to a Building and Pest condition, Pool Inspection Condition and/or Pool Safety Inspection, you should contact and engage appropriate professionals to complete an inspection of the property and prepare a report. Once you have obtained the report, you should provide a copy to your Solicitor and advise whether you are satisfied with the Inspection reports or if there are particular matters of concern.
- If the Contract is subject to finance, ensure that you have completed all loan application paperwork and provided your Lender with all required information well in advance of the finance approval date. You should keep in regular contact with your Lender and ensure that they are aware of all critical due dates contained in the Contract. Your Lender must provide written confirmation that your loan application has been unconditionally approved prior to the finance approval date.
Once you have received confirmation from your Lender that your loan is unconditionally approved, you will then need to sign all required Loan Agreement and Mortgage documents. You should sign these documents as soon as possible to ensure that your Lender will be ready to provide the required funding on the settlement date for the Contract.
- Arrange a time to complete a pre-settlement inspection. You are entitled to complete an inspection of the property closer to the settlement date to check (amongst other things):
- that no fixtures have been removed;
- that any chattels included in the Contract are still in the property and in good working order; and
- to ensure that there are no other anticipated issues with the Seller providing possession of the property by the settlement date.
If the Seller has made any changes to the property, this may entitle you to terminate the Contract or claim compensation from the Seller.
If you are purchasing vacant land, it is still important to complete a pre-settlement inspection to ensure that no earthworks or construction has occurred on the Property subsequent to the Contract being signed.
If you are selling a property:
- If there is a mortgage recorded against the property, ensure that your Lender has received all required paperwork to provide a release for the mortgage by the settlement date. You should also ensure that the sale proceeds to be received on the settlement date will be sufficient to pay the full amount required to your Lender in order to discharge and release the mortgage;
- Ensure that all chattels that are not included in the Contract are removed from the property prior to Settlement;
- If there are Tenants in the property, ensure that you (or your Managing Agent) completes the required forms and notices to be given to the Tenant and Buyer within the required timeframes.
Why is it important to complete property searches?
If you are purchasing, we always recommend that you undertake searches in relation to the property and the Seller. The Seller is obliged to disclose certain information and notices about the Property. As such, it is important that searches are carried out to check that the Seller has complied with their disclosure obligations, that warranties in the standard conditions of the Contract are correct and to obtain the information required to assist in the conveyancing transaction.
If there are search results that raise issues of concern, you should be aware that you may not be able to terminate the Contract in all circumstances. For example, if searches reveal that there are unapproved structures on the property, issues with flood levels, noise corridors or restrictions or limits on the use of the property, you may not have a right to terminate or claim compensation from the Seller. However, we still recommend completing these searches so that you can be aware of these issues.
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