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Unconditional Contracts – The Importance of Disclosure and Completing Searches

By 15 July 2019 August 23rd, 2019 Commercial Law

When entering into an unconditional Contract for the sale of a property, a Seller may be led to believe that they have no obligations to disclose any matters affecting the property.

Similarly, a Buyer entering into an unconditional Contract may think that completing property searches is an unnecessary expense.

If you have signed an unconditional Contract for the sale or purchase of property in Queensland, you should be aware that there are still:

  1. obligations imposed on a Seller to disclose certain information relating to the property; and
  2. searches that may give a Buyer rights to claim compensation or terminate the Contract.

What is an “unconditional Contract”?

A Contract for the sale or purchase of property will be “unconditional” if there are no terms or conditions in the Contract that must be satisfied or fulfilled on or before the settlement date.  For example, a Contract for a property sold at auction is “unconditional” as it is not subject to the Buyer obtaining:

  1. satisfactory building and pest reports for the property;
  2. satisfactory enquiries and searches in relation to the property being purchased; and/or
  3. sufficient finance approval to purchase the property;

Similarly, a Contract that is subject to the above conditions will become unconditional when such conditions are satisfied or fulfilled.

I have signed an unconditional Contract for the sale of my property. Do I still have to disclose anything to the Buyer?

Although a Contract may be unconditional, a Seller still has obligations to disclose certain matters affecting the property being sold.  In particular, a Seller must disclose to the Buyer:

  1. Any encumbrances affecting the property and which will remain in existence after settlement. Encumbrances are matters which burden and impede the property and/or the title to the land.   For example:
    1. Easements which burden the land (granting someone other than the registered owner/s a right to use and/or benefit from the land);
    2. Easements in favour of a Local Government or other Authorities (Easements in Gross);
    3. Unregistered encumbrances such as drainage, stormwater and/or sewerage lines running through the land;
  2. Whether the property being sold is subject to any tenancies or Lease arrangements that will continue after settlement;
  3. Whether the property being sold is the subject of any current or threatened claims or disputes (including court proceedings and/or neighborhood, fencing or tree disputes in QCAT).

I have signed an unconditional Contract to purchase a property. Do I still need to complete any searches?

Although a Contract may be unconditional, in most instances the standard conditions of a Contract and/or legislation provide a Buyer with a right of termination or claim for compensation if certain matters affecting the property and/or the Seller/s are discovered. For this reason, the following searches can be invaluable when purchasing a property:

  1. Title search: A title search discloses particulars of the Seller and the land which are recorded in the Queensland Land Titles Register (including the registered owner, the registered property description and all registered interests over the land being sold).  If the Seller/s and/or the property described in the Contract are not accurate, the Buyer may have a right to terminate the Contract. For example, a Buyer will have a right of termination if:
    1. The Contract contains an error in the description of the property and as a result, the Buyer will suffer significant expense and/or loss (that is, the Buyer will be materially prejudiced);
    2. The Contract does not disclose the existence of a registered encumbrance affecting the land; and/or
    3. At settlement, the Seller named in the Contract is not the registered owner of the land
  2. Registered Plan search: A registered plan search will provide an image of the Plan which is registered with the Queensland Land Titles Register when the Lot (a unit within a building or the land being purchased) was created.  If the location of or the area of the Lot is not accurately described in the Contract, or if there is an error with respect to the boundaries of the property, and if the Buyer will be materially prejudiced as a result of such inaccuracy or error, the Buyer will have a right to terminate the Contract or claim compensation.
  3. Contaminated Lands Register (“CLR”)/Environmental Management Register (“EMR”) search: If the property being purchased is recorded on either the CLR or EMR and the Seller has not disclosed this prior to entering into the Contract, the Buyer will have an immediate statutory right to terminate the Contract or at the very least, a right to claim compensation.  A Buyer’s right of termination exists regardless of the terms and conditions contained in the Contract.
  4. Local Government and other statutory authority searches: These searches will provide general information in relation to the property including rates, town planning and building approval details.  Although not all adverse search results will give the Buyer a right to terminate or claim compensation, a Buyer will be afforded rights if the following matters arise:
    1. If there is a notice or order (issued prior to the Contract date) requiring the Seller to pay money or complete work on the property, then the Seller is responsible for complying with such notice or order. If the Seller does not comply prior to settlement, the Buyer will be entitled to claim any costs and expenses arising from such notice or order as a debt against the Seller.
    2. If there is a proposal to alter or locate transport infrastructure on the property and such proposal has not been disclosed in the Contract, the Buyer will have a right to terminate the Contract.