The tips, traps and legal risks – Part Two
The moderating housing market in Melbourne has provided positive news for buyers. But unlike other industries, the housing market can also be quite volatile. Part two of this article focuses on some of the traps and legal risks associated with buying property.
1. Contract of sale
Buyers must understand the ‘particulars of sale’ and ‘general conditions’ in any contract of sale. In Victoria, the prescribed standard contract used by agents and lawyers is the “Contract of Sale of Real Estate” issued pursuant to the Estate Agents (Contracts) Regulations 2008. While the seller can use a different form of contract to effect the sale, this must be prepared by a solicitor or licensed conveyancer. The real challenge for buyers is when they are faced with a contract that significantly alters their legal rights, either by way of amendment to the general conditions or by way of overriding “special conditions”.
2. Special conditions
A solicitor or agent may add additional clauses to go into the contract — known as “special conditions”. While ‘special conditions’ are a common feature in today’s housing market, they are usually requested implemented by the seller. Accordingly, special conditions should not be read lightly and a professional must be retained to interpret such conditions. There are several cases where the Court has found special conditions relating to deposits, completion, time and notice to be void with the consequence of incurring a penalty.
3. Inspect! Inspect! Inspect!
Buyers must consider whether they need to undertake any pre-contract searches and enquiries and arrange for inspections. Particularly when the sale occurs by way of auction, buyers continuously downplay the importance of pre-contract and pre-settlement inspections. The unfortunate result is that a building defect may be discovered following completion of the contract and, in the absence of a legal warranty, the implications can be quite significant. Some of the overlooked inspections include: building and pest inspections, sewerage and drainage, zoning and reports on landslips.
4. Read first, sign second
Purchasing property is one of the greatest financial decisions and buyers should ensure that they understand their rights and obligations under the contract. Buyers should also be careful in relying on verbal statements and signing documents based on something they have not read. Buyers should request all representations to be made in writing and if something requires an explanation, professional advice should be sought. For more information, see our article on false statements and promises here.
5. Buying off the plan
Buying off the plan entails a significant land tax concession in addition to the other grants a buyer may receive from the State Revenue Office. However, there is a great risk that you may end up with a property that is different to the plan, the artist’s impression or the advertising material. Accordingly, it is important that you receive the right legal advice when you buy off the plan, particularly when a firm completion date has not been provided.
Disclaimer: This article contains general information only and is not intended to be a substitute for obtaining legal advice.