A binding contract does not exist until a written offer has been formally accepted by the vendor and the contract has been signed by both parties.
The contract document outlines the terms and conditions of the sale and contains provision for:
- The name and address of the vendor
- Your name and address
- Details of the land for sale
- Chattels included and excluded from the sale
- The sale price (including GST if applicable)
- Settlement date
- Tenancy details (if applicable)
- Conditions of the sale
The most common examples of conditions are subject to obtaining satisfactory finance, the sale of an existing property or the completion of a satisfactory building inspection. You may wish to include a pre-settlement inspection as a condition of the contract.
An auction contract of sale is generally unconditional. However, it is sometimes possible to negotiate the inclusion of particular terms (i.e. the amount of the deposit or period for settlement) through the agent prior to the auction.
While not a legal requirement, the agent may require you to provide an initial deposit of not more than $100 when you offer to purchase a property. This holding deposit will be returned to you if the offer is not accepted. However, if you sign a contract and then decide to ‘cool off’ within the cooling-off period, the deposit is forfeited to the vendor.
A further deposit will be payable once the cooling-off period has expired or, in the case of an auction, a deposit may be required on the day of the auction. The amount of this deposit is negotiable but may be as much as 10% of the agreed sale price, particularly if the sale is by auction. You can negotiate a lesser amount prior to auction or arrange to provide a bank guarantee.
The deposit should be paid to the vendor’s agent, solicitor or conveyancer who will place the money into a trust account until the settlement date. Your cheque should be made payable to the appropriate trust account and marked ‘not negotiable’. Remember, if you change your mind after the cooling-off period has expired you can lose any deposit you have paid unless the vendor has breached the contract in some way. You may be required to pay further compensation for breach of contract.
Be wary of paying a big deposit if there is no agent acting for the vendor. By law, the agent must pay the deposit into a trust account as an extra safeguard for consumers.
Settlement is usually set between 30 and 90 days, but this period of time can be negotiated between you and the vendor. The agreed date is recorded in the contract.
If there are tenants currently occupying the premises on a lease, the period of lease details must be recorded in the Form 1. Depending on the agreement that the tenants have with the current owner of the property, you may be able to seek vacant possession as a condition of sale, but you must record the condition in the contract. For further information about residential tenancies contact Consumer and Business Services on 131 882.