There are many issues which could arise when entering into a sale or to purchase a Contract for Sale. It is critical for individuals and companies to seek legal advice before entering into a Contract for Sale to avoid certain issues.
Here are some issues which could arise if you enter a Contract without obtaining legal advice:
Not having a cooling-off period in place
When you purchase a residential property in New South Wales, you have a five business-day cooling-off period after you exchange contracts. The cooling-off period starts as soon as you exchange and ends at 5pm on the fifth business day after exchange. During this period, a purchaser would normally instruct their conveyancer or solicitor to review the contract and obtain any inspection reports necessary to check the property’s structure and to check if there are any termite issues. It's also the time when a purchaser needs to organise their loan approval.
The cooling-off period allows a purchaser to rescind contracts if they cannot proceed for whatever reason and a Rescission Notice must be issued to the vendor’s solicitor prior to 5pm on the fifth business day of the cooling-off period.
The cooling-off period is also a time for the purchaser to negotiate any changes to the Contract with the vendor.
Not having financial approval in place
It is absolutely crucial that purchasers have their loan approval in place before proceeding with a purchase Contract. Purchasers should not accept a verbal loan approval from their lender or broker, but instead should request a letter confirming that the loan is unconditionally approved. Having no loan approval from the lender proceeding to cool-off and paying the balance of the deposit spells disaster and is very dangerous. If the cooling-off period has expired and the purchaser does not have sufficient funds to complete the purchase, then the purchaser will be in breach of the Contract as they will be unable to complete the Contract. The vendor will then have a right to terminate the Contract by issuing a Notice. After termination of the Contract, the vendor can keep or recover the deposit (to a maximum of 10% of the purchase price).
The vendor can also sue the purchaser either:
1. When the vendor has resold the property under a contract made within 12 months after the termination, to recover:- The deficiency on resale; and
- The reasonable costs and expenses arising out of the purchaser’s non-compliance with the Contract or the notice and of resale and any attempted resale; or
2. To recover damages for breach of the contract.
Not having the correct name/s on the Contract for Sale
Ensuring the correct name is recorded on the Contract is very crucial. Here is why:
- If a purchaser owns a company and is the director of that company, then the director may want to consider placing the Contract in the name of their spouse, so that if the company owner is sued then creditors will not be able to make a claim against the property. If company directors are unsure about this, then they should obtain legal advice about the best way forward.
- As the Contract for Sale is a legal document, it is important that your names are recorded correctly to correspondence with all your identification. The spelling of your name is critical when buying or selling property, as discrepancies can result in delays in settlement. Individuals needs to ensure that their full name is recorded including any middle names they may have.
So, to avoid experiencing any of these issues, we strongly recommend that you obtain legal advice before entering into a Contract for Sale. If you have further questions, please contact us at frank@franklaw.com.au.
This is not legal advice.
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