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: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:
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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