Quite often, when entering into a contract to purchase/sell a property, there are many specific sections and clauses you may not be aware of or understand.
It is very important to engage a solicitor or conveyancer to ensure everything within the Contract of Sale is compliant, accurate, and you clearly understand what each clause means.
Following are several areas which buyers and sellers should be aware of prior to signing a contract as highlighted to us by solicitors/conveyancers.
Chattels v Fixtures
On page 3 of the Contract of Sale there is a section for “Excluded Fixtures” and “Included Chattels”.
Fixtures are permanently attached to the property, like built in furniture or light fixtures, and are considered part of the real estate. These could include flag poles, bird cages, pool pump equipment, etc.
Chattels are moveable personal property that can be easily taken with the owners when they leave, such as furniture and appliances. Some items that could be included in this section are remote controls for air conditioners or garage doors, small garden sheds, dishwashers, garden seats, and even steps in the entertainment area, etc.
It’s very important to clearly state what is to remain at the property following settlement and have that agreed upon in this section.
Clause 8.1 Risk
Many buyers are not aware that the property they are purchasing is at their risk from 5pm on the first business day after the contract date.
This means it is the buyer’s responsibility to take out building insurance from when the contract is signed, not when it goes unconditional. Should the property flood or have a fire, it will be the buyer’s responsibility to repair the building.
The buyer does not have to take out insurance for the seller’s contents.
Access to the Property
Under Clause 8.2 Access, a new reason for access has been added for the buyer to enter the property to carry out an inspection for smoke alarms.
The clause now reads, “After reasonable notice to the Seller, the Buyer and its consultants may enter the Property:
- once to read any meters;
- for inspections under clause 4;
- once to inspect the Property before settlement;
- once to value the Property before settlement; and
- once to carry out an inspection for smoke alarms installed in the Property.”
We’ve recently had a situation where a tenant thought it was illegal for the buyer to enter the property on the day prior to settlement to carry out a pre-settlement inspection and was not willing to give permission. Once we explained the situation and that it was in fact legal, permission was granted.
Under Clause 7.8 of the contract, the seller must install smoke alarms complying with the Smoke Alarm Requirement Provision in any domestic dwelling and failure to do so is an offence under the Fire and Emergency Services Act 1990.
Should the seller fail to comply with this clause, the buyer is entitled to withhold 0.15% of the purchase price but only if claimed by the buyer in writing on or before settlement.
Extension of Settlement Date
This particular clause could have serious implications for both sellers and buyers as it allows for the settlement date to be extended.
Clause 6.2(1) states: “Either party may, at any time up to 4pm on the Settlement Date, extend the Settlement Date by giving a notice under this clause nominating a new date for settlement which must be no later than 5 Business Days after the Schedule Settlement Date.”
Clause 6.2(3) states: “More than one Extension Notice maybe given under clause 6.2(1) but the new date for settlement nominated in an Extension Notice may not be a date later than 5 Business Days after the Scheduled Settlement Date.
We have recently had this exact situation occur where, on three consecutive days, the settlement of a property was extended. The seller was not ready to settle so, by way of notification prior to 4pm on each day, the sellers’ solicitor advised settlement would be extended to the following day.
Documents to be handed over at Settlement
Did you know the seller is required to hand over certain document and keys at settlement in exchange for the balance of purchase price?
This means that if any specific documents covered in Clause 5.3 of the contract have been requested and not provided prior to settlement, the buyer could have a termination right at settlement.
With regards the property keys, it is acceptable for the real estate agent to hold possession of the keys as the “Seller’s Agent”.
As the buyer, you may receive notification from you solicitor/conveyancer that settlement has occurred and may expect you can now have the keys. However, until we receive confirmation from both legal representatives that settlement has occurred and we are authorised to release the keys, we cannot legally give the property keys to you.
As stated previously, it is essential you engage a solicitor/conveyancer when buying and selling property.
Remember, if you are thinking of selling, need any real estate help or advice, or would like to know what your home may be worth in the current market, I am just a phone call away.
All the best, Simon Salm
Sources: GM Law & Sunstate Conveyancing