It is not unusual for purchasers to be asked to sign a Contract and to pay a deposit at the Agent’s office either on a weekend or at night before they can see their Solicitor to obtain advice.
This will normally not be a problem as long as the rules set out below are followed:
Make the Agent let you actually look through the Contract BEFORE you sign it; and
Look for the following things:
- Ask the Agent to show you where, in plain English, the cooling off period is set out. Contracts which are for “off the plan” properties must give the purchaser a minimum of ten (10) business days cooling off period.
- Look at the front page of the Contract for the following: Are your names spelt absolutely correctly AND are they identical with the way your names are, or will be, set out in your Application for Finance (so check to see middle names are included for instance). If not require the names to be changed by handwriting before you sign and put your initials in the left-hand margin next to the point where your names have been changed; and
- In regard to established/existing properties check the list of “Inclusions” on the front page to see that everything that you want to be in the property when you move in is listed – such as air conditioning, curtains, barbeque, etc. If you are unsure whether or not this has been done, ask the Agent to show you where this has been done on the Contract. If there is anything that is not listed and which you want to be in or on the property when you move in then require the Agent to write in those items in handwriting and again put your initials in the left hand margin immediately opposite where that handwriting occurs; and
- Check the description of the price and the amount of the deposit AND the timing for payment of the deposit to make sure it is correct. Usually you will only be required to pay a deposit equal to 0.25% of the price when you initially sign the Contract and you will pay the balance of the deposit amount (usually 10% but it can be less or more) before the end of the cooling off period referred to in point 1(a) above. If you are being asked to pay more than 0.25% of the price then you should ask for an explanation as to why; and
- On the front page towards the top will be boxes for you to tick to choose between “vacant possession” or “subject to existing tenancy”. Unless you are happy for a tenant who is already in the property to stay there even after you have finished buying the property then the box for “vacant possession” must be marked; and
- If the agent has made any verbal promises to you such as – they will repaint the bedrooms – then make sure there is a clause somewhere in the Contract which says that they will do that, in plain english. If there is not such a clause request the agent to write it in to the Contract. If the agent will note write in these then you should do so.
Off the Plan Purchase
If this is an “off the plan purchase” or if it is any Contract after the 2nd June 2020 then the cooling off period must be at least ten (10) business days; and
If the purchase is an off the plan purchase (usually high rise apartment blocks) then the following should be in the Contract:
- A Plan prepared by a Surveyor which shows things including the lot number and the area of the subject lot and sufficient information to clearly identify the location of the lot (particularly in regard to multi storey apartments) and a copy of the draft By Laws for the Strata Development. The Contract has to have other things attached to it but during the cooling off period your Solicitor can check those things. In fact purchasers can rescind the contract (withdraw from the Contract) within fourteen (14) days from the exchange of Contracts originally occuring if the prescribed information and documents are not attached to an off the plan Contract and also have some rights in regard to established properties;
- In an “Off the Plan” Purchase the Law requires any deposit that you pay to be held in a trust account or what is known as a controlled monies account until the purchase is completed. The deposit cannot be released to the vendor before final settlement of the purchase.
Obviously it is important that your Solicitor have the opportunity to look at the Contract and to then ask the Vendors to make any necessary changes before the cooling off period expires. This means that you must make an effort to see the Solicitor promptly AND you must ensure that the Agent delivers the Contract to your Solicitor within say 1 business day of you signing the Contract. If the Agent emails a full copy of the Contract to the Solicitor then that will probably be sufficient.
You may wonder when is it that you are legally bound to go ahead and buy the property. The answer is that when you as purchasers and the vendors have signed the Contract AND a date has then been inserted into the Contract (usually on the front page) AND you have paid the initial deposit, then the Contract is binding on both parties. Up until the time that all of those three things have happened you are able to withdraw from the Contract and get your deposit back. If you withdraw from the Contract during the cooling off period you will lose the 0.25% of the price.
We are happy to sit down with our clients before they go looking for a property and to discuss the above and any other things the client is worried about so that when you go and look at properties you are armed with the necessary information.
If you want to make an appointment to speak with us, ask to see either Bruce Coode or Megan Johnson, both of whom have extensive experience in these types of transactions and they will be able to answer your questions.
Written by Bruce Coode