Read the Contract – part 1 of 3
Summary of what we will learn in this webpage:
- What to check / look out for, in the first 3 pages of the “Contract for the sale and purchase of land 2018 edition”
Step 1: Say now we have found a house we would like to purchase.
We would be given a “Contract for the sale and purchase of land 2018 edition” (called Contract for short from here on) with all the other required documents that make up a valid contract.
Now we have to read it (before committing to the purchase and exchanging contracts)!
Click on Sample Contract 2018 Edition, if you do not already have a copy in front of you as a reference.
On the very first page of the Contract, we check:
1) Vendor item. The names that appear here should be the same as that on the Title Search document. (Note: there are circumstances where the names are different like in the case of a Transmission application, but for simplicity, we shall not dwell on nuances and variations from the norm here.)
2) Date for Completion item. Is it written 42 days after the contract date, or 70 days after the contract date, or some other number? Do we have enough funds, or been given unconditional loan approval, to be able to complete this purchase within these days? If not, do not sign on the Contract till we negotiate with the vendor or the vendor’s solicitor for a longer completion period. The default period in NSW is 42 days for completion; which means if one already has pre-approval before exchange, immediately after exchange and within the next 42 days, the bank should be able to grant unconditional approval and be ready for completion.
3) Land item. Confirm that this is the house address we want to buy.
4) Improvements item. On completion, would we get the house under Vacant Possession, or is it going to be Subject to existing tenancies? Which of these are ticked? Also, what else is ticked – is House ticked, Garage ticked, and Other ticked and filled in; if we are buying a house that comes with a garage and some other stuff, we want these ticked.
5) Inclusions item. Things like blinds, built-in wardrobes, clothes line, dishwasher etc, things that are included in this purchase should be ticked.
6) Price and Deposit amount. Is this the purchase price we want to buy at, and the deposit amount (up to 10% of purchase price) we are prepared to pay on exchange date or when cooling off period expires.
On the second page of the Contract, we check whether Land Tax is Adjustable item is ticked or not. If it is, it means we will have to help pay the vendors land tax for the year, for the period from Completion date till the end of the land tax year.
On the third page of the Contract, List of Documents heading, some vendor’s solicitor leave these unticked – this is not that an important page for us.
After these first 3 pages, next come 17 pages of the Contract’s warnings and standard clauses, ending in page 20. Standard clauses are what they are, standard. The way we vary these are in the Special Conditions pages.