Read the Contract (on Special Conditions) – part 2 of 3
Summary of what we will learn in this webpage:
- What some of the more common Special Conditions mean?
- As a prospective purchaser, do we accept these special conditions, or shall we negotiate before signing on the contract?
Step 2: Next, we look for the Special Conditions pages. As these are many and varied, we’ll list some of the more common ones here (though there is one below that is not that common). For the more common special conditions, the style of words will be varied and different, but the meaning they convey should be similar to the ones below.
For any special conditions we see in the contract that we think should be deleted or amended, we normally email the vendor’s solicitor to ask him/her to delete/amend. Of course, they can refuse to agree to our requests for amendments. All requests for amendments must happen before the 10% deposit is paid and contracts exchanged, as exchanged contracts mean the contract is binding as it is and is on foot. Sometimes, we request for amendments during the cooling off period, i.e. after the 0.25% deposit is paid and contracts exchanged but before the 10% deposit is fully paid.
All the special conditions listed below can be found in one pdf file – Sample Special Conditions.
This is a very common special condition. This paragraph means that if the purchaser or the vendor cannot complete (or settle; complete and settle are used interchangeably) on the completion date (i.e. the date stipulated in the Date for Completion item on page 1 of the Contract), then either the purchaser or vendor can issue a Notice to Complete requiring the other party to complete within 14 days.
So, for example, say Date for Completion on page 1 of the Contract states that it is 42nd day after the contract date. Say for example, the Contract date on page 1 of the Contract states that it is 15 October 2018. (reminder: contract date is also called the date of exchange, i.e. this is the date both purchaser and vendor sign on identical copies of the Contract).
42nd day after Contract date of 15 October 2018 = 26 November 2018.
So Date for Completion (also called settlement date) is 26 November 2018. Say purchaser could not settle on this day, so from the 27th November 2018 onwards, the vendor can choose to issue a Notice to Complete to the purchaser requiring the purchaser to complete within 14 days.
So if the vendor emailed a Notice to Complete to the purchaser on 27th November 2018, the vendor will state in the Notice to Complete that the purchaser must complete by 11 December 2018 (thereby giving the purchaser another 14 days to be ready for settlement).
We often see this paragraph after the previous paragraph about a Notice to Complete within 14 days, and this is about interest payable if the purchaser cannot complete on the Date for Completion as stipulated on page 1 of the Contract. Using the same example as before, if Date for Completion is 26 November 2018 and the eventual final completion date is 11 December 2018, then the purchaser has to pay to the vendor, on top of the balance of the purchase price, interest of 10% on the balance of the purchase price.
Say, purchase price is $770,000.
Deposit is 10% of purchase price = $77,000.
Then, balance of the purchase price is $770,000 – $77,000 = $693,000.
On the eventual final completion date of 11 December 2018, the purchaser will not only have to pay $693,000, but he’ll also need to pay 10% of $693,000 for 14 days = $2658.08.
Note that this interest only applies to the purchaser when s/he cannot complete by Date for Completion as stipulated in the Contract. If the vendor is the party who cannot complete by the Date for Completion, the vendor does NOT need to refund any interest to the purchaser, by virtue of the words written in this special condition!
We often see this paragraph after the previous 2 paragraphs on Notice to Complete and interest payable. Using the same example, the vendor’s solicitor will receive another $350 from the purchaser on the eventual final completion date if s/he issues a Notice to Complete on or after 27th November 2018.
This paragraph normally comes under the heading of Settlement in Special Conditions pages.
This paragraph refers to paper settlement. In electronic settlement platforms like PEXA, this paragraph wouldn’t apply.
In paper settlement, the physical settlement venue is normally nominated by the vendor’s lender and agreed by the vendor or the vendor’s solicitor. It is normally a venue in the city, like SAI Global Sydney office for example.
This paragraph states that if the vendor owns the property for sale outright, with no mortgage, and hence s/he holds the Certificate of Title, then the physical settlement venue should be at the vendors solicitor’s office. If the purchaser requests that settlement should occur in some city venue instead, the purchaser needs to pay the vendor another $110 on completion to cover the vendor’s cost of hiring a settlement agent to settle in the city.
This paragraph normally appears under the heading of Cancelled Settlement or Re-scheduled Settlement in Special Conditions.
In short, it means that if settlement needs to be re-booked for another date and time, the purchaser must pay $220 on completion for the vendors solicitor’s costs in cancelling and rebooking settlement.
If either party before completion dies, becomes mentally ill or becomes bankrupt; or if either party is a company and before completion this company goes into liquidation, then either party can walk away from this Contract, i.e. purchaser would be able to get back his deposit monies paid on exchange.
In short, this paragraph states that the purchaser is buying the property as is, in its present condition, and therefore cannot ask for compensation or walk away from the Contract by blaming the state of the property later (i.e. after exchange but before completion).
This paragraph applies when the vendor appoints an agent to sell his/her property. In short, the purchaser should have been introduced to this property by the agent listed on the front page of the Contract, and by no one else. If somehow a purchaser is introduced to this property by another agent, and this other agent tries to claim his commission from the vendor, the purchaser would have to pay the vendors costs in defending the claim from this other agent.
This is to prevent the purchasers solicitor from raising Requisitions on Title using the many varied forms out there. When we see this clause, we will look for an attached Requisitions on Title form attached to the contract and raise (email) this particular one with the vendor’s solicitor.
This paragraph applies when a swimming pool comes with the property. In short, the purchaser takes the swimming pool and the surrounding fencing as is, and cannot force the vendor to comply with the requirements of the Swimming Pools Act if such a notice is issued after exchange. Instead, the purchaser has to comply at his expense.
Purchaser needs to rely on his own enquiries and should not trust the Survey report or Building certificate that may be attached to this contract.
Furthermore, if the purchaser applies for a Building certificate from the Council before completion, and if the Council informs that there are issues to be remedied, the purchaser cannot force the vendor to remedy these issues nor walk away from this contract. Worse still, the purchaser will have to pay the vendor for his expenses in complying with any work order notice arising out of the purchaser’s application for such a Building certificate.
These are pretty standard amendments to the standard clauses in pages 7 to 20 of the Contract. As purchaser’s solicitor, we are not overly concerned with negotiating these away with the vendor’s solicitor, except if this property is one of the vendor’s many investment properties, and Land Tax is ticked adjustable on page 2 of the Contract, we would request the vendor’s solicitor to undelete Clause 14.4.2.
This is not such a common special condition. This paragraph protects the vendor and allows him to walk away from the contract if there is an error/misdescription in the contract.
This is a very common special condition. In short, it means regardless of the amount of deposit a purchaser pays on exchange, if the vendor becomes entitled to forfeit the deposit, the purchaser has to top up the deposit to 10% of the purchase price upon demand by the vendor.
As the name suggests, this clause allows the vendor to use the purchaser’s deposit monies for purposes stated in points a, b and c before Date for Completion. Normally, when we see this clause, we ask the vendor’s solicitor to delete it. Of course, the vendor’s solicitor can refuse to do so, and if this is the case, we can decide if we still want to proceed with the purchase and exchange.
This applies if there is a paper settlement, not applicable for electronic settlement like PEXA. The Transfer form should be mailed to the vendor’s solicitor at least 14 days prior to completion, otherwise, the purchasers have to pay another $165 on completion for mailing the Transfer form late.