A guide to understanding contracts

Paying attention to contracts, and the information contained within them can often be the difference between a good and bad buy.

A standard contract of sale, which may include a vendor’s statement, incorporates much of the financial, planning and legal details that will determine if you decide to proceed with your purchase. 

These may include any restrictions on the titles (easements or covenants), details of all outgoings (council rates, land tax), any building approvals and notices about proposed works, how the relevant planning scheme affects the land or zoning, and proof of the vendor’s title. 

Remember that contracts vary on a state-by-state basis and according to the type of real estate transaction (i.e. auction, private sale, multiple listings or leasing). So, it’s important to secure qualified counsel in your region before signing on the dotted line. 

Seek legal assistance

Needless to say, it is imperative for buyers to seek legal advice so that any plans to develop the property are not affected by pre-existing clauses. 

It also pays for vendors to be thorough. If details are incorrect or incomplete, the purchaser can withdraw from a contract before settlement, and possibly claim damages if a discrepancy is discovered after settlement.

Documents in regular use

Three of the most frequently used documents real estate agents and vendors/lessors come into contact with are the exclusive sale authority, the exclusive auction authority and the exclusive leasing/and or management authority. 

These forms provide exclusivity for the vendor/landlord and agent — for the vendor or landlord to sell or lease only through the nominated agent, and for the agent to exclusively sell/lease the property. Knowing that you are dealing with an agent who will represent your best interests and comply with your instructions and an industry code of conduct is also important.

Fee structure should be explicit

Vendors/lessors should be aware that agents’ fees and marketing expenses were deregulated in 1995. 

Agents must inform vendors/lessors that their commissions and outgoings are subject to negotiation before signing any authority.

Conveyancers streamline the process

Conveyancing, when expressed at its simplest, is the transfer of an interest in property from one person to another.

It may sound logical, but conveyancing involves so much more than just checking rates, the preparation of the Transfer of Land document and handing over the keys.

For the job to be done properly, the title should be researched thoroughly by someone who knows the meaning of all the legal jargon, such as inquiries about rates, planning, zoning, notices and orders made by public authorities that have control over, or interest in, the land to ensure that no liabilities or encumbrances are passed on to the new owner; and satisfying stringent mortgagee requirements.

Common issues relate to caveats and covenants attached to the property, illegal extensions that have not been approved, the property differing in size from that on the title, and damaged or missing inclusions or chattels at the final inspection.

The main advantage of conveyancers over solicitors is cost (usually an all-inclusive fee) but ensure that the conveyancer has sufficient professional indemnity insurance and a solicitor on hand — at no additional cost — should the need arise.

Do-it-yourself conveyancing kits are available for those brave enough to attempt it but be warned that there are many pitfalls, including indemnity insurance.

Content originally appeared on The Real Estate Voice

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