Step 3 – Contract & Vendors Statement
The Contract stage
Having completed steps 1 & 2 you are ready to bid at auction, or you are negotiating to buy and making an offer.
At auction the successful bidder will sign an unconditional contract – no cooling off rights and the contract is not subject to finance approval.
Whereas if it is not an auction a purchaser will generally have the benefit of the 3 day cooling off period or may make an offer subject to finance approval or any other condition.
Cooling off rights – Victoria
With several notable exceptions, including obtaining legal advice prior to signing a contract, a purchaser of a dwelling home has certain rights to avoid contracts.
The cooling-off period is 3 working days from the time the purchaser signs any documentation. If you do decide that you wish to avail yourself of this provision you should contact your solicitor immediately if the cooling-off period has not already expired. This right does not apply to properties purchased at auction (or 3 days prior to or after the auction).
Cooling off applies 3 days from when you, the purchaser, signs – not from when the vendor signs or accepts the offer.
This document sets out the terms or the proposed terms of a contract for you to buy the property. Until you sign a contract you can ask for any condition to be incorporated.
The key elements of the contract of sale or contract note are:
The Names of the Parties Buying and Selling
You need to ensure that your name or names are correct.
“and / or nominee”
If you are buying on behalf of a family member or want to nominate a company, it is preferable to have the above words added after your name.
The Description of the Property
The property can be identified by reference to its address and/or by its title particulars, being the volume & folio identifier, or a lot on a plan of subdivision. If it is an apartment or flat, and a car park is included that is not on title, this needs to be checked and specified. Some car parks and storage units have a separate title.
Inclusions of any Chattels
The inclusion of any chattels must be accurate and complete. All fixtures are included in the purchase without having to be mentioned. Sometimes it is not easy to know for sure whether an item is a fixture or not, so if in doubt it is best to name it as an inclusion.
The Price and GST
This is the agreed price you are paying for the property. If the price includes GST, this should be made clear. It is not uncommon to see special conditions added by the Vendor’s solicitors that the price does not include GST and GST is an additional imposition. Seek clarification if you see such a clause.
Usually, 10% of the price is paid on signing the contract and this will be held in a trust account until its release has been authorised. Deposits can also be paid by bank guarantee or deposit bond by agreement.
Date of Settlement
Unless a specific date has been set, the date of settlement is often 30, 60 or 90 days from the exchange of contracts (or earlier by agreement). At settlement, the title is transferred to you in return for the payment of the price in full. It is a good idea to talk to the vendor to work out a date for the settlement that suits you both. If vacant possession is to be given at settlement this needs to be stated on the contract and the vendor is obliged to give you vacant possession on the date of settlement.
If the purchase of this property is to be dependent on the sale of your own present home, there first needs to be either an exchange of contracts on the sale of your present home or a special clause needs to be included in the contract. Otherwise, you may be in the position that you need to arrange bridging finance. A lot of vendors won’t accept a contract subject to the sale of another property.
Subject to Finance
It would be most unwise to enter the contract unless you have the funds or a written loan approval enabling you to complete your purchase on time. With the approval of the vendor, and prior to contract, a clause can be added to the contract to protect you against the risk that your loan may not be approved. The contract is thereby conditional on finance approval and if your finance is refused you may cancel the contract. You must note that at an auction the contract must be a cash contract. It is not possible to request a ‘subject to finance’ clause. Therefore it is imperative to arrange your finance before you bid at an auction.
You need to carefully study any special clauses added to the contract, and ask us about them if you are unsure of their meaning. Usually, there are conditions wherein you, the purchaser, acknowledges the occupational boundaries of the property agree with the boundaries on the certificate of title. Furthermore, the conditions prohibit any claim for compensation by you if an error is revealed in the title boundary. It is essential, therefore, that you check the distance of the boundaries with a tape measure before you sign the contract, or any cooling-off period has expired.
State of Repair
The property is sold to you in its present condition and state of repair; if you buy on this basis it is almost certain you have no right to object if it later turns out that the building is defective in some way. You may be able to negotiate a special condition that the contract is subject to a satisfactory building inspection and pest report by a building surveyor or architect.
The vendor may have agreed to complete building works, and if so, these need to be carefully specified.
If you are purchasing off-the-plan, there can be significant stamp duty savings (to owner-occupiers only and no longer for investors) and special clauses need to be incorporated that relate to this issue. Off-the-plan contracts need to be very carefully read and understood.
When you are ready simply fill out the on-line buying instruction form and we’ll take care of the rest.
The Vendor’s Statement
In Victoria, by law, you are to receive a Vendor’s Statement (also known as a Section 32 Statement) signed by the vendor in accordance with Section 32 of the Sale of Land Act, with a copy attached to the contract.
The statement contains prescribed information which, if incorrect or insufficient, may enable you to avoid the contract or sue the vendor for damages. This statement should contain information relating to:
A copy of the title to the property should be attached, which should identify the vendor as the owner and identify the relevant property. Also attached should be a copy of any subdivision, strata, cluster or stratum plan, if the property is a unit or a flat. This will allow you to check the identity of the property to make sure that it is the one described in the contract.
Easements and Covenants
You need to take any easements or covenants into account when purchasing a property. An easement gives someone the right to use part of another person’s particular land for a particular reason. Whereas a covenant restricts an owner’s right to do what he wishes with his land. Restrictive covenants are often concerned with building standards, or prohibit the use of the land for certain purposes. Particulars of any failure to comply with the terms of the easement, covenants or restrictions should also be disclosed.
Rates & Charges
Details of non-apportionable rates or charges, to which you become liable after the sale, should be disclosed as well as any recurrent rates and charges.
Notices & Orders
Particulars of any notices, orders or approved proposals issued by public authorities in relation to the property must be included.
What services (water, sewerage, electricity, gas, telephone) are connected to the land?
Planning & Building
The Vendor’s Statement contains limited Planning & Building information
It will show the zoning. It is important that the land is zoned in a manner that allows you to use or develop for the use you intend. For example, if you are buying a residential property, it is important that the land is within a residential zone. If you are buying a property for commercial use, it is important that the land has an appropriate commercial zoning. A copy of the planning certificate verifying the zoning should be attached to the vendor’s statement. Planning schemes restrict the use of the land and any other use may be prohibited or require special approval from the council.
If any building or renovation work has been carried out in the last 7 years on the dwelling you are purchasing, the vendor’s statement should give details of any permit which was obtained for the work, as well as warranty insurance.
What a Vendor Statement does not disclose
The Vendor’s Statement does not disclose the following matters:
- whether the land is flood-prone;
- whether the land is filled land or suffers from any other latent defect;
- whether any buildings breach any provisions of the Victorian Building Regulations;
- whether there are any defects or problems with any buildings and fittings on the property (eg. leaky roof, infestation of white ants, heating equipment not functioning etc.);
- whether there are any proposals that may affect the property and which are not yet approved;
- whether there is a swimming pool which requires to be fenced to comply with council regulations.
- whether the fences are on the title boundaries or whether a neighbour has a possible adverse possession claim.
- as well, there may be particular requirements and limitations relating to how the property may be used or developed (ie; with new buildings). It would be in your interest to speak to the Council and if there is a potential problem raise it with us.
What is it? and why do we recommend that you buy Title Insurance.
First Title, an Insurance Company, provides a comprehensive title insurance policy that provides protection to purchasers of residential property against known and unknown risks that could cause stress and financial loss in the future.
During a conveyancing transaction we, the Lawyer, will work diligently to identify risks that may affect the property. We will often find matters that could affect the use of the property in the future, however, there are also risks that even the most thorough processes cannot discover.
Examples of risks insured by First Title’s Home Owners GOLD policy include:
- structures that do not have building approval certificates;
- structures that fall foul of zoning requirements;
- boundary disputes between neighbours;
- identity fraud is copied and property is fraudulently mortgaged.
- organised crime gangs are operating in Australia. They target innocent homeowners and steal or mortgage their property; and
- an extensive range of general ownership risks.
For a minimal cost, with policies starting at $400 we highly recommend you take out Title Insurance. It is a one-off cost, not an annual premium. Order title insurance
When you are ready simply fill out the online buying instruction form and we’ll take care of the rest, including giving you a fixed price quote.
For further information contact us.
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