A Guide to Contract of Sales For Real Estate Purchases in Australia

Buying a property is no small task and a contract of sale is at the centre of the entire process.

However, once you break each step of the purchase down it becomes more manageable.

When you have found a suitable property to purchase, understand the agent fees associated with the purchase and have your financing information in place, it is time to enter the negotiation stage. It is important that you are well represented legally to look over the contract of sale and work out the finer points with the owner, the real estate agent and any other representative parties.

To ensure that a sale of a property meets all current Australian legal requirements, a contract of sale is necessary.

These contracts can look a bit daunting as they are filled to the brim with clauses and fine print so let’s look at a contract of sale in more detail.

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What is a Contract of Sale?

A contract of sale lists all the relevant information pertaining to the sale and purchase of a property.

Who Prepares a Contract of Sale When Buying Property?

The contract should always be prepared by a qualified solicitor or licensed conveyancer and checked by a solicitor or conveyancer representing the other party. This is to ensure that both sides are protected in the transaction.

What is Included in a Contract of Sale for Real Estate?

The information provided in the contract of sale should leave nothing to chance. It should list all parties and their representatives including the full address and the selling price.

A contract of sale for real estate might be subject to whether you can get financing, building inspections or if you can sell your existing property.

Here is a list of some of the factors which are found in a standard contract of sale. Note these may differ for each Australian state.

Pertinent information includes:

  • the selling agent
  • the purchasing party
  • the seller’s name
  • the property price
  • the initial deposit, payment terms and conditions, and loan details
  • property address
  • improvements to the property
  • any exclusions from the sale
  • anything else included within the title
  • any household fixtures, furnishings, and chattels
  • the cooling off period as specified by the state
  • the intended property settlement date and period (between 30-90 days depending on the state) including penalty rates
  • warnings of the necessity of smoke alarms on the premises
  • date of offer
  • certificate of title information
  • encumbrances such as a mortgage or lease agreement

While most property contracts have standard terms to cover, depending on the particular property you are buying or selling, special conditions of the sale might come into play. These conditions will be included in the contract of sale and have the ability to override the standard terms and conditions as necessary. Always understand what these terms relate to before signing.

The seller is responsible for attaching disclosure documents, conditions of the sale, warranties, and notification of any defects.

These may include

  • plans for sewer lines
  • zoning certificates
  • property certificates
  • plans of the land including subdivision or strata plans, if applicable
  • covenants, restrictions and easement documentation
  • home warranty insurance certification
  • a cooling off notice

While these may not sound important in the grand scheme of things, failure to include this documentation may give the buyer the right to cancel the contract within the specified period.

Unless otherwise noted, a contract of sale usually denotes:

  • the land does not contain any sewers owned by other authorities
  • the information in the zoning or planning certificates is true and accurate
  • there are no adverse affectations such as public authority plans to purchase the land

What can be Negotiated in a Contract of Sale?

Cooling Off Period

While the cooling off period is waived when purchasing a house through an auction, the cooling off terms relating to private sales can be negotiated. They can be longer or shorter, or even removed from the terms of sale altogether. Many vendors are now opting for the cooling off period to be waived.

From a buyer’s perspective, it is imperative that any legal advice, finance, and building inspections are carried out before the exchange of contracts. If the cooling off period is waived, a written certificate from the buyer’s solicitor is necessary indicating the nature and the effect of the terms.

Cancellation Fees

Any cancellation fees relating to the cancellation of the sale of a property can also be negotiated.

Settlement Period

The property settlement period between the exchange of contracts and the exchange of ownership and title can also be negotiated between the buyer and the seller. The period can be shorter or longer to suit both parties. The settlement period will need to take into account all final legal checks.

The Deposit

The amount of the deposit and the method of payment can also be negotiated before being added to the sale of contract. A seller generally asks for 10% of the property while the buyer looks to pay as little as they possibly can. Purchasers will need to speak to their financial advisers to determine the best way to proceed.

Fittings and Fixtures

The definition of permanent fixtures has changed slightly as more and more custom built furniture pieces are being added to modern homes. It is important for a seller to identify what the owner means by fittings as it may or may not include appliances like fridges, television and sound systems. Dishwashers, although they are considered a fixture, should always be noted for clarity.

How is the Contract of Sale Completed?

During the exchange of contracts, the buyer and seller must agree to, and sign all copies of the contract. If an agent is responsible for the contract documentation, it must be provided to each party within a two day period.

Don’t forget:

There is no valid cooling off period for a vendor.

Once contracts have subsequently been exchanged, the vendor is bound to the terms and conditions of the agreement.

What Happens on the Day of Contract Settlement? In terms of property settlement

The contract settlement date is the day where all representatives of the parties, including any financiers, meet to exchange legal documents.

This is the day when:

  • final checks are performed
  • the payment of the purchase price is made
  • all relevant legal documents are exchanged

In terms of property settlement, there is one more step to be done.

The property transfer needs to be completed at the Land Titles Office; this then completes all the conveyancing processes, legal processes and concludes the house purchase and sale.

Section 126 of the Instruments Act 1958 states that any contract for the sale of real estate must be in writing, signed by the person to be charged or by a person lawfully authorised in writing by that person. Basically, this means that verbal property sales are not legally binding unless a contract of sale is completed in full.

It is compulsory for the vendor to provide a potential buyer with the Vendor’s Statement before a contract of sale is signed. The vendor and purchaser each sign one copy of the contract. These copies are exchanged, usually by the real estate agent.

Note the cooling off period relating to property within Victoria is three days.

For all information regarding a property sale in Melbourne or surrounding Victorian addresses, please visit the Law Institute of Victoria or the REIV website.

How Does a Contract of Sale Differ for each Australian state?

Contract of Sale In Melbourne and Victoria

Section 126 of the Instruments Act 1958 states that any contract for the sale of real estate must be in writing, signed by the person to be charged or by a person lawfully authorised in writing by that person. Basically, this means that verbal property sales are not legally binding unless a contract of sale is completed in full.

It is compulsory for the vendor to provide a potential buyer with the Vendor’s Statement before a contract of sale is signed. The vendor and purchaser each sign one copy of the contract. These copies are exchanged, usually by the real estate agent.

Note the cooling off period relating to property within Victoria is three days.

For all information regarding a property sale in Melbourne or surrounding Victorian addresses, please visit the Law Institute of Victoria or the REIV website.

Contract of Sale in Sydney and New South Wales

Residential property in Sydney and NSW cannot be sold without a signed contract of sale.

There have been many changes in the conveyancing practices in NSW. For all properties exchanged after July 1, 2016 valued at over $2 million, the 2016 version of the contract of sale for real estate should be adhered to. This edition replaces the previous 2005 and 2014 version.

Here are some of the notable changes.

1. Where the market value of a property is in excess of $2 million, the purchaser is obliged to comply with a foreign resident capital gains withholding payment obligation in which the purchaser must maintain 10% of the selling price at property settlement and present it to the ATO unless a clearance certificate is supplied. A smaller amount may be payable if the vendor supplies a variation notice issued by the ATO.

2. Vendors of single freehold or strata schemes with a swimming pool or spa and no more than two lots, are required to attach one of the following:

  • a valid certificate of compliance
  • a relevant occupation certificate (less than three years old) and evidence of registration
  • a valid certificate of non-compliance

3. Vendors are required to obtain the consent of all purchasers before rescinding an off the plan contract or alternatively, the permission of the Supreme Court.

In NSW, it is compulsory for the agent to have a copy of the Schedule 1 Prescribed Documents with the contract of sale before they can market the property.

The buyer and the seller are not legally bound until signed copies of the contract have been exchanged. The vendor and purchaser each sign one copy of the contract. These copies are then exchanged, usually by the parties’ solicitor/conveyancer except for auction sales when the agent exchanges the contracts. Exchange can occur by mail or face to face. In NSW, the cooling off period for a property is five days.

Visit the Law Society of NSW or REINSW for more information.

Contract of Sale in Brisbane and Queensland

A cooling off period of five days applies to the sale of property in Queensland. The contract of sale must include the following warning statement in order to be valid:

“The contract may be subject to a five business day statutory cooling off period. A termination penalty of 0.25% of the purchase price applies if the buyer terminates the contract during the statutory cooling off period. It is recommended the buyer obtain an independent property valuation and independent legal advice about the contract and his or her cooling off rights, before signing.”

Usually, the purchaser signs the contract first. If the offer is acceptable to the seller, they sign the contract, and a copy is delivered to the purchaser. A binding contract comes into effect when the purchaser receives this notification of acceptance.

It is worth noting that only lawyers can legally act on a conveyance in Queensland.

For more information visit REIQ or the Queensland Law Society.

Contract of Sale in Adelaide and South Australia

To accompany the contract of sale, under the Land and Business (Sale and Conveyancing) Act 1994, a Vendor’s Statement for the sale of a small business must be provided if the property sells for a price of up to $300,000. Interestingly enough, most South Australian based property transactions are handled by a conveyancer, also known as a land broker.

In SA, it is compulsory for the vendor to provide a potential purchaser with a Form One Disclosure Statement before a contract of sale is signed.

As soon as both parties sign the contract of sale and the buyer receives their copy, the purchaser and the seller are bound to the terms of the agreement laid out within. This is arranged by the real estate agent who delivers copies to the vendor’s and purchaser’s solicitor.

The standard cooling off period when purchasing a property in South Australia is two days.

For more information on contracts of sale in SA, visit the Law Society of SA or REISA.

Contract of Sale in Perth and Western Australia

An offer to buying property in Western Australia is usually made using the Contract for Sale of Land or Strata Title by Offer and Acceptance form and the Joint Form of General Conditions for the Sale of Land. Although there are other versions, these are the two documents most commonly used in the state. Buyers and sellers are advised to ensure that they are using the latest version to take into account any amendments in 2011 and beyond.

While there is no mandatory seller disclosure statement when selling property in WA, the acting agent must find out or verify facts about the transaction and communicate them to the purchaser. They need to contact the relevant authorities to check if there are any restrictions on the title and regulations such as extensions and pool fencing.

There is no mandatory cooling off period for properties sold in Western Australia. If the contract is to include a cooling off period, then the parties need to agree to have one inserted into the contract. Both the seller and the purchaser must sign the final contract of sale.

Failing to obtain finance within the specified time can result in the contract being terminated.

For more information visit REIWA or the Law Society of WA.

Contract of Sale in Darwin and the Northern Territory

Under NT law, an approved ‘Contract of Sale of Land’ form must be used for all house sales. The contract is usually prepared by the conveyancer or real estate agent and needs to be approved by the Registrar of Land, Business and Conveyancing Agents or the Law Society Northern Territory.

Ensure that you understand the contract before you sign it and discuss it with your lawyer or solicitor. Any alterations will need to be initialled and signed and any special conditions of the sale adhered to within the specified time frame. The contract is not legally binding until the contracts have been exchanged. In the Northern Territory, the standard four-day cooling off period may be reduced, extended or waived as part of the negotiations between the purchaser and seller.

For more information, visit REINT or the Law Society of NT.

Contract of Sale in Hobart and Tasmania

When a house is sold privately, the seller’s conveyancer, solicitor or real estate agent is responsible for the paperwork. The purchaser usually signs the contract first. Once the buyer signs the contract it becomes a legal and binding document. Tasmania, like Western Australia, has no specified cooling off period.

In Tasmania, purchasing real estate remains caveat emptor which means buyer beware. It is definitely worth inspecting the property and reading the contract of sale in full prior to purchase.

At present the pro forma contract of sale for real estate used by conveyancers and solicitors in Tasmania is in two parts. It features:

  • the standard condition of sale
  • the particulars of sale

The vendor and purchaser each sign one copy of the contract to ensure it is a legally binding document.

For more information on buying and selling houses/property in Tasmania, visit REIT or the Law Society of Tasmania.

Contract of Sale in Canberra and ACT

In the ACT, it is compulsory for the seller to provide a potential purchaser with the required legal documents before the property is offered for sale. The vendor and purchaser each sign one copy of the contract. These copies are exchanged, usually by the parties’ solicitor or conveyancer in a face to face meeting.

The cooling off period in the ACT is five days.

Visit REIACT or the Law Society of ACT for more information.

Important Points to Remember About a Contract of Sale

While we have touched upon some of the details for each state in this guide, it is imperative to understand that each state has different rules and regulations for the sale and purchase of property. It is necessary to read up on the laws and legislations of your particular state and speak to your lawyer for clarification.

FAQs

Can a contract of sale be cancelled after the exchange?

There are occasions when a buyer has the right to cancel the transaction and get their money back, even when contracts have been exchanged and the cooling off period has passed or been waived in its entirety. The same applies for those properties sold via an auction. While this is rare, it can still happen. It could occur when the vendor has failed to disclose certain requirements about the property such as individual rights of way or zoning rights. Do your due diligence at all times and speak to your lawyer if you have any concerns.

What is the difference between a conveyancer and a solicitor?

Both a conveyancer and a solicitor can assist with a straightforward property purchase or sale. However, once things start to become complicated, then a solicitor or a lawyer may only be qualified to guide you through. It depends on the particular property and the special set of circumstances at play.

When should I talk to a conveyancer or solicitor?

The best answer is the sooner, the better. You don’t need to wait until you have a contract ready to sign. In fact, it is better to have done the selection process much earlier so you have them there as a sounding board should you come across any specific issues relating the property purchase. If a legal problem arises then they are there at the ready. Never, EVER, sign anything without seeking a conveyancer or a solicitor’s advice first.

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