Navigating the Fine Print: The Key Elements of a Contract of Sale

The transfer of property ownership requires much more than just a handshake between the vendor and purchaser. Often, the parties talk things out several times before they actually reach an agreement. In more complicated transactions, solicitors or conveyancers can negotiate on behalf of the parties. As soon as the parties settle, they will both sign a contract of sale and commit to it.

What is a contract of sale?

A contract of sale is a written and legally binding agreement between a buyer and a seller of a property. The legal document sets out the terms of the real estate transaction that all parties must comply with.

What is included in the contract of sale?

A good contract of sale contains relevant information such as:

  • the details of the property
  • the names of the buyer and the seller
  • the details of your real estate agent (if you have one)
  • the details of the buyer and seller’s respective legal practitioners or conveyancers
  • the agreed sale price
  • the required deposit amount and payment due date
  • the balance owed at settlement
  • the agreed settlement period
  • any inclusions and/or exclusions of the property (e.g. fixtures and chattels)
  • the general conditions of the property sale
  • a disclosure statement or Section 32 statement

Aside from the above information, you may also consider adding special conditions in the sale. Examples of these special conditions include:

  • the rights and obligations of all parties if the property is subject to a lease or tenancy
  • penalties for delay in settlement
  • a condition requiring the buyer to do their own due diligence into the property
  • default provisions i.e. if the purchaser or vendor defaults
  • simultaneous settlement for when the money from the property sale will be used to buy another property
  • payments by either party for necessary repairs and maintenance of the property
  • specific chattels or fixtures that you want included in the sale

Who prepares the contract of sale?

Generally, the seller arranges for his lawyer or conveyancer to draw up a contract of sale and present it to an interested buyer. The buyer will then ask their own lawyer or conveyancer to review the document.

What are the common problems encountered when entering into a contract of sale?

The process of buying or selling a property can be a long-winding and stressful process. Here are the common problems that could arise when entering into a contract of sale:

  • The other party refuses to negotiate the sale price or terms.
  • The vendor fails to completely or honestly disclose the property’s condition.
  • The property ends up overpriced because of an inaccurate valuation, making it difficult for you to enter the market and find a buyer.
  • A lease is attached to the property.
  • There are easement and covenant issues e.g. gas or waterpipes running through the property, rules that you must construct the property in a certain way.
  • There are heritage issues.
  • The calculations on the statement of adjustments are wrong.
  • There are occupancy permits that shouldn’t be issued (because the property is not liveable).
  • There are major defects and other building issues.
  • There are rezoning issues.
  • The buyer fails to meet the agreed-upon deadlines (e.g. paying the deposit, getting a mortgage approval, etc.).
  • There is a delay in the completion of renovation work.

Some sales will never have any issues and others will inevitably face one problem after another. As long as you know what to look out for, you can prepare tailored and quick-to-deploy solutions. If your contract of sale allows it, you can include these solutions and ensure you can smoothly navigate the conveyancing process.

What happens after signing a contract of sale?

After signing the contract of sale, property buyers in Victoria generally have a cooling-off period of 3 days wherein you can walk away from the sale. If you ever decide to back out during this period, you can get a full refund of the deposit minus $100 or 0.2 per cent of the sale price (whichever amount is greater).

Just take note that cooling-off periods do not apply to properties:

  • sold at auctions
  • over 20 hectares and used for agricultural purposes
  • used for industrial or commercial purposes
  • where the buyer previously signed a contract for the property with similar terms
  • where the buyer is a corporate entity or estate agent

Engage TNS Conveyancing for your contract of sale needs

When it comes to real estate transactions, not reading the fine print could put you at risk of an expensive rip-off.

Our conveyancing services include the preparation and execution of your contract of sale for residential, commercial, and industrial properties in Victoria. Our conveyancers can also assist you in negotiations of contract clauses to make sure they meet your requirements. Before you sign away, get in touch with us by filling in our contact form or calling 03 9959 9850. Free quote and callback with our conveyancers. No obligation to hire.

Disclaimer: This article is intended to provide general information in summary form on conveyancing matters, current at the time of first publication. It does not constitute legal advice and should not be relied upon as such. Formal legal and conveyancing advice based on your specific circumstances should be sought before taking any action.