The key to contracts
Anyone buying or selling property is required to enter into a Contract of Sale.
The Contract of Sale in the context of a property transaction is the single most important document. It sets at the rights of the parties and provides the parameters or a map as to how the transaction will be conducted. Should a dispute arise, it will determine how that dispute is resolved.
Ordinarily the seller’s lawyer will prepare the Contract of Sale and for that reason it will be heavily weighted in the sellers favour. As the majority of property in Victoria is sold via public auction, at the conclusion of that auction the winning bidder is required to execute an unconditional Contract of Sale. Thus the purchaser is very rarely provided with the opportunity to amend the Contract of Sale.
Clearly this is a very important document, but what actually is a Contract of Sale and why is it required?
The Instruments Act requires that any agreement for the sale of land be recorded in writing. Any other agreement, such as a verbal agreement is not enforceable.
When a real estate agent provides the Contract of Sale, they are required to use the form of contract contained in the act.
This contract will contain all the essential terms of the transaction including details of the purchaser and seller, the day of sale, details of the price and deposit, including how and when it is to be paid, details of the property and chattels (those fixtures and fittings forming part of the sale) and settlement details.
Additionally the contract will also contain all the prescribed general conditions and if necessary, any required special conditions.
It is worth noting that lawyers are permitted to use their own form of contract.
When a real estate agent refers to the submission of a written offer to the seller, what they are actually requiring is that a Contract of Sale is filled out with all the above details and then the purchaser’s signature on that contract.
By signing the contract a purchaser is confirming that they intend to be bound by it. The real estate agent will then submit that contract to the seller. Should the seller be happy with these terms he or she will then also sign confirming acceptance of your offer.
As this stage the contract crystalizes and comes into existence. This means that there is a binding and enforceable contract between the parties.
Part of the contract documents must also include, what is known as a Section 32 Statement or Vendors Statement. The name is derived from section 32 of the Sale of Land Act, which obligates a seller to provide to the purchaser certain information about the property being offered for sale.
Interestingly the Act requires the seller to provide the buyer with the Section 32 statement prior to the execution of the contract.
In the event that the Section 32 Statement is incomplete, the Act provides the buyer with the ability to end the Contract of Sale and the refund all deposit monies. However the Act further provides that should a buyer be no worse off as a result of the non-disclosure, there is no ability to end the Contract.
As such a buyer should not automatically make the assumption that a technical breach will provide them a basis to end the contract.
As always this article contains general information only and should not be relied on for detailed advice related to your particular circumstances. Should you require such advice, please contact your lawyer.