Contract terms you need to know

Conveyancing terms you need to know when buying a home

Buying a property can be complicated, especially for first-time home buyers. We’ve created a simple checklist of the various terms you may encounter when going through the conveyancing process.

Typically, when you’ve found a property, the real estate agent will need you to make an offer covering the standard contract terms. The standard contract terms include the purchase price, proposed settlement date, and contract conditions and can be done in one of three ways:

• a verbal offer
  
• an informal written offer, usually via email
• a formal written offer by presenting a signed contract to the seller – if it’s accepted and signed by the seller, it’s legally binding.

No matter how you offer, but especially in writing, you must know the exact terms you are agreeing to. We have provided a simple explanation of common contract terms found in Property Law Act (the conveyancing law in Queensland) that buyers are often unaware of.

We review contracts for free for buyers. Contact us before signing to ensure you get what you expect.

Contract terms you need to know

“Buying entity”

The contract identifies the “Buyer” as the party or entity specified in the contract schedule. It is essential to verify and confirm that your details as listed in the contract are correct. Even a minor mistake such as misspelling your name or incorrectly identifying a trust company or ACN can cause significant problems when it comes to obtaining finance and settling. So, it is highly recommended to double-check all the details in the contract before signing it.

You should also obtain financial and legal advice to ensure you are purchasing the property in the correct entity.

“Subject to finance”

By ticking the “subject to finance” box in the contract schedule, the purchase of your property is subject to you obtaining financing. You will then have a specified period (usually 14 days) to organise finance.

Contracts usually have a condition that you need to secure financing. This prevents the seller from selling the property to another buyer while you wait for your bank to approve your loan.

“Subject to building and pest inspection”

If the contract schedule has the “subject to building and pest inspection” box ticked, you’ll have a specific timeframe (usually 14 days) to hire a licensed building and pest inspector to examine the property. This condition is comparable to the “subject to finance” clause.

We recommend adding this clause. This will allow the property to be thoroughly inspected for any issues before buying it.

This will give you peace of mind. If you find major issues, you have the option to cancel the purchase. You can also try to negotiate a lower price to account for the cost of repairs.

“Time of the essence”

Most contracts in Queensland express this contract term. Essentially, if the contract specifies a deadline for a task, you must complete it within that time frame. If you don’t do that thing on time, you’ll break the contract and the seller can usually terminate it.

“Payment terms”

The contract should set out when:

• any initial deposit is payable
• any balance deposit is payable
• the balance purchase is payable.

Remember, you typically pay the initial deposit when signing the contract, and the remaining purchase price is payable at settlement. If you fail to pay money when due (including the deposit), you will be in breach of the contract, and the seller will generally have the right to terminate the contract.

“Property risk”

In Queensland, property risk transfers to the buyer from 5pm on the first business day after the seller signs the contract. This is different from the settlement date. The buyer assumes the risk of the property at this time.

This means if you are the owner of the property, you are responsible for anything that should happen before the settlement is completed.

If you are the buyer, you must insure the property from the date the contract is signed. The type of insurance you need to take out will depend on the property you purchase.

“Entire agreement”

Most contracts in Queensland state that they constitute the complete agreement and do not include anything else unless specifically mentioned. This means that only what is explicitly stated in the contract is considered part of the agreement. Any additional terms or conditions must be specifically included in the contract to be considered valid.

This clause ensures the contract is clear and comprehensive, leaving no room for ambiguity or misunderstandings.

“Special conditions”

Special conditions are unusual terms not included in the standard contract terms. Where there is something unusual about your purchase, you may need to address a special condition. We strongly recommend you discuss special conditions with your conveyancer.

Want to know more? Our experienced Townsville Conveyancing Team is here to help.