Why should you get legal advice before buying?

In Victoria, there is no standard form of contract or any restrictions on the amount of special conditions that a vendor’s conveyancer or solicitor can put into a contract for the sale of real estate. While previously there have been legislated general conditions which could be used as a guide, many conveyancers and solicitors choose to fill their contracts with conditions that most Courts in Australia would consider unfair to buyers and that breach of Australian Consumer Laws.

In most respects, a consumer purchasing a toaster or a cheeseburger will have more rights than a person purchasing a property. Accordingly, it is imperative that prospective buyers seek the services of an experienced conveyancer to provide advice on, and review any contract of sale.

The commonly used form of contract for the sale of real estate in Victoria provides that the purchaser buys the property in its current condition, and any omission or mistake in the description of the property or any deficiency in the area of the land does not invalidate the sale. Accordingly, a purchaser should test and document what appliances are in working order on the day of sale, including hot water service and any heating/cooling, as well as measuring the land to the nearest intersection to ensure the property fences are on the correct boundary.

Purchasers should also take note of any improvements or structures that appear to have been built within the preceding 7 years, or that are placed close to property boundaries where easements are commonly located.

In addition to the requirements set for vendors under section 32 of the Sale of Land Act 1962, there may also be additional requirements pursuant to section 135 and 137B of the Building Act 1993 which need to be met before a vendor can enter into a contract to sell a property, and failing same, the contract will be voidable at the option of the purchaser at any time before settlement.

If you are purchasing into an owners corporation, it is important to review the owners corporation certificate, minutes of the last annual general meeting, and owners corporation rules to ensure you are satisfied with the current position of the owners corporation. You should take note of any large item works that may need to be completed in the future such as replacement of windows, resurfacing the driveway, or any structural issues, and where present, ensure that that the maintenance fund of the owners corporation is sufficient to cover any costs associated with the works.

The difficulty in reading a section 32 is that you must have regard to what documents it should contain, as much as what documents is does contain, something that generally only experience will allow you to do. For example, there is no requirement for a section 32 to contain information about illegal building works, only to disclose information about permits granted in the last 7 years. Accordingly, if you suspect renovations have been undertaken to a property in the proceeding 7 years that would have required a permit, you need to look for the planning permit (if required), building permit, occupancy certificate, or in other cases the owner-builder inspection report and builder warranty insurance.

The other issue with reading a section 32 is that information is often omitted or incorrect statements are given by the vendor’s solicitor or conveyancer. Many inexperienced solicitors and conveyancers have broad statements in their section 32 stating that there has been no failure to comply with the terms of any covenant, easement or similar restriction, when a simple examination of the property online clearly shows a garage which has been built over an easement without consent, or a front fence which breaches zoning requirements.

Ideally, when you’re in a position to place an offer on a property you should be in contract with a conveyancer to review any contract and section 32 for properties that you are interested in. Alternatively, you should contact an experienced conveyancer as soon as possible after signing a contract so that they may review the documents during the cooling-off period (if applicable).

If you have purchased a property off-the-plan and settlement is more than a year away, you should still engage an experienced conveyancer as soon as possible so that they can keep on top of any amendments to the proposed plan of subdivision which may be subject to change before settlement.

Subject to some exceptions, a purchaser can end a contract of sale within 3 clear business days of signing. Cooling off previsions do not apply to purchasers who are also estate agents, corporations, or for the purchase of commercial property, farming land, or land >20 hectares. Furthermore, a purchaser cannot cool off from a contract for a property purchased at, or within 3 clear business days of a publicly advertised auction, or if the purchaser has previously entered into a substantially similar contract for the same property.

Cooling off previsions do not apply to the vendor, only the purchaser.

In Victoria, properties are sold as is/where is. Accordingly, in addition to obtaining pre-contract advice, you should measure the land to the nearest street intersection to ensure the fences are on the correct boundary lines, and inspect and document the condition of the house and goods sold with the land. If you are purchasing at auction, it is advisable to ensure your finance approval is in order and you have completed a building/pest inspection on the property if required. Alternatively, if you are not purchasing at auction, you can make your offer subject to finance and a building inspection.

The most negotiated part of the contract is usually the price, followed by the settlement date. However, purchasers may also wish to negotiate the amount of deposit paid and conditions of the contract such as a requirement that appliances be in working order at settlement, or the inclusion of finance, building and pest inspection clauses. When considering what contract conditions should be negotiated, you should seek advice from an experienced conveyancer to ensure any conditions added are worded correctly to protect you, and that any unconscionable vendor conditions are removed.

In addition to negotiating the contract conditions, you can also negotiate what goods are included with the sale. If the vendor owns a piece of furniture that is well suited to the property, such as a sofa or free-standing water tank, you may wish to negotiate its inclusion in the sale. However, in a competitive property market, vendors may be inclined to accept unconditional offers over those with multiple conditions and as such any conditions added to the contract should considered accordingly.   

In addition to including the purchase price, deposit amount and settlement date, the contract of sale should contain the entire understanding and the whole agreement between the vendor and purchaser relative to the sale of the property. In particular, a purchaser should not rely on any representations or warranties made by the estate agent or any other party on behalf of the vendor and a purchaser should try to avoid any implied terms. If it is important to you that that property be within a particular school zone, or that your bank be granted access for the purpose of undertaking a valuation, it is important to make your own enquiries and write it into the contract where appropriate.  

In Victoria, estate agents will usually have a prospective purchaser submit their offer to purchase a property by completing and signing a contract of sale. If the terms are agreeable to the vendor, the vendor will also sign the contract, and the purchaser will be in a legally binding agreement. In other cases, an estate agent may have the prospective purchaser submit complete a document of their intention to purchase, the problem we see with these documents is that they usually contain all the required information under the Instruments Act to constitute a contract for the sale of real estate, and as such could be viewed as a contract in itself. In any event, you should always seek advice from an experienced conveyancer before signing any document in relation to the proposed purchase of a property.