Buying or selling a property is a big deal, and the contract of sale is the key legal document governing the transaction. ‘Standard form contracts’ with ‘standard conditions’ are commonly used for residential property sales across Australia, although these vary between states/territories to reflect the applicable laws and practices of each jurisdiction.
‘Special conditions’ are extra clauses added to the contract. Understanding these clauses is vital, as they can determine whether you can walk away from a contract if certain requirements are not met, or what penalties you might face if a special condition is not fulfilled. Having a lawyer or conveyancer carefully review the contract and all conditions before you sign it is non-negotiable.
What Makes a Condition ‘Special’?
Standard conditions cover the basics of a property transaction, such as how the deposit is paid, how settlement works, and what happens if a party defaults. In standard form contracts, they are often settled by professional bodies such as law societies, real estate institutes, and/or conveyancing institutes.
Special conditions are unique to a particular transaction and can protect the buyer or seller, address a specific issue with the property, or provide for flexibility. They can allow the contract to be tailored for:
- Unique buyer/seller needs: Like an earlier or later completion date.
- Specific property issues: Such as a structural defect or unapproved building work.
- Negotiated terms: Such as early access to the property or an occupancy arrangement.
To the extent of any inconsistency, special conditions typically override standard terms.
Common Special Conditions for Buyers
As a buyer, you will often want special conditions to act as a safety net, giving you a way out of the contract if certain checks are not satisfactory.
1. Subject to Finance Approval
This is arguably the most common condition.
- What it means: The contract is entirely dependent on you, the buyer, getting final approval for your loan from your bank or lender by a specific date.
- The protection: If you genuinely apply for the loan but the finance is not approved by the due date, you can generally cancel the contract and get your deposit back. You must make an honest effort to get the finance.
- The risk: If you miss the deadline and haven’t formally cancelled the contract, it can become unconditional, meaning you’re locked in even if you don’t have available funds from the lender.
2. Subject to Satisfactory Building and Pest Inspection
This is crucial for nearly all residential property purchases.
- What it means: You have a set number of days (e.g., 7 or 14 days) to organise a qualified professional to inspect the property for structural issues (building report) and damage from termites or other pests (pest report).
- The protection: If the reports reveal significant, major, or adverse issues (like active termite damage or serious structural defects), you may be able to:
- Negotiate with the seller to fix the issues.
- Ask for a reduction in the sale price.
- Cancel the contract and get your deposit back.
- Be aware: The condition may only cover ‘major’ defects. Normal wear and tear or small maintenance jobs may not allow you to end the contract.
3. Repairs & Maintenance
- What it means: This condition requires the seller to complete specified repairs or maintenance to the property before completion. The terms should be carefully drafted, setting out the specific work and the standard required.
- Be aware: If the work is not completed by the settlement date and it is not major work, giving the buyer the right to rescind the contract may not be warranted (nor wanted by either party). In such cases, the clause might instead provide for the buyer to be compensated for carrying out the work at an agreed rate.
4. Early Access or Occupation
To assist with the practicalities of storage and moving, buyers may request early access or occupation of the property.
- What it means: Allows the buyer to move into the property or store items in it before the settlement date, subject to agreed terms and a licence fee.
- Be aware: It is vital to have a licence agreement in place outlining the terms and conditions of the buyer taking early occupation of the property. The agreement should not reflect a tenancy arrangement, and specific terms should cover the licence fee, dates of occupancy, restrictions (for example, not to carry out any works on the property), liability, and insurances.
Common Special Conditions for Sellers
Sellers may also add special conditions, often to limit their liability or manage risks.
1. Property Sold ‘as is’ or Limiting Objections
- What it means: The buyer agrees to purchase the property in its current condition and will not object or claim compensation for existing or disclosed faults, defects, or issues, such as unapproved structures (e.g., a deck or pergola without council sign-off).
- The seller’s protection: It limits the seller’s responsibility for repairs or dealing with council issues.
- Buyer be warned: This transfers the risk entirely to the buyer. You are essentially taking on any future costs and responsibilities related to those issues.
2. Exclusion of Fixtures or Inclusions
While standard contracts typically list inclusions (e.g., curtains, light fittings), a special condition might be added to explicitly exclude an item, such as a special chandelier, a sentimental rose bush, or a dishwasher that the seller intends to take.
- Key takeaway: Check the listed inclusions and exclusions carefully against your understanding of what stays with the property.
Key Takeaways for Buyers and Sellers
Special conditions can provide important protections and flexibility outside standard contract conditions. They should be carefully drafted, and both parties should understand their effect.
- Get advice early: Never sign a contract of sale without a conveyancer or property lawyer reviewing all the special conditions first. This should happen before the contract is binding.
- Clarity is key: Special conditions should be in writing and drafted clearly and precisely. Ambiguous wording can lead to disputes, delays, or even the contract falling over.
- Know your deadlines: If your contract has special conditions (like a finance or inspection clause), you must adhere strictly to the timeframes. Missing a deadline can cause the contract to become legally binding.
This is general information only and does not constitute legal advice. The conveyancing process and laws vary between Australian jurisdictions, and you should obtain professional advice relevant to your circumstances and property location. If you or someone you know wants more information or needs help or advice, please call (08) 8232 8446 or email [email protected].