TOP 10 COMMON

CONTRACT MISTAKES

TO AVOID

PRESENTED BY

OWEN HODGE

LAWYERS

CONVEYANCING

WHAT WE’LL COVER?

1. Danger of Wrong Description of Property

2. Failure to Understand the Inclusions

3. Failure to List Encumbrances

4. Incorrect Information About the Names of the Parties

5. GST Obligations Mentioned in Ambiguous Terms

6. Vague Special Conditions

7. Confusion About Arrangement of Finances

8. Confusion About Critical Dates, Obtaining Reports and Final Inspections

9. Confusion About Cooling-off Period

10. Availing the Service of an Experienced Property Lawyer

Overview

Buying or selling a property can be an overwhelming

decision. You might be purchasing your dream

property or intending to sell off an investment which

represents your nest egg.

Drafting a contract relating to a buy or sell

transaction is not an easy job as the contract

forms the basis of transfer of property. Therefore,

it should be carefully worded and vetted.

When you are entering into a buy or sell

transaction, you should have a few pointers in

mind to avoid some very common mistakes.

• If the Property title is not correctly entered in the

contract, it might lead to a lengthy and costly legal

process later.

• A mistake in relation to entering the details of the

“Certificate of Title” or wrongly entering the street number

or house number or confusing between the two are

general mistakes committed while noting property

addresses in the contract.

• One day when sell off your property in the future, this

might pose a problem in regard to transfer of title.

• You might also have issues with possession if there is no

clear title attached to the property you are intending to

buy or sell.

1. Danger of Wrong Description of Property

2. Failure to Understand the Inclusions

• Terms of purchase or sale should be clear and unambiguous.

• While advertising a property, many real estate agents promise add-ons which needs vetting. If you have any

doubts, ask and clarify your doubts with everyone involved in the process.

• Most importantly, read and understand the contractual terms about the inclusions and exclusions from the

property that you are intending to purchase or sell.

• The valuation of a property maybe related to the

number of encumbrances listed on the property.

• Some contracts may have encumbrances which are

lifted and replaced on the property during a property

transaction.

• The contract should clearly list out the exact

encumbrances and costs involved in removing and

replacing them, to help buyer determine whether there

are any hidden costs involved.

• Listing of encumbrances in the contract and a clear

understanding about who pays off what, leads to less

confusion between the purchaser and seller during

transfer of property.

3. Failure to List Encumbrances

4. Incorrect Information About the Name of the Parties

The phrase "and/or nominee" is commonly used in

contracts when the parties are unsure about what

name they wish to have on the title.

It is often assumed that by doing this,

the name of the parties can be

amended after signing the contract.

However, the name of the parties to

a contract cannot be changed by a

simple addendum and addition of

any new parties require termination

of the existing contract, mutual

agreement for a new one and a

fresh new agreement being drawn in

place of the old one.

• The costs mentioned in the contract sometimes may not mention whether it is inclusive or exclusive of Goods and

Services Tax (“GST”) and whether Stamp Duty applied.

• Any such ambiguity might lead to an erroneous presumption about the total price of the property and incurring of out

of pocket expenses and other hidden costs.

• These costs often add up to a substantial amount and cannot be recouped.

5. GST Obligations Mentioned in Ambiguous Terms

6. Vague Special Conditions

A contract relating to a buy or sell

transaction should not contain vague

and unrealistic special conditions.

The terms and time frames mentioned

on any special conditions should be

realistic and achievable.

7. Confusion About Arrangement of Finance

The parties involved in a contract often do not

have a clear idea about the arrangement of

finances when borrowing from the banks.Be clear about your borrowing limit, the time

frames involved in getting loan approvals and

how that might impact the settlement of the

contract.

8. Confusion about Critical Date, Obtaining Report

and Final Inspection

The cooling off period, the

date of deposit due, the

settlement date and the

date for final inspection

should be mentioned in

clear terms to remove any

chance of ambiguity.

Several reports including the Pest Report,

Building Report or Survey Report may

have to be obtained from respective

authorities before the final handover of the

property occurs.

Make sure the time limits and dates for

obtaining these reports and the party’s

responsibility are clearly mentioned in the

contractual terms.

9. Confusion About the Cooling-Off Period

• Many people are not aware that in New South Wales (“NSW) if one buys residential property other than at auction,

he/she has the benefit of five business days to withdraw from the contract and is also entitled to get back the deposit

with a standard deduction.

• The terms about a cooling off period should be clearly mentioned in a contract so that people can withdraw within a

specified time period before the conclusion of the contract.

10. Availing the Service of an Experienced

Property Lawyer

• Drafting and finalising a contract relating to a buy or sell transaction requires specific knowledge and expertise.

• Since a lot of your monetary and emotional investment is at stake, it is always advisable to engage the service of an

expert lawyer to represent your interests during contractual negotiations.

How Can We Help?

The buy or sell contract in a property transaction is more than a simple conveyancing process, it is

vital that you ensure that your interests are represented by a law firm who can guide you through

all aspects of the broader transaction rather than just ‘do’ the conveyancing.

At Owen Hodge, our clients get access to a team of legal professionals who are highly

experienced in all aspects of the legal complexities involved in a contract of purchase/sale and

how to ensure that your best interests are represented in the contract.

THANK YOU

If you have any queries in relation to conveyancing and contractual

negotiations or would like to speak to one of our legal experts, please

feel free to contact our team at Owen Hodge Lawyers on 1800 770

780.

http://www.owenhodge.com.au/