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The Four Stages of a Conveyancing Transaction PART ONE – Pre Contractual

INTRODUCTION Following on from my article on 7 Things That You Can Do to Make Your Conveyancer Happy I thought that it would be appropriate to give you a greater insight into the stages of the conveyancing process through a series of articles each covering each stage There are essentially 4 stages that cover the […]

The Four Stages of a Conveyancing Transaction PART ONE – Pre Contractual

The Four Stages of a Conveyancing Transaction PART ONE – Pre Contractual

By Aylward Game - Mar 23, 2016 Conveyancing

INTRODUCTION

Following on from my article on 7 Things That You Can Do to Make Your Conveyancer Happy I thought that it would be appropriate to give you a greater insight into the stages of the conveyancing process through a series of articles each covering each stage

There are essentially 4 stages that cover the breadth of the conveyancing process:

  1. Pre Contractual
  2. Conditional
  3. Unconditional
  4. Settlement/Post Settlement

Each of these stages offers its own risks.

First of all is the Pre-Contractual stage

PRE CONTRACTUAL STAGE

This importance of this stage, which occurs before the signing of contract, is often overlooked with clients signing the “standard” Real Estate Institute of Queensland (REIQ) contract without really reading the document fully.

One of my faults (and my wife advises me not my worst fault) is that I read everything – it drives her mad when I look over every page of my car hire and event hire contract but she certainly supports me when I carefully read all pages of the real estate contracts for houses that we have bought.

A standard REIQ contract can be divided into the following parts

  1. Reference Schedule

This part covers important details such as

  • Real Estate Agent
  • Buyer (and their Solicitor)
  • Seller (and their Solicitor)
  • Property Address
  • Price (including deposit amounts and when these are payable)

Yet you would be surprised how many errors we find when we receive contracts signed by clients – this is an important legal document but common errors include

  • Spelling errors
  • Wrong property
  • Incorrect contact numbers
  • Confusion re what fixtures are excluded and what chattels are included

Next are three key matters – the Finance and the Building and Pest Inspection Dates and Terms and the Matters Affecting the Property.

The Finance Condition sets out whether the contract is subject to finance, whether the buyer is free to seek finance from any financial institution, what finance amount is required to meet the condition and when the Finance Date is due.

Please note that the standard REIQ contract specifies that unless Finance Amount, Financier and Finance Date are all completed then the contract is NOT “subject to finance” and failure to be able to pay for the purchase is not a ground for termination.

The Building and Pest Condition sets out when the inspection is to be performed and again it is important to note that if the Inspection Date is NOT “subject to Building and Pest” and issues that would be covered by such an inspection are not grounds for termination.

The Matters Affecting Property provides the place where the seller of the property is able to disclose

  1. encumbrances on the property that will remain after settlement;
  2. details of tenancies on the property – please note that leases less than 3 years will not show up on a title search on the property

The Reference Schedule then shows details of compliance with Pool Safety, Electrical Safety Switch, and Smoke Alarm requirements.

Finally, the Reference Schedule shows any Special Conditions that apply to the contract.

  1. Terms of Contract

Yes, this is the fine print and in an article of this size, we cannot provide a detailed commentary on each term.

However here are some key terms of which you should be aware:

  • Term 1 – Definitions – “business days” – this is a key term given that many conditions are expressed as due within x business days
  • Term 2 – Purchase Price – notably whether price includes GST and what adjustments can be made to the Purchase Price
  • Terms 3 and 4 – Finance and Building and pest Inspection Reports and Pool Safety – notably notice requirements and termination rights
  • Term 5 – Settlement – notably times within which settlement must occur and arrangements for handover of keys at settlement
  • Term 6 – Time – this reinforces that where something is to be done by a certain time it is vital that this timeframe is strictly followed
  • Term 7 – Matters Affecting the Property – notably seller warranties and how issues with encroachment and survey matters do not necessarily give a right to termination
  • Term 8 – Right and Obligations Until Settlement – notably that the property is at the risk of the buyer from 5 pm on the first business day following the signing of the contract and how many requests for early (before settlement) possession will be handled
  • Term 9 – Parties Default – this covers each party’s rights if the other part is in default of the contract
  • Term 11 – Electronic Settlement – this is a relatively new initiative that will be covered in a later article.

CONCLUSION

Buying a House will for most people be the most important financial decision that they make – we cannot recommend highly enough the importance of reading the contract fully and ensuring that you satisfy yourself on all matters before you sign the contract.

Naturally, we are happy to advise you on this important, yet often overlooked, stage of the conveyancing process.

UP Next PART 2 – Conditional Phase

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