What is in a contract of sale for property?
The contract includes all of the terms of the sale including the property address, the price, the settlement date, the parties to the contract, where the deposit will be held, what’s included in the sale (such as structures or furnishings), whether any items are specifically excluded from the sale, as well as all of the obligations that each party must perform prior to settlement.
The contract may also have legal disclosures such as notice that illegal building works have been carried out or that there are boundary encroachments.
Contracts for sale may also give particular rights to a party, such as a right to occupy a property before settlement, the right to search for a tenant prior to settlement, a right to lodge a development application, or a right to use the deposit to purchase another property.
In addition to the contract terms and conditions, a real estate contract of sale will also contain certain documents that are required to be attached to land contracts according to Section 52A of the Conveyancing Act 1919 (NSW) and the Conveyancing (Sale of Land) Regulation 2022 (NSW). This includes documents such as:
A title search – this shows who owns the land, as well as anything affecting the title of the land, such as mortgages, registered leases, easements, restrictions on the use of land, or positive covenants.
A plan of the land – this identifies the parcel of land being shown. It is a copy of the records that NSW Land Registry Services holds, and is typically prepared by a surveyor. If the property being sold is a strata lot, it will usually show the lot as well as where that lot sits in relation to all of the other lots and common property in the strata plan.
Copies of the documents that create any easements, profit a prendre, restrictions on the use of land, or positive covenants that appear on the title to the land.
If the property is in a strata scheme or a community scheme, a copy of the by-laws or community management statement.
A planning certificate from the local council which contains the information required under section 10.7 of the Environmental Planning and Assessment Act 1979 (NSW).
Diagrams from a recognised sewer authority which show the location of any sewer lines, as well as the location of the authority’s sewerage infrastructure.
Where the property includes a swimming pool, a swimming pool compliance or non-compliance certificate.
Some contracts will also include documents relating to construction on the land such as:
An identification survey report – this is a plan prepared by a registered surveyor that shows the boundaries of the land, and the location of any structures in relation to those boundaries. It is typically used to check whether there are any boundary encroachments.
A building certificate – this is a certificate provided by the local council in relation to existing works on a property, and which confirms that the council has inspected the property and will not take any action to file an order against the land for non-compliance for a period of 7 years.
An occupation certificate – this is a certificate provided by the local council or a private certifier which authorises the occupation and use of a new building or building section.
A certificate evidencing Home Building Compensation Fund cover (formerly known as ‘Home Warranty Insurance’).
Who prepares the contract of sale?
When selling a property in NSW, a contract of sale is usually prepared by the vendor’s solicitor or conveyancer. When dealing with residential property, it is a requirement of the Property and Stock Agents Act 2002 (NSW) that a real estate agent must not offer a property for sale unless a contract of sale has been prepared and is available for inspection by any prospective purchaser.
Although the contract of sale is usually prepared by a vendor’s solicitor, a purchaser will usually also have their lawyer or conveyancer review the contract, and may have them negotiate some of the terms of the contract before it is signed.
What happens after signing a contract of sale?
Once the parties to the sale are satisfied with the terms of the contract, they will both sign and date the contract. The legal representatives of each party will then liaise with each other and will each independently guide the vendor and the purchaser through their various obligations in the lead up to settlement of the sale. This may include things such as ordering searches, calculating settlement adjustments, arranging finance or discharging a mortgage, preparing transfer documents, liaising with Revenue NSW to get an assessment of transfer duty (stamp duty), and arranging financial settlement and the transfer of ownership of the property.
What if a contract of sale is not prepared properly?
A contract of sale is a legal document and it sets out many of the rights and responsibilities of each party. If a contract for sale of land is not prepared properly, you may be in breach of legislation and there can be significant consequences. These consequences can include:
The contract may not be legally enforceable, and a party may be able to get out of the sale.
A party may have the right to make a claim against the other. This may be because of a breach of a warranty or the failure to make proper disclosures in the contract.
If you are selling the property, you may need to find another buyer which means you may have additional costs such as real estate commissions, marketing costs, legal fees, and holding costs such as additional mortgage payments.
If you are a buyer, you may miss out on the property which may result in opportunity cost, as well as forego all of the expenses you incurred up to that point, such as the cost of reports, legal fees, and buyer’s agent fees.
Who should I speak to about entering into a contract for sale in NSW?
Buying property is a significant financial undertaking, and it is essential that you receive the right legal advice when negotiating the terms of the contract. Whether you are buying or selling property, you should obtain advice from a property lawyer or conveyancer.
At Thornton + King, we have a team of Law Society Accredited Specialists in Property Law who can assist with reviewing or preparing contracts of sale for any time of real estate in NSW. This includes residential property, commercial property, industrial property, rural property, and more. To speak to a property law and conveyancing expert, submit an enquiry now.
