What are the pitfalls in Contracts of Sale

The moment you find a property you love is incredibly exciting. 

Amidst that excitement, you’re presented with a dense, legally binding document: the Contract of Sale. While it may seem like a formality, this contract is the blueprint of your entire purchase. 

Signing it without a meticulous review is one of the biggest risks a buyer can take.

At Skilled Conveyancing, we review these contracts every day. 

While each property is unique, there are common red flags and complex clauses that frequently catch buyers off guard. 

Here’s what you need to look out for.

1. The Section 32 Vendor’s Statement: Is It Complete?

The Section 32 is arguably the most critical part of the contract. It contains essential information about the property that the vendor is legally obligated to disclose. Key things we always verify:

• Zoning and Overlays: Is the property affected by a heritage overlay, a bushfire management zone, or other planning schemes? These can significantly impact your future building plans or insurance costs.

• Easements: Are there any easements on the title? For example, an easement might give a utility company the right to access a part of your land, restricting where you can build a pool or extension, etc.

• Owners Corporation (Body Corporate) Rules: If applicable, are the rules provided? Are there onerous restrictions on pets, renovations, or renting that don’t align with your lifestyle or reason for purchasing?

• Building Permits: For any recent renovations or structures, are the relevant building permits, Owners Builder documents and/or certificates of final inspection included? Their absence could indicate illegal building work.

A missing or incomplete Section 32 is a major red flag and can even give you the right to withdraw from the contract.

2. Special Conditions: The Devil’s in the Detail

Special conditions are clauses added to the standard contract that can either protect you or expose you to significant risk.

• Unbalanced Sunset Clauses: Common in off-the-plan purchases, a poorly drafted sunset clause could allow the developer to terminate the contract if the project is delayed, leaving you without a home in a potentially rising market.

• Unfair Deposit Releases: Be wary of clauses that allow the vendor to seek early release of deposit monies (which are held in trust on behalf of both the vendor and the purchaser) without the need for them to comply with the requirements of Section 27 of the Sale of Land Act.

• Vague “Subject To” Clauses: If your offer is subject to finance or building/pest inspections, these conditions must be precise, as a poorly worded clause might not allow you to withdraw, if;
  • your loan is not approved or 
  • if the inspections reveals defects.

3. Incorrect Property Details & Inclusions

It may sound simple, but errors in the basic description of the property are more common than you think.

• Boundaries: Do the dimensions shown on the Plan of Subdivision match the actual property?
  • The Plan of Subdivision is the official legal document defining the land, and any discrepancy, creates an unclear Title and significant risks for all parties involved, from buyers to developers.
  • It can also lead to significant legal and financial problems, including;
    • difficulty in proving ownership
    • disputes over property boundaries
    • challenges with finance and sales
    • issues with services (like water and sewerage), and 
    • potential inability to sell the property or access mortgages. 

• Fixtures and Fittings: The contract should explicitly list what is included and excluded.
  • Don’t assume the dishwasher, light fittings, or window coverings are staying. 
  • If it’s not written down, it does not form part of the Contract and can be taken. 
  • Ambiguity here leads to stressful disputes on settlement day.

4. The Settlement Terms

The agreed-upon settlement period (typically 30, 60, or 90 days) must be clearly stated and work for you. Consider whether this gives you enough time to finalise finance, conduct inspections, and organise your move. 

Also, note the penalty interest rate charged and the legal costs associated if the vendor serves a Notice of Default & Rescission, if you are unable to settle on time.

Your Best Defence: An expert Review

The common thread in all these pitfalls is that they are often buried in complex legal language designed to protect the vendors interests. Without expert education, knowledge & experience they are easy to miss, until it’s too late.

This is not a process to navigate alone! 

The cost of professional conveyancing is a small investment that protects the entirety of your property investment. 

At Skilled Conveyancing, we don’t just process paperwork; we act as your advocate, meticulously scrutinising every clause to identify risks and ensure your interests are robustly protected.

Don’t let excitement override investigating or exercising care, reasonably expected to be taken, before entering into a legal and binding Contract.. 

Before you sign on the dotted line, have the experts at Skilled Conveyancing review your Contract of Sale. 

Contact Skilled Conveyancing on 03 9729 3512 or email us for peace of mind and a secure investment.