Buying real estate is a major step that involves the legal transfer of property from one person to another.
That transaction is managed by a Contract of Sale, which can differ in some ways from state to state in Australia, especially around vendor disclosure requirements.
For many buyers, their personal experience with the law may be limited, which means that contracts of sale can seem confusing in the beginning.
Of course, we always recommend the use of a qualified legal practitioner to assist in the process, but it’s also always a good idea for buyers and sellers to have a reasonable understanding of the process that they’re about to embark upon, including understanding the important details around contracts of sale.
In this article, we’ll highlight the general terms of a Contract of Sale for real property as well as discuss the key differences in each state or territory across Australia when it comes to vendor disclosure. By the end of this article, you’ll understand better what is contract of sale!
Also, when researching contracts (presuming you didn’t go to law school and specialise in contract law!) it can be confusing to learn about property and land sale contract conditions. This article will help you understand everything you need to know about a property sale contract and land sale contract.
What is a Contract of Sale?
The conveyancing process is the transfer of the legal title of real property from one party to another and must be completed in order for a real estate transaction to be completed. This process entails the exchange of documents – and money – from one party to another.
One of the most important of these documents is the Contract of Sale, which sets out the terms and conditions agreed upon between the buyer and seller in a clear and concise manner.
There are a number of details that are included in a standard Contract of Sale, which generally include the following:
- Conditions of the sale, such as financing information or additional building and pest inspections and the dates that these must be completed
- The contract date
- The names of the vendor and purchaser
- The property’s address
- The amount of deposit that must be paid and the date that it must be paid
- The sale price of the property
- The date of the property settlement
- Whether the property will be available as a vacant possession or if it is subject to a lease
- Any fixtures or fittings that are included in the sale.
As we mentioned previously, there are differences in contracts of sale depending on which state or territory the property is located, and these are predominantly around what and when information needs to be legally disclosed and by whom. We’ll outline these in the following sections. Throughout the country, every state has differences when it comes to what is contract of sale. For example, a contract of sale Victoria differs to a contract of sale QLD.
What is a warranty in a contract of sale?
When doing research to answer the question what is contract of sale, you’ll also need to understand what is a warranty in the context of a contract of sale.
Quite simply, a warranty in a contract of sale is essentially an undertaking or a statement of facts made by the seller to the buyer about the property. Typical warranties in property contracts of sale include things such as confirmation that the seller owns the property, or about the condition of the property or features of the property.
Contract of Sale Victoria
One of the key differences in Victoria, is that a Contract of Sale must include a compulsory vendor statement, which is called a Section 32 statement.
The Section 32 statement is an important part of any real estate transaction. It’s a legal document given by the seller of a property to the interested buyer. The name is derived from Section 32 of the Sale of Land Act in Victoria.
This legislation requires a seller to provide specific information to a buyer about the property in question – before they sign the Contract of Sale. If they don’t then the buyer may have the right to pull out of the contract.
Information included in this document will include:
- Any mortgages or debts charged against the land
- Planning information
- Disclosure of services connected to the property
- Any registered building work that has been carried out in the past 10 years, which will be covered under warranty for a decade, even if the property has changed hands multiple times.
Sometimes you’ll see a contract of sale for property referred to as a Contract of Sale of Land Victoria. This is the same as a Contract of Sale Victoria.
Contract of Sale NSW
When buying or selling real estate in New South Wales, the Contract of Sale must come with what’s called a Schedule 1 Prescribed Documents.
In the standard contract of sale NSW these documents are prepared by the vendor’s conveyancer/solicitor to inform the potential buyer of relevant information about the property.
The Schedule 1 Prescribed Documents will include:
- Section 149 (2) Certificate – (Council zoning of land residential or commercial, etc.)
- Service Drainage Diagram – (Location of services)
- Title & Title notations – (Owners and restrictions on land use)
- Plan or Deposit or Strata Plan – (Location of Lot)
- NSW Fair Trading also recommends that buyers carry out an independent pre-purchase inspection report.
Sometimes referred to as a “standard property report”, a pre-purchase property inspection report is a written account of the property’s condition that can be included in the contract for sale of land NSW. It will include any significant building defects or problems such as rising damp, movement in the walls (cracking), safety hazards or a faulty roof. It is usually carried out before you exchange sale contracts so you can identify problems which, if left unchecked, could prove costly to repair.
Buyers also should consider having a pest inspection carried out on the property before signing the contract for sale of land NSW.
As always, our advice to any buyer is to have a legal professional advise you on the details of any contract, whether it is a standard contract of sale NSW, or especially if it offers special conditions.
Contract of Sale South Australia
In South Australia, there are different disclosure requirements, which are regulated via the use of a Form 1 when talking about a contract of sale South Australia.
When a vendor has hired a real estate agent, it is the agent’s responsibility to prepare the Form 1 and to make all the enquiries necessary to do so accurately, however, a vendor needs to ensure they provide their agent with correct information so that the Form 1 is accurate.
When the Contract of Sale has already been signed, the Form 1 needs to be provided to the buyer at least 10 clear days prior to the settlement date.
If the Form 1 is not served on the purchaser, or the one served is inaccurate in some way, then the purchaser will have the right to rescind the contract at any time up until settlement.
It’s also important to note that cooling off rights do not begin until a legally binding Form 1 has been given to the buyer (after contract signing). If the Form 1 is provided before the contract is signed, cooling off begins on the contract date.
The Form 1 must be available to buyers before the auction date if a property is being sold at auction.
A Form 1, as part of the Contract of Sale South Australia, generally covers similar information to NSW’s Schedule 1 Prescribed Documents, so an independent inspection report is also recommended.
A contract of sale of land South Australia requires a conveyancer or a property professional in order to be executed properly.
Contract of Sale ACT
The vendor disclosure requirements are different again in the Australian Capital Territory, and what constitutes a contract of sale ACT varies slightly.
In the nation’s capital, for a contract of sale of land ACT vendors are required to provide documents prior to sale which can include an assessment of the physical condition of the property, an asbestos assessment report, and any restrictions to development on the land, an energy efficiency rating statement, and a pest inspection report.
The contract of sale of land ACT will outline the terms and conditions agreed upon by both parties for the transfer of property.
Most property and land in the ACT is sold using a standard contract of sale ACT.
Contract of Sale Queensland, Tasmania, Western Australian and Northern Territory
In the remaining states and territories, there isn’t a legal vendor disclosure requirement involved in a property sale contract, however it is important to understand that any material facts about a property are legally required to be disclosed by the seller.
Material facts include anything that the seller knows about a property which may impact a buyer’s desire to buy the property – that is, if the seller knows the property has had significant termite damage or it is a property stigmatised by an unsavoury event such as a suicide or a murder.
It is almost impossible to know what might impact a buyer’s decision to buy, so best practice is to disclose everything. Without taking this course of action there is a risk that the buyer may have grounds to cancel the property sale contract and be entitled to a refund of all, or most, funds paid.
Contract of Sale QLD
In the sunshine state bodies corporate should provide relevant information for townhouses, apartments and units in the standard contract of sale Qld. Again, the Queensland Office of Fair Trading advises buyers to carry out independent inspections, especially building and pest reports given the prevalence of termites. A standard Contract of Sale QLD must have a warning statement in it. This statement must appear directly above the place where the buyer signs the contract.
Vendor disclosure legislation was axed in 2012, offering a key difference in what constitutes a contract of sale.
Likewise, the vendor disclosure legislation was axed in 2012.
Contract of Sale WA
Sellers aren’t required to provide a disclosure statement to any prospective buyers but should prepare a seller’s disclosure statement for their agent. The disclosure statement in contract of sale WA covers the seller’s knowledge about many important areas affecting the use and value of their property. Buyers should always look to cross-check information with the title, council and your conveyancer or solicitor.
In Western Australia it is possible to sell privately without using an agent. In these circumstances it’s possible to have your contract drawn up by your lawyer – known as the Contract for Sale of Land or Strata Title by Offer and Acceptance. This contract of sale of land WA is the terms and conditions to which both the buyer and seller agree for the sale. It’s important to understand that while you can conduct a sale of property without an agent it is never advisable to sign a contract of sale WA without legal advice.
Summary: Everything you need to know about contract of sale of land or property
What constitutes a contract of sale?
So, to summarise, what constitutes a contract of sale is a document that lists all of the conditions and the terms that have been agreed upon between the buyer and seller to facilitate the transfer of property from one person to another. Be aware that there is a standard contract of sale and a contract that will have special conditions or amendments made to it. In most instances here we’re referring to a standard contract of sale.
What is a warranty in a contract of sale?
In a nutshell, it is a promise, or statements of facts made by the seller to the buyer about the property. If you’re seeking examples of what is a warranty in a contract of sale, it’s things like, condition of features such as the pool, a statement that the seller owns the property and has the legal right to sell it.
What is unconditional contract of sale?
When listening to conversations about real estate buying and selling you may have heard someone say, “We’re putting forward an unconditional contract of sale”. Unconditional simply means without conditions. So, an unconditional contract of sale means that there are no conditions to be met. This will usually be done in a seller’s market when the buyer needs to act swiftly and they may not be able to match the funds offered by another buyer, so they offer a contract that will be executed much more quickly and without lots of conditions being met, such as finance conditions, or building and pest inspections, and so on.
You may also hear the term, “The contract has gone unconditional”. This means that all the hoops have been jumped through and all hurdles clear and the sale is now in the final stages. There are no more conditions to be met.
Intuitive Finance – the smart choice
More and more homebuyers and investors are considering buying interstate because of affordability considerations.
However, while it is a sound investment strategy to consider “borderless” investing, it’s important to understand that every state and territory has its own legislation that regulates the sale of real estate and therefore they each have a different Contract of Sale.
And that is where Intuitive Finance can help as we have clients across Australia and can assist with understanding the various requirements when it comes to contracts of sale and disclosure regimes.
The world of banking and finance can be a pretty daunting one for both novice and sophisticated investors and since our establishment in 2002 we’ve focused on providing outstanding service and business standards.
This approach was vindicated when we were named Victoria’s favourite mortgage broker at the 2015 Investors Choice Awards.
So, if you’re considering investing interstate, why not contact Melbourne-based Intuitive Finance today to ensure you have the right information and expert support on your side.
The information provided in this article is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs.