The Benefits of Attention to Detail
By Charlotte Streten
We are seeing an increasing number of contracts come through where minor errors have been made during the drafting process. These minor errors can cause major problems during the conveyancing process.
In the mad rush of your day it can often be difficult to lay the ground work for ensuring that your hard won sales result in problem- free contracts.
We have identified a few common issues which arise in contract and have set up a quick checklist to be completed before drafting commences to ensure the main issues are correct
Description of Names
Often we see the names of buyer spelt incorrectly; this can be due to alternate spellings of common names, missing middle names or even not noting the Buyers full and correct legal name on the contract.
A simple way of ensuring that the name noted on the contract is correct is to insist of getting a photocopy of the Buyers Drivers Licence; this not only provides you with additional certainty regarding the Buyer’s identity but also gives an excellent reference for spelling.
Similarly, where individuals buy property through a company or Trust it is critical that the full details of the entity are obtained. This includes getting the ACN of the company and ensuring that the individual signing on behalf of the company is entitled to do so. It is also important to determine if a purchase is being made as Trustee; if so you must enter the name of the Trust on the Contract; failure to do so may result in significant Transfer Duty implications.
It is critical that a title search is conducted over EVERY property which you draft a contract to sell.
While the title search gives a range of useful legal description of the property for contract purposes, title searches also provide a list of the registered encumbrances over the property.
As you would know, when drafting a contract the Seller must disclose any encumbrances effecting the property.
This can include encumbrance which will not pass with the property such as Mortgage and Caveats, as well as encumbrances which may be transferred to any Buyer including Leases and Easements.
The REIQ Contract warns sellers that they must disclose all Title Encumbrances which will remain after settlement. It also warns drafters that stating ‘refer to title’ or ‘search will reveal’ is not sufficient. Where this occurs issues may arise which may negatively impact on your clients and may give rise to a right to terminate or a right to seek compensation.
By ensuring that a title search is completed and that these particulars are transcribed in the contract this potential problem can be resolved. If you are unsure if the encumbrance should be noted we recommend a cautious approach it is better to over-disclose than under-disclose.
Finance and Building and Pest Inspection
Finance and Inspection clauses are commonly not fully completed. Unfortunately, the result of this is that the clause can be rendered completely void therefore the Buyer misses out on a right to negotiate terms or get out of contracts which they are no longer happy to proceed with.
Further, while standard Finance approval provisions do not require the Buyer to provide documentation regarding the terms of their finance approval, a Buyer can be obliged to provide a copy of any building and pest report to demonstrate the problems within the Property.
If a Buyer is concerned regarding a property, but wishes to sign the contract so as not to miss out, often times a building and pest clause is not sufficient; it is often prudent to include a Due Diligence provision as a Special Condition to provide a broader right for the Buyer.
We recommend that all drafting staff mark off the following checklist prior to drafting contracts to ensure that the ground work has been laid for a contract:
- Title Search;
- Company Search (if necessary)
- Special Conditions Yes/ No
If you have any questions please feel free to contact us on 07 3667 8966.