The Importance of the Date on Property Contracts
McLaughlin & Associates Lawyers Principal John McLaughlin discusses the importance of the date on a Property Contract.
Getting the date right on your Contract of Sale is most important for a number of reasons.
Firstly, the Contract should not be dated until all negotiations have been completed and agreement has been reached.
Too often, a Contract is dated when the buyer signs and submits the Contract to the vendor for acceptance. What often happens is that the vendor may reject the buyer’s first offer because they are not satisfied with the amount offered or may not be happy with some of the conditions that the buyer seeks to include in the Contract (for example, due diligence clauses, Council approvals, the length of time for settlement, subject to a prior sale, etc.), so the seller may make a counter offer to the buyer and these negotiations may go back and forth for several days, in some cases even weeks.
The trouble is that sometimes certain critical dates and events are tied back to the Contract Date. For example, a Contract may read that the Building and Pest Report is due “within 7 days of the Contract Date” or that finance is due “within 14 days of Contract Date”. If several days have transpired since the dating of the contract that can put extreme pressure on the buyer and/or his service providers to meet those requirements, and extensions of time may have to be sought from the vendor who is under no obligation to agree to grant such requests and the buyer may end up losing the property because they cannot fulfil the terms of the Contract within the dates specified.
Also, the Settlement Date may be expressed to be “30 days from Contract Date”, which means that if negotiations have taken a week to be completed, then you are effectively settling in just over three weeks, not a month, and that may put you under a lot of pressure.
We have had situations where a buyer has innocently and unintentionally been in breach of the Contract because the deposit was expressed to be paid within “2 days from Contract Date”, but negotiations were not settled for some five days after the date on the contract as there was toing and froing between the seller and buyer over the price. Agreement was finally reached and the Contracts were distributed to the parties’ solicitors, but by then the time for paying the deposit had already passed, so technically our client was already in breach of the Contract which could have had dire consequences as it allowed the seller to terminate the contract for breach and sue the buyer for the outstanding deposit and for damages, and any loss on resale of the property.
Also, transfer duty (which used to be called Stamp Duty) is payable to the Office of State Revenue “within 30 days of the date of the Contract or of it becoming unconditional”. So, if you have a cash, unconditional Contract, the transfer duty may be payable sooner than you anticipated.
So, the takeaway point to this is do not date the Contract until negotiations are complete and agreement is reached between the parties. The agent will usually date the Contract once final agreement has been reached before sending it off to the parties’ solicitors.
If you require advice on a contract, contact one of our lawyers on 07 3808 7777 or firstname.lastname@example.org.