Contract of sale
A An agreement that the law will enforce. of sale is prepared by the vendor’s A legal practitioner (lawyer) who sees clients and opens files to deal with their legal matters but usually does not appear in court. See also barrister. or conveyancer. A contract of sale contains the terms of the purchase, the parties’ details, the purchase price, how it is payable, the day of sale (i.e. the settlement date), a description of the property and chattels, and the day that (1) Having control over property. Possession is not the same as ownership. For example, a bicycle you have borrowed from a friend is in your possession but you do not own it. (2) Having illegal drugs on your person or property. of the property is available. Before you sign a contract of sale, you should seek legal advice.
Some All the property a person has, including real property and personal property. It is often used to describe property belonging to someone who has died, or the property of a bankrupt. agents A document that sets out what a person wants to happen to their money and other property after they die. accept offers via email or text message but most will ask buyers to do as follows:
- the buyer signs the contract of sale with their preferred price, settlement date and amendments to any of the conditions;
- the written The first step in agreeing to make a legally binding agreement. An offer must be accepted before there can be a legally enforceable contract. For example, a person can offer to sell their car for $5000 and a buyer can accept the offer and pay that purchase price. is given to the A seller.; and
- once the vendor has accepted the buyer’s offer and signed the contract, the vendor’s A person who acts for someone else. They can make decisions, carry out tasks or make agreements for the other person. For example, if you ask someone to bid for you at an auction they will be acting as your agent. sends copies of the signed contract to the vendor, the buyer and their solicitor or conveyancer.
Note that when a buyer signs a contract of sale, they are effectively making an offer to the vendor. A buyer is bound by the offer once the vendor accepts it by countersigning the contract.
At an auction, a vendor’s acceptance should be immediate. If a property is sold by private treaty or agreement, the vendor may accept the written offer immediately or they may take a few days to accept the offer. It is recommended that the buyer set a timeframe within which their written offer is Legally binding or effective. (this is usually three clear business days from the day the buyer signs the contract, unless a different period is specified in the contract).
A deposit can be paid in one sum, or as a preliminary deposit and balance. The deposit should be the smallest sum the buyer can negotiate. It is general practice for a deposit to be 10 per cent of the purchase price. A deposit is usually paid when the buyer signs the contract of sale.
The SL A written law made by parliament. Also called an ‘Act of parliament’, ‘statute’ or legislation. requires the vendor’s agent, solicitor or conveyancer to hold the deposit in a A bank account in which money is held on behalf another person, not for the use of the account holder. For example, a lawyer’s trust account holds clients’ money. It is regulated by strict accounting rules that safeguard the clients’ interests. For example, a trustee may hold a child’s inheritance for them until they turn 18.. It is a criminal A criminal act prohibited by state or commonwealth criminal law. An offence is either a summary offence (minor) or an indictable offence (serious). for the person holding the deposit to use it for their own purpose.
If the vendor wishes to receive the deposit before settlement, a statement under section 27 of the SL Act must be given to the buyer (see ‘Section 27 statement’, above).
If the vendor breaches the contract, the deposit must be returned to the buyer. In contrast, if the buyer breaches the contract, the vendor keeps the deposit.
If both the vendor and buyer agree, the deposit can be put into an interest-bearing account in their joint names. However, paying the deposit from the account requires the signature of both the vendor and the buyer. While this practice allows interest to be earned, the accessibility of the deposit is diminished. This is usually only done for very long settlements.
Another option that may be desirable for a buyer, where there is a longer settlement, is a deposit (1) An undertaking by someone to do or not do something, especially a good behaviour bond, which can be part of a sentence given by a court. (2) A tenant’s payment of money to a landlord at the start of a tenancy. The bond is held in case there is any damage to the property or the tenant fails to pay rent. (see ‘Guarantees and deposit bonds’, above).
Sometimes a contract states that the deposit must be paid directly to the vendor’s solicitor for investment in an interest-bearing account until the contract settles. Solicitors, not agents, can arrange these accounts.
If a property is purchased by more than one individual, each individual is required to note in the contract of sale their respective interest, or how the property title is to be shared (e.g. Mickey: 40 per cent; Minnie: 60 per cent).
Buyers need to choose one of four options:
- The property is held jointly – each individual has an equal share in the property (if one buyer dies, the surviving buyers automatically receive equal portions of the deceased’s share, regardless of any contrary provision in the deceased’s will);
- The property is held as A form of joint ownership in which two or more people own property. Each person has their own separate share, and that share of the property can be left in a will. Compare with joint tenants. – each individual has an equal parcel of shares;
- The property is held as tenants in common – individuals have unequal parcels of shares (individual buyers can choose who receives their share in their will).
- The property is held by an entity (e.g. a company or A type of property ownership or arrangement where one party, known as the trustee, holds property or money for the benefit of another party, referred to as the beneficiary.) in which the co-owners each have an interest.
As soon as the vendor accepts the buyer’s written offer, some buyers choose to lodge a (1) A warning or notice – for example, to a buyer to thoroughly check a product before buying it (see caveat emptor). (2) A notice filed with Land Victoria warning anyone who searches the land title that someone claims ownership or some other right in the land. on the vendor’s title. This protects the buyer by preventing the vendor from dealing with the title except to complete the contract. Caveats must be lodged electronically via an electronic conveyancing platform, such as Property Exchange Australia (PEXA). Buyers need to engage a solicitor or conveyancer who is PEXA subscriber to lodge a caveat on their behalf. This is an additional (1) A statement giving the details of a crime an accused person is claimed to have committed. (2) A personal property security. (3) A judge’s directions to a jury at the end of a case. on top of the standard conveyancing fees. In practice, this is usually only done for longer settlements.
In general, the risk of damage to a property remains with the vendor until settlement. However, it is prudent for the buyer to take out building insurance from the day the contract is signed. This is in case the vendor is underinsured, and because the buyer’s bank will want to see proof that the building is adequately insured.
Buyers who are purchasing a property with common property should ensure that the common property and shared services are insured by the A body corporate created by registration of a plan of subdivision or a plan of strata or cluster subdivision. See also prescribed owners corporation.. (See Chapter 6.5: Owners corporations.) Two-lot subdivisions are exempt from the requirement for common property insurance (note that ‘accessory’ or carpark lots are not considered to be separate lots).
Investigating the title
Buyers should always examine the certificates that are commonly found in a A document that a seller (vendor) of real estate must give to the buyer buyer before a contract of sale is signed. It contains information about the property, such as rates and council planning restrictions that affect it. Also called a section 32 statement.:
- a zoning certificate from the Victorian Government Department of Planning or the local council;
- a VicRoads certificate about plans to build or widen roads;
- a rate certificate from the relevant water authority;
- a SRO certificate showing the taxable value, Money owed that is due on a certain date and is late being paid (overdue). of land tax, and land tax payable;
- a land information certificate from the local council showing rates, road charges and other municipal records;
- building approvals and notices from the local council (forms 2.10, 10 Building Regulations 2006 (Vic));
- an A legal restriction, such as a mortgage, that prevents the owner from freely dealing with real estate or other property. certificate from the water authority showing unregistered encumbrances in its records (if applicable); and
- the building permits for homes built or renovated in the previous seven years.
If any of the above certificates are not included in the vendor’s statement, the buyer should conduct their own search for these certificates.
Certificates can be applied for online and fees are payable. Solicitors and conveyancers generally use professional search agencies for this task.