Do you read the contract before the auction?

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Most buyers do not. They assume that contracts are in general terms fair to both parties. And they live in fantasy land. More than 90% of auction contracts we are sent have special conditions that modify the very fair legislated General Conditions as listed in The Estate Agents ACT. And the vast majority of those special conditions change the entire balance of the contract. To be fair about 75% of the changes we request on behalf of our clients are agreed to by the vendors’ solicitor.

HOWEVER, we were sent an auction contract last week for a property that one of our client wanted to purchase. And there were, as always, a number of special conditions that modified the legislated General Conditions of the contract.

Many of these special conditions allow for some extra fees and charges if the purchaser changes settlement dates, or changes the interest rate on late payment by a few percentage points. But now we have seen the most insidious changes ever. In the General Conditions on a contract of sale that are listed in Legislation, the vendor warrants (promises or guarantees) that they have the right to sell the land (or will by settlement), they also warrant they are not under legal disability and that they are in possession of the land. It goes further to say that the vendor has not sold, granted an option or promised the land anyone else.

The contract we were given last week removed these warranties. The vendor would not warrant that they owned or had the right to sell the property. They would not warrant they were even in possession of the property nor that they had not already sold it. There were many other clauses in the special conditions which removed any penalties that could be imposed on a vendor if they did not settle. In other words if the vendor decided not to settle or if they got a better offer during settlement and sold to another party there was little the purchaser could do if they signed the contract that was offered.

We made an offer on the property removing these ludicrous clauses. They declined our offer, as is there right, and sold it to someone else at a price lower than our offer who we assumed signed the contract as it was presented.

There are two main things to think about. Firstly, if the vendor really does not have the right to sell the property I feel very sorry for the purchaser, who will have his deposit tied up indefinitely and also be “on the hook” for completion of the contract whenever the vendor may either get permission or if they have it, decide to sell.

Secondly, if the vendor does have permission to sell and is under no disability and hasn’t sold the property to anyone else, and does intend to honour the agreement and settle, then their solicitor, in his arrogance, has just cost them thousands of dollars.

The General Conditions listed in the Estate Agents Act were put together by the Law Institute of Victoria and all interested professional groups have agreed that these are fair and reasonable to both parties. Special conditions introduced by a vendor’s solicitor should only be used where there is something special about the property being sold or a special timeframe or something else unique about that particular sale, as to require modification to the general rules.

If it is a normal sale where the vendor is intending to settle in the normal fashion, then any solicitor or conveyancer trying to remove basic rights of the purchaser should be seen as being deceptive and The Law Institute or Government should act to protect purchasers from the most ridiculous of clauses. MANY OF WHOM DO NOT KNOW THEY ARE SIGNING A TOTALLY ONE SIDED CONTRACT THAT THEY WILL NEVER BE ABLE TO ENFORCE.

Always ensure you have had a contract checked by a competent solicitor or conveyancer to ensure you have someone looking after your best interests. We never purchase a property without legal advice unless we have a cooling off period, which you do not have when purchasing at auction

If you are considering buying a property this year please feel free to give my office a call and we can have a chat.

Ian James
Director
JPP Buyer Advocates

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About the author

Ian has been operating his own businesses for more than 25 years. During this time the self taught lessons of building the business, dealing with staff, suppliers, clients and economic woes have been invaluable. Ian is a fully licensed Real estate Agent, a member of the REIV and registered with the Business Licensing Authority.

Buying property is not just sticking up your hand and outbidding your rival. It is an emotional, fiscal and psychological decision that needs to be planned and well executed. Ian is usually involved in over three hundred property negotiations per year; ranging from the $250,000 first unit purchase for a young couple to multiple million dollar residential developments. Ian's business background and endless numbers of negotiations make him one of the industry's leading negotiators.

Ian is married with two adult children, living in Patterson Lakes. He is a keen fisherman when weather and business allows the time.

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