PURCHASING A PROPERTY IN QUEENSLAND? WHAT SHOULD YOU DO BEFORE SIGNING?
Property transactions are complex and contain a myriad of legal issues. It is important that you seek legal advice before you sign a contract. Some of the issues to be mindful of include, but are not limited to:
1. Matters to consider before signing
- Check the particulars in your contract, including your name, the purchase price and deposit, any conditions and the settlement date. Please ensure you can meet all timeframes – this may involve checking with your bank and/or building inspector. It is also important to review any title encumbrances listed on the contract and seek legal advice as this may impact your obligations or the ability to settle.
- Buying entity: ensure you have considered the implications of the buying entity (e.g. purchasing in a trust vs your personal name). We recommend seeking advice from your accountant or financial planner first.
- Foreign buyers: if you are not an Australian citizen or permanent resident, you will need to seek Foreign Investment Review Board (“FIRB”) approval. You should obtain FIRB approval prior to signing the contract or make your contract subject to obtaining this approval. Your transaction will also be subject to Additional Foreign Acquirer Duty (“AFAD”). You will need to factor this into your budget.
- Settlement: under the standard REIQ contract, either party may extend the settlement date by up to five business days by giving notice to the other party, without the need for the other party to agree. You should take the possibility of an extension into account particularly if settlement on the nominated date is critical to you or your plans (e.g. you have booked a removalist).
- Due diligence: we recommend conducting due diligence investigations on the property prior to signing e.g. checking flood maps or development approvals if this is key to your plans.
2. Time critical steps you will need to complete after signing a contract
- Deposit payment: ensure you can make deposit payments by the due dates, keeping in mind any daily transfer limits you have. You should also provide the deposit holder with evidence of the payment by the due date as well. The seller can terminate the contract and keep your deposit if you pay the deposit late. You should not rely on any directions or relaxations about payments that are contrary to the requirements of the contract.
- Insurance: the property will generally be at your risk from 5.00pm on the first business day after you sign the contract. As such you will need to take out insurance for the property. Before signing the contract, make sure you will be able to obtain appropriate insurance, particularly if any part of the property will be used for non-residential purposes.
3. Cyber fraud
Before paying the deposit, you should call the deposit holder to verify the account details listed on the contract. This applies to any other payments you make under the transaction (e.g. if you are transferring settlement funds into your solicitor’s trust account). When calling to check payment details, you should only use a phone number for the relevant party which is verified from a source that is different to the communication containing those details.
4. Time is of the essence
Time is of the essence of the Contract which means that both parties to the Contract must perform their obligations strictly by the due date. A failure to act in time in relation to a date relevant to the transaction may mean the seller can terminate the contract or you may lose rights under the contract.
5. Cooling off period
If applicable to your contract, the cooling-off period is a 5 business day period during which you may terminate the contract for whatever reason. The cooling-off period starts on the day you receive a copy of the contract signed by both parties or, if that day is not a business day, on the next business day. If you exercise the right of termination pursuant to the cooling-off provisions, the seller may retain a penalty of 0.25% of the purchase price from the deposit paid.
6. If you are purchasing at auction
If you are buying at auction, you should ensure that all of your affairs are in order before you bid at the auction. This is because you will be bound by the contract upon signing the contract on auction day. We recommend that you:
- confirm the correct entity bidding at the auction and to be named on the contract as buyer – consider whether you will be purchasing the property in your personal name, with another person, or a company or trust (if via a company or trust, you must ensure that you establish the purchasing entity before the auction);
- make sure that you will have sufficient funds to complete your purchase on the settlement date nominated in the proposed auction contract (e.g. by making enquiries of your financiers and financial advisors to confirm that all required approvals have been given on acceptable conditions, and that the required funds will be available);
- ensure that you will have sufficient funds to pay the deposit on auction day;
- inspect the property and ensure you are satisfied with the state and condition of the property – you should obtain any building and pest reports before the auction;
- arrange for any searches to be done before the day of auction (with sufficient time for them to be returned); and
- review the draft contract and, if necessary, negotiate the terms of the contract with the seller so that the contract can be amended to reflect your agreed terms prior to auction day.
Contracts signed at auction are not subject to a cooling-off period. As such, we recommend you consider the above matters and provide a conveyancing solicitor with instructions immediately.
At this stage, we note a solicitor would generally not have been engaged by you to act in connection with your proposed purchase, as they have not been provided with a copy of the proposed contract. Please note a conveyancing solicitor cannot advise you of the specifics of your contract or time critical steps relating to your transaction until they have received a copy of your contract.
