TOP SIX MISTAKES QLD SELLING AGENTS MAKE WHEN PREPARING A CONTRACT
There are a lot of moving pieces when it comes to getting a seller and buyer to sign a contract. We have set out the common mistakes we see to help you avoid these pitfalls.
#1 Incorrect party names
It’s important for the seller’s name on the contract to match the name on title exactly. This includes all middle names for individuals. It also includes an ACN for a company or the trust instrument if a trust is involved.
For the buyer’s name, it’s important to include the full legal name. Often contracts will be drafted based on sighting the name listed on the buyer’s driver’s licence. However, this may not be the buyer’s full legal name as listed on their passport or birth certificate.
#2 Having a deposit greater than 10% of the purchase price
The total deposit should never be greater than 10% of the purchase price (unless it is an off the plan contract which can be no more than 20%). Where it exceeds this threshold, the contract automatically becomes an instalment contract. This drastically changes the rights and obligations of the buyer and seller.
#3 Not completing all sections of the finance clause
If it is the parties’ intention for the contract to be subject to finance, all components of the finance section of the contract need to be completed.
We recommend the following:
- Finance Amount: Sufficient to complete
- Financier: Buyer’s choice
- Finance Date: [x] days from Contract Date
If any of these sections are not completed, the contract will not be subject to finance, despite what the parties intended.
#4 Having an ambiguous settlement date
It’s important to be specific about the settlement date. Settlement should be listed as:
- A specific date e.g. 10 January 2023
- A specific number of days e.g. 30 days from the Contract Date; or
- Tied to a specific event e.g. contemporaneous with settlement of the buyer’s sale contract
Settlement should not, for example, read “30-40 days from Contract Date”.
#5 Not obtaining legal advice on special conditions
Where the parties would like a special condition added into the contract, we recommend ensuring that legal advice has been sought. For easy reference, we have a list of common special conditions: https://www.maplawyers.com.au/special-conditions/
#6 Not having the contract validly signed
A couple of things to keep in mind when the parties are signing the contract:
- If the buyer or seller is a company, the contract must be signed in one of the following ways:
- 2 directors must sign on behalf of the entity
- 1 director and 1 secretary must sign on behalf of the entity
- The sole director who is also the company secretary must sign on behalf of the entity
- If the company has two directors and only one signs, the contract may not be legally valid (unless there is an appropriate authority in place).
- If a party signs the contract in person (i.e. not electronically), they should initial every page (including the standard terms) and have their signature witnessed by a third party.
- Where a disclosure statement is to be provided, the seller must sign this document before the buyer. The signed disclosure statement should also be provided to the buyer before the buyer signs the contract.
