Standard Contracts of Sale

1. What is a contract of sale?
2. Who writes a contract of sale?
3. What is in a contract of sale for property?
4. Special conditions in property sale contracts
5. What happens after signing a contract of sale?
6. Doing your due diligence

A contract of sale in NSW is one of the many, essential legal documents involved in a property transaction. Whether you’re buying or selling a house, it’s important you’re familiar with this document and what should be included. To help, we’ve broken down everything you need to know about property sale contracts. If you have any questions, please don’t hesitate to get in touch with our conveyancing team.

What is a contract of sale?

A property sales contract is a legally binding document containing the terms and conditions agreed upon between a seller and buyer in relation to goods. It also lists all the relevant information related to the property, such as names and addresses, the conditions of sale and the price.

Who writes the contract of sale?

A contract of sale in NSW is typically prepared by a conveyancer or property lawyer. It can also be drafted by a real estate agent, but the contract is then checked by the conveyancer or lawyer of both parties.

What is in a contract of sale for property?

Contract of sales in NSW have a list of requirements that must be upheld in order for your land sale contract to be viable. The essential components of a contract of sale include:

• • Details about the vendor and purchaser: This includes the name and present residential addresses of the parties to the house contract.

• The description or physical dimensions of the property to be sold.

• • A list of chattels included in the property: Chattels are items that are not physically attached to the property and these include things like curtains, furniture, dishwasher, fridge, and washing machine.
  • The purchase price or “consideration” of the property and the date of such payment(s): In property sales, consideration may usually be divided into a deposit and the remaining balance. The percentage of the amount to be deposited depends on the terms of negotiation mutually agreed upon by both parties.

• General covenants such as:

• Terms and conditions relating to loss or damage to the property prior to settlement
  * Consequences for breach of contract
  * Penalties for delay in settlement
  * Transfer charges
  Whether the real estate contract of sale is subject to finance approvals or tenancy
  • Easement rights: An easement gives an individual or a company the right to use the land or property for a particular purpose. Easements that are registered on a certificate of title will remain as the land is bought and sold. It can only be removed upon mutual agreement of the easement holder and the owner of the land. Common easements include:
    • A shared driveway between neighbours; or
    • Routing of electrical mains or drainage systems through a property by governmental authorities.
• Sunset clause: This clause is a provision in a contract of sale that sets certain stipulation(s) after which the agreement will no longer be effective, such as reaching settlement by a certain date. The incorporation of this clause enables both the buyer and the seller to protect themselves from certain circumstances. For example, a buyer can use a clause to state the expected completion date of certain constructions and/or developments and cancel if such developments are not completed within the particular time period. Similarly, a seller might use a sunset clause to fix a settlement date thereby ensuring that the payments are fully and promptly paid.
• Cooling-off Period: The contract of sale often contains information about a ‘Cooling-off period’. This clause enables a buyer to end the contract without large penalties. Learn more: what is the cooling off period?
• Goods & Services Tax (GST): Before signing a contract of sale, it is always recommended that the purchaser should check whether GST is included in the purchase price or not.

Special conditions in property sale contracts

Special conditions are additional conditions attached to a standard contract of sale in NSW. These can be requested by either the seller or buyer but are subject to mutual agreement by both parties. Some examples include:

• Payments to be made by either party regarding necessary maintenance and repairs to the property
• Payment of the deposit amount in instalments
• Termite inspection certificate to be prepared by a registered company

When should I ask for a contract of sale?

When you’re buying a house, you’ll typically receive a property sales contract after your offer has been accepted by the seller (the vendor). The real estate agent or vendor’s conveyancer will send through the contract for you to sign. Before signing the property sales contract, we highly recommend getting your conveyancer or lawyer to read over it.

However, when you buy a house at auction, you will be expected to sign the property sales contract and pay the deposit immediately after the auction (if you’re the successful bidder).

What happens after signing a contract of sale?

Buying a property involves more than just agreement between vendor and purchaser; negotiations often involve price, property condition, and compromises. After negotiations, a legally binding contract of sale is signed by both parties, typically facilitated by solicitors or conveyancers. Using one’s own legal representation is crucial for ensuring contract soundness. In complex cases, solicitors may negotiate terms. Contract exchange makes the agreement legally binding, requiring both parties’ commitment to the sale, and typically involves the buyer providing a deposit. It’s important to note that the process varies by state, necessitating expert advice.

Financing the property

Before purchasing or constructing a home, it’s essential to explore financing options. Approach banks and financial institutions to determine eligibility for a loan, required deposit amount, fund availability, and borrowing limits. Loan amounts are typically based on factors such as income, interest rates, loan terms, and existing financial commitments such as credit cards and personal loans. 

Eligibility for a loan often depends on having sufficient funds for a deposit and additional costs, stable employment with adequate income to service the loan, and meeting lender requirements.

Property handover

Settlement marks the transfer of ownership of a home, where the remaining sale price is paid, and you become the legal owner. During settlement, your lender disburses funds for your home loan, and you receive the keys to your new home. Typically occurring about 6 weeks after contract exchange, the settlement period can be negotiated with the seller by your conveyancer or solicitor. You’ll need funds to cover settlement costs such as legal fees, conveyancing fees, stamp duty, and any unpaid lending charges. Some contracts allow a final inspection on the settlement day to ensure the property’s condition matches the agreed terms. After settlement and a satisfactory inspection, you can move into your new home.

Doing your due diligence

Performing due diligence before buying a house is one of the best ways you can safeguard your interests and money. Buying a house is one of the biggest investments you’ll make in your lifetime, so it’s essential you do your research before committing. As part of due diligence, all property buyers generally should:

1. Research the market,
2. Ensure the property aligns with the plan,
3. Check the usage of the property,
4. Review what is included in the contract of the sale,
5. Consider the strata title,
6. Review home building insurance,
7. Conduct title searches,
8. Check sewer connections,
9. Book building and pest inspections.