In any property deal, the Contract of Sale is a key legal document that sets out the terms and conditions between the buyer and seller. This binding sales contract makes sure both parties are clear about their rights, responsibilities, and important details of the sale before the settlement takes place. In New South Wales (NSW), sellers need to have a Contract of Sale ready before putting a property on the market, and it must follow NSW property laws. Whether you’re buying or selling a property, knowing what this contract entails is vital for a smooth and legally secure transaction. Let’s explore the key components of a Contract of Sale in NSW, and if you have any questions, please don’t hesitate to get in touch with our Owen Hodge Lawyers conveyancing team.
What is a Contract of Sale in NSW?
A NSW Contract of Sale is one of the many essential legal documents involved in a property transaction. 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 Included in a Contract of Sale for Property?
A real estate Contract of Sale in NSW has a list of requirements that must be upheld in order for your property transfer to be viable. The essential components of a Contract of Sale for property in NSW should include:
Details about the vendor and purchaser
A Contract of Sale for property in NSW must clearly state both the vendor (seller) and the purchaser (buyer) to create a legally binding agreement.
This section usually includes:
Vendor (Seller) Details
– Full legal name(s) of the property owner(s) selling the property.
– Address and contact information of the vendor.
– Entity type, if relevant (e.g., individual, company, trust, or joint ownership).
– If the vendor is selling on behalf of an estate or under a legal arrangement, necessary legal authorisation or documentation must be included.
Purchaser (Buyer) Details
– Full legal name(s) of the person(s) or entity buying the property.
– Address and contact information for correspondence.
– If purchasing as joint tenants or tenants in common, the contract should outline ownership proportions.
– If the buyer is a company or trust, details of the legal entity must be provided.
These details are vital for establishing legal responsibility and ensuring the proper transfer of ownership at property settlement. Any mistakes in this section can lead to delays or legal disputes, so it’s important to check them carefully before signing.
The description or physical dimensions of the property to be sold
A Contract of Sale in NSW must clearly describe the property being sold. This helps both the buyer and seller understand what is included in the deal and reduces the risk of disputes over boundaries, ownership rights, or features.
Legal Description of the Property
The contract contains the lot number, plan number, and title reference as recorded in the NSW Land Registry. If the property is part of a strata scheme, it specifies the unit entitlement and common property. A Title Search is typically attached to verify ownership and any encumbrances, such as easements, caveats, or mortgages.
Physical Dimensions and Boundaries
The contract outlines the total land size in square metres or hectares and details the property boundaries. If relevant, it includes survey reports or plans that define the exact dimensions of the land and any improvements, like buildings, fences, or driveways. Discrepancies between the contract and actual land size may require legal clarification or a property survey.
Inclusions and Exclusions
The contract should clearly state what is included in the sale, such as fixtures, appliances, and additional structures like sheds, pools, or garages. Any excluded items, such as removable furniture or specific fittings, must be mentioned to avoid confusion. A well-documented property description safeguards both buyers and sellers, ensuring no surprises at settlement.
If there are uncertainties about property boundaries or legal descriptions, it is wise to seek legal advice before signing.
A list of chattels included in the property
In NSW property of sales contracts, the Contract of Sale must clearly outline which chattels are included in the purchase to prevent disputes between buyers and sellers. Chattels are movable items not permanently attached to the property, unlike fixtures that are built-in or structurally fixed.
Common Chattels Included in a Sale
The sales contract should detail all movable items that will stay with the property, such as:
– Freestanding appliances (like refrigerators, washing machines, microwaves).
– Furniture (if selling a furnished home).
– Outdoor items (including garden furniture and potted plants).
– Removable light fittings or curtains, if agreed upon.
Difference Between Chattels and Fixtures
– Chattels can be removed without causing damage (for instance, a dining table).
– Fixtures are permanently affixed (like kitchen cabinets or wall-mounted air conditioners).
– Disputes often arise over semi-permanent items (such as wall-mounted TVs or curtain rods), making it crucial to specify in the contract whether they will remain.
Avoiding Disputes
– If a seller plans to remove certain chattels, these must be explicitly excluded in the sales contract.
– Buyers should thoroughly inspect the property and request a list of chattels before signing.
– A clear list of chattels ensures both parties agree on what stays and what goes, avoiding last-minute surprises at settlement.
– If there’s any uncertainty about inclusions and exclusions, seeking legal advice can clarify your rights.
The purchase price or “consideration” of the property and the date of such payment(s)
The purchase price, or consideration, is a key term in a real estate Contract of Sale in NSW. It details the amount the buyer agrees to pay for the property and outlines the payment schedule before settlement.
Agreed Purchase Price
The contract specifies the final sale price that both buyer and seller have agreed on. If any negotiations take place, changes to the price must be documented in a written amendment before signing. If the purchase price includes GST, this must be clearly stated.
Deposit Payment
Buyers are generally required to pay a deposit, usually 10% of the purchase price, when signing the contract. This deposit is held in a trust account, typically managed by the seller’s solicitor, conveyancer, or real estate agent, until settlement. In some instances, buyers and sellers may negotiate a lower deposit or use a deposit bond instead of cash.
Balance Payment and Settlement Date
The remaining balance of the purchase price must be paid by the settlement date, which is usually 42 days after the contract exchange unless agreed otherwise. Settlement marks the legal transfer of ownership, and all payments need to be completed before the buyer can take possession of the property. A clear payment structure helps both parties understand their financial responsibilities. Missing payment deadlines could result in contract termination or penalties, making it crucial to seek legal advice before signing.
General Covenants
General covenants in a NSW Contract of Sale define the legal obligations and rights of both buyers and sellers in property transactions. These terms aim to protect both parties and ensure a fair and enforceable agreement. Here are some key covenants commonly found in NSW property contracts.
Terms and conditions relating to loss or damage to the property prior to settlement
Before settlement, the seller is responsible for the property and must keep it in the agreed condition. If the property is damaged (due to fire, storm, or vandalism) before settlement, the contract may allow the buyer to negotiate repairs, a price reduction, or even terminate the contract. Buyers should check if the contract includes insurance for unforeseen damage before settlement.
Consequences for breach of contract
If either party fails to meet their obligations, the affected party may terminate the contract, seek compensation, or take legal action. For instance, if a buyer does not settle on time, the seller may keep the deposit and claim further damages. Conversely, if the seller withdraws unlawfully, the buyer may be entitled to compensation or a court order to enforce the sale.
Penalties for delay in settlement
Delays in settlement caused by either party may lead to penalties. Many contracts impose a penalty interest calculated as a percentage of the outstanding purchase price per day. The NSW standard penalty interest rate is typically specified in the contract or aligns with industry regulations.
Transfer charges
The contract specifies who is responsible for transfer charges, including stamp duty, registration fees, and legal costs. Buyers should be aware of additional expenses beyond the purchase price to avoid unexpected costs.
Whether the Real Estate Contract of Sale is subject to finance approvals or tenancy
If the contract is subject to finance, the buyer must proceed only if they secure loan approval within a set timeframe. If the property is tenanted, the buyer inherits the tenant’s lease and cannot request vacant possession unless otherwise agreed.
Easement rights
An easement grants an individual or organisation the legal right to use part of a property for a specific purpose. These rights remain with the land, even when ownership changes, and can only be removed by mutual agreement between the landowner and easement holder.
Common easements include shared driveways, utility easements for essential services, and right-of-way easements allowing access across properties. Buyers should review the property title for registered easements, as these may affect development plans or property use.
Sunset clause
A sunset clause in the NSW Contract for Sale of land, sets a deadline for certain conditions to be met. If not fulfilled within the specified timeframe, the contract can be cancelled without penalties. For buyers, this clause may indicate an expected completion date for off-the-plan developments, allowing withdrawal if construction is delayed. For sellers, it establishes a firm settlement deadline, ensuring timely payment and transaction completion. Sunset clauses benefit both parties by preventing indefinite delays.
Cooling off period
The cooling-off period is a legally required timeframe in NSW allowing buyers to withdraw from the contract after signing without major penalties. This protects buyers from hasty decisions and provides time to reconsider. The standard cooling-off period is five business days after the contract exchange. If the buyer cancels within this period, they forfeit only 0.25% of the purchase price to the seller. Cooling-off periods do not apply to auction sales or if waived in writing by the buyer.
Goods and Services Tax (GST) in property sales
Before signing a NSW Contract of Sale, buyers should check if GST is included in the purchase price. GST applies to certain property transactions, including new residential properties, commercial sales, and vacant land sold by a registered business. If the contract does not clearly state GST inclusion, the buyer may face additional tax liabilities. Buyers are advised to seek legal and financial advice to avoid unexpected GST costs.
Special Conditions in a Property Sales Contract
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 from the real estate 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 NSW 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 NSW contract of sale is land 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:
- Research the market,
- Ensure the property aligns with the plan,
- Check the usage of the property,
- Review what is included in the contract of the sale,
- Consider the strata title,
- Review home building insurance,
- Conduct title searches,
- Check sewer connections,
- Book building and pest inspections.
Secure Your Property Transaction with Owen Hodge Lawyers
Whether you’re buying, selling, or investing, having a legally sound Contract of Sale for property in NSW is essential for a smooth and risk-free transaction. Understanding the terms, conditions, and legal obligations within your contract can help prevent disputes, financial losses, and unforeseen liabilities. At Owen Hodge Lawyers, our experienced property law team provides expert guidance on standard contracts of sale, contract reviews, negotiations, and legal compliance.
Don’t leave your property transaction to chance — contact Owen Hodge Lawyers today for professional legal support and ensure your sales contract for real estate dealings is secure, fair, and legally protected.
Frequently Asked Questions
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Before you make your choice, it’s important to speak to your trusted conveyancer so you can understand the difference between private sale vs auction to determine what sales method is right for you.
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