Buying a house: Tips and traps.

Purchasing a house can be one of the most significant financial decisions you make. It is crucial that you understand your legal rights before entering into the buying process.

Submitting an offer

You should consider any conditions that you require to form part of your offer. This can include:

• A "subject to finance" clause if you are obtaining finance for the purchase. It is important to note that these clauses may have a "best endeavours" element which can mean that you are obligated to take all reasonable steps to obtain finance (which may not be with your preferred lender). Also make sure the clause requires you to obtain an unconditional approval to be satisfied.
• A "subject to inspection clause" which may involve obtaining a building inspection report or pest report. It is important to understand the scope/limitations of any inspection report as these reports will commonly have a limited scope and limitation of liability clauses.

If your offer is accepted, you should ensure that these conditions are reflected in the contract.

Form 1 & cooling off:

A Form 1 is a legal document which provides information about the property including the mode of title, any mortgages/encumbrances on the property, easements and zoning.

However, it does not include all information relevant to the property such as encroachments and building condition.

The Form 1 must be accurate and complete. You may have remedies available if the Form 1 is defective including withdrawing from the sale or other legal action.

The Form 1 provides "cooling off" details. The cooling off period expires at the completion of the second clear business day after:

• the contract was executed (if you receive the Form 1 prior to executing the contract); or
• the Form 1 was served on you (if you receive the Form 1 after executing the contract).

You do not need to provide any reason for cooling off.

There is no cooling off period if you purchase a property at auction.

Following the expiration of the cooling off period (and satisfaction of any conditions) the contract is binding.

Deposit & breach of contract

Typically a deposit is paid upon the expiration of the cooling off period (or auction). The deposit amount can vary and is negotiable but is generally up to 10% of the purchase price.

If you do not settle (or are unable to settle) on the settlement date specified in the contract, you will be in breach of your contract. You should carefully consider the contractual consequences for breaching the contract or delaying settlement.

If the vendor has not defaulted and you seek to terminate the contract, the vendor may be able to retain your deposit and you may even be liable to pay further compensation based on the costs of a subsequent sale.

It is crucial to obtain legal advice if you do not wish to proceed with a contract or if there is a risk of a delayed settlement.

Conveyancing

Before entering into a contract or before the expiration of your cooling off rights, you should consider engaging a solicitor or conveyancer to provide advice on your Form 1, contract and your rights and responsibilities.

We're here to help!

Johnston Withers Lawyers and Conveyancers understand how overwhelming buying property can be. If you would like advice from one of our helpful conveyancers, please contact us on (08) 8231 1110 or get in touch online.