Johnston Withers

Special conditions in sale of land contracts.

Published on Wednesday 24 July, 2019 by Andrew Mitchard

Commercial and property law
Sale of land

Buying or selling property is often one of the biggest financial decisions most people make. It’s important to know the ins and outs of your decision to buy or sell property, and that means understanding sale of land contracts – as well all the special conditions in a contract of sale for property or land.

Sale of land contracts can be complicated, but they’re incredibly important to get right, especially if there are any special conditions in a contract of sale for a property. Keep reading to find out more about clauses in real estate contracts and examples of special conditions in contracts of sale.

Our registered conveyancers and property lawyers have extensive experience in preparing special conditions in contracts of sale for properties of all values, and explaining clauses in real estate contracts to all parties involved in the sale.

Send us a message, or give us a call on (08) 8231 1110.

Special condition in sale of land contracts johnston withers lawyers

First things first, sale of land contracts must be in writing

When buying or selling land, the sale contract must be in writing. Sale of land contracts are usually relatively standard in South Australia and will include standard clauses such as the price of the property and the settlement date (generally known as the standard terms). But sometimes there are clauses in real estate contracts that aren't standard (known as ‘special conditions’).

It is important for both the seller and buyer of land to understand the special conditions of a contract and how they should comply with them in order to protect their interests. We’ll go through some examples of special conditions in contracts of sale of houses/land in a moment, but let’s start by going into more depth about what special conditions of a contract and/clauses in real estate contracts actually are first.

What are special conditions in contracts of sales of property?

Special conditions are additional conditions to the standard terms in the sale of land contract.

They can be included in a contract by either the buyer or seller of the land subject to mutual agreement by both parties.

A special condition in a contract of sales for property should set out:

  • The obligations required to fulfil the condition;

  • Who must comply with it and at whose cost; and

  • What are the consequences of failing to comply with the condition (e.g. a refund, damages for breach of contract or forfeiture of the deposit paid).

The type of special conditions of a contract that will apply will depend on the particular circumstances. Here are some examples of special conditions in a contract of sale that a buyer might require:

  • Settlement is subject to the buyer obtaining finance for the purchase of the property;

  • Settlement is subject to the buyer selling its home or obtaining a satisfactory building inspection;

  • Assurances by the seller to the buyer to do something e.g. to repair or to remove rubbish;

  • Buyer’s access to the property for renovations before settlement;

  • Building testing and inspection including soil, pest and contamination assessments; and

  • Pool safety compliance and certificates.

We’ve gone into more detail on these examples of special conditions in contract of sales for property below:

Subject to finance clauses in property contracts

A buyer often will need to borrow money from a bank to purchase property. A buyer might request a special condition in the contract of sale that the property purchase is subject to their finance being approved by the bank (known as a “subject to finance” clause). This clause allows the buyer time to have their finance approved and funds available by their bank for the purchase of the property. If the buyer’s finance is not approved, the condition will usually allow the buyer to withdraw from the contract.

It’s important for the buyer to understand the timeframes associated with obtaining finance and the methods required to inform the seller of whether finance has been obtained or not. If the timeframe for obtaining finance expires, the seller may terminate the sale of land contract and enter into a contract with another buyer.

If a buyer intends to seek finance from a bank or lending institution to purchase a property, it is important that the buyer requests a subject to finance clause in the contract. There may be serious consequences to a buyer who intends to purchase with finance but does not include a subject to finance clause in the contract. If the buyer is subsequently unable to obtain finance, then the buyer will still be obligated under the contract to settle and if it fails to settle, it risks forfeiture of the deposit and being sued for damages.

If you are signing a contract with a “subject to finance” clause it is important to read through the clause to make sure that the terms suit your circumstances. Some standard form special conditions will say that the condition is satisfied if you receive “indicative approval” or similar to the finance request. A prudent buyer should require that the condition is only satisfied where the bank confirms in writing that the finance is granted. We can help make sure these conditions are worded properly.

Subject to buyer’s sale of home clause in property contracts

These clauses in real estate contracts often include the circumstances where the sale of land is subject to the sale of the buyer’s existing property. This condition will usually set the terms upon the sale of the buyer’s property, such as a time period upon which the buyer has to settle their contract for sale. If the condition isn’t satisfied then the sale of land contract will usually terminate.

Due diligence clauses in property contracts

A due diligence condition allows the buyer to conduct an investigation into the property that they intend to purchase (e.g. a building inspection). This condition will often allow the buyer to terminate the sale contract if they are not satisfied with a condition of the property based on their investigations.

The due diligence clause in a property contract will usually place timeframes upon which the buyer has to complete the investigation and then make up their minds on whether or not they wish to continue with the purchase. If a buyer does not complete an investigation in time or fails to inform the seller of their intention to terminate the contract, it may be too late for the buyer to withdraw from the contract without incurring costs or risks. Again, it is important to carefully draft these clauses. For example if you were the buyer, you would want a clause that specifies that you decide if the results of the assessment or inspection are adequate.

There are many other special conditions on contracts of sale for property that are needed from time to time, such as the settlement being subject to the land being subdivided, or other planning or similar approvals, building inspection, the land being subject to a tenancy or where the sale is to a foreign buyer (in some circumstances).

If you’re a seller, buyer or sales agent and need help drafting a sale of land contract or want advice in relation to any special conditions, we’re here to help. To get started, contact Tanya Williams on (08) 8231 1110 or send us a message.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Johnston Withers Lawyers Andrew Mitchard


Andrew Mitchard

Managing director

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