On today’s podcast, Melissa explains why it’s important to get the sale contract documents reviewed before you buy a property.
Introduction to getting a contract review
Did you know that in many cases, if you discover a risky problem with a property after you purchase it, you may not be able to back out of the purchase and get your deposit back?
Which begs the question. How do you find out if there’s an issue with a property before you buy, so that you can decide if the property is worth buying or if you should walk away?
The answer: By getting an experienced conveyancing lawyer to review the sale contract documents and provide you with advice.
What documents needs to be reviewed in a contract review?
In Victoria, there are 2 key documents you want reviewed by a conveyancing lawyer before buying.
Contract of Sale
A ‘contract of sale’ contains the terms and conditions of the purchase and a ‘vendor statement’, also known as a section 32, contains a series of disclosures about the property that the seller is required to make to you by law.
Disclosures in the vendor statement include things like:
- rates and levies
- restrictions that run with the property
- works that have been performed at the property
- zoning laws.
Why do you need a contract and vendor statement review before buying?
Well, it’s because of one key principle: you incur the liability at your cost for anything wrong with a property from the day you enter into the contract to buy the property.
If you don’t get advice on the contract and vendor statement before buying a property, you won’t know what the risks are and you won’t be able to make an informed decision about what you’re buying.
And when you discover the risk after you buy, and you want to back out of the contract and get your deposit back, it’s too late! You can’t unless the contract or some rule of law specifically states otherwise.
Getting proper legal advice about the contract and vendor statement from an experienced conveyancing lawyer will help you know and manage any risks affecting the property, or in the contract, before you buy.
Specifically, it will ensure 3 key things:
Unfair contract terms
You’re aware of any unfair terms and conditions under the contract that increase your cost, liability or obligations as the buyer, which you can negotiate with the seller to remove or amend.
Risks that run with the property
You’re across all key risks disclosed about the property in the vendor statement, which can be things like:
- illegal works
- restrictions that affect your intended use of the property
- encumbrances registered against the title
- combustible cladding investigations
- owners corporation issues.
You’ve exercised due diligence
You’ve exercised due diligence before you buy, which all purchasers must exercise before buying property in Victoria.
What does proper legal advice in a contract review look like?
An experienced conveyancing lawyer will be able to:
- identify all key risks in the contract and vendor statement, even the most inconspicuous ones
- explain how those risks affect you as a buyer in a clear and meaningful way
- propose any changes that need to be made to the contract
- check that you understand the advice
- give you tips on the sorts of enquiries about the property you should make to government bodies, such as the Council and owners corporation
- help you to negotiate changes to the contract
Cost of a contract review
Many home buyers may be concerned about the cost to engage a conveyancing lawyer to provide property legal advice about the contract and vendor statement before buying.
That’s completely understandable. Buying your first home is one of, if not, the biggest financial investment you can make in your life. Every dollar counts and you are watching your budget closer than ever.
I know, I’ve been there too.
For proper legal advice, you’re looking at anywhere from $250.00 to $600.00 unless the size and complexity of the documents demand a higher fee.
But the truth is, the cost of getting the contract and vendor statement reviewed is far less than cost and stress you could face if you didn’t, for reasons already provided.
Scenario if you didn’t get your conveyancer to review a contract
Let’s say you bought an apartment that looked picture perfect, and you decided not to get the contract reviewed before buying to save some money.
You discover 2 weeks later, the levies payable to the owners corporation are over $10,000 a year to rectify non-compliant combustible cladding on the outside of the apartment complex and to fund a lawsuit against the builder of the complex to recover rectification costs.
The seller had disclosed this risk in the contract and vendor statement before you bought the property.
You decide it’s too costly to proceed with the purchase and no longer want the property. You want to end the contract and get your deposit back.
But sadly, you can’t.
You’re required to proceed with the purchase, causing you stress and anxiety, and convincing you that you have just made the worst decision of your life.
The heartache could have been avoided had the contract been reviewed by an experienced property lawyer before buying.
The lawyer would have identified the risk of paying excessive owners corporation levies for a dispute without end date, which would have informed your decision not to proceed with the purchase and dodge a bullet.
Conveyancer vs conveyancing lawyer in Melbourne: Can conveyancers review a contract?
A cost cutting approach that many people take is to review the contract and vendor statement themselves, or to engage a local conveyancer to review the documents, to avoid paying a lawyer to do it for them.
I highly recommend that you do not review the Contract and Vendor Statement yourself or engage a cheaper professional, like a local conveyancer that is not a qualified lawyer, to review the documents for the sake of saving money.
Conveyancers are not legally insured or qualified to review Contracts, so you may not be covered by their professional indemnity insurer if you decide to claim losses incurred from receiving inadequate advice.
An experienced conveyancing lawyer is trained to identify even the most inconspicuous and complex risks that may not be apparent to you when you look at the documents and are insured to provide legal advice.
Conclusion on getting a contract review
Getting legal advice about a contract and vendor statement is the greatest safety net that you can invest in before buying property, which is only one of the most important financial decisions of your life.
So it pays to know, through the advice of an expert conveyancing lawyer, if you’re making a good decision when it comes to buying a property.
For more information, please listen to the full podcast!
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