What to Look for in a Property Contract (Overlooked Clauses & Hidden Details)

Buying a property is exciting, but it’s also one of the biggest financial commitments many of us will ever make. For this reason, it’s essential you understand and thoroughly review the property contract. The thing is, property contracts are packed with legal property jargon, and it’s easy to miss clauses or essential details that could cause headaches down the road. In this article, we’ll break down what to look for in a property contract in Victoria, highlighting some commonly overlooked clauses, and red flags to watch for. 

Key Points Covered

• What’s in a property contract 
• Overlooked clauses
• Red flags to watch out for

What’s in a Property Contract in VIC?

A contract of sale in Victoria must include several important details, like:

• Correct identification of both parties involved in the transaction.
• The complete address of the property being sold.
• The final agreed-upon price for the property.
• How much deposit is required (commonly 10% in Victoria – but is often lower for first-time buyers) and when it needs to be paid.
• The date when the property ownership officially transfers to the buyer.
• A list of items included in the sale (fixtures, fittings, appliances, etc.) and any exclusions.
• Specifies whether GST applies to the purchase and how it is calculated.
• Information about the title (such as freehold or leasehold) and any mortgages, liens, or restrictions on the property.
• For apartments or townhouses, details about any owners’ corporation, including fees and rules.
• Sellers in Victoria are legally required to provide specific disclosure statements (Section 32 or Vendor’s Statement), including information on zoning, outgoings, building approvals, and any issues that could affect the property’s value or use.

Keep in mind this is specific to Victoria, and each state has different requirements for what must be included in a contract, so it’s important to do your research. When in doubt, consult a professional conveyancer. This is a legally binding agreement, and once signed, it can’t be undone, so make sure it contains all the correct information.

Read More: What Happens After You Buy Property in VIC?

Overlooked Clauses and Hidden Details

These are the sections that people often miss or don’t fully understand, but they’re crucial to avoid unwanted surprises down the line. 

Special Conditions

Every property contract can have special conditions that customise the agreement:

• Finance Approval Clause: This gives you an out if your bank declines your home loan application.
• Building and Pest Inspection Clause: If the property has hidden structural problems or pests, this clause lets you back out of the sale. 
• Subject to Prior Sale Clause: If you’re relying on selling your current home to buy this one, this clause ensures that your purchase is dependent on your sale going through.

Settlement Date and Possession

• Settlement Date: This is the day the property officially becomes yours, and you pay the balance of the purchase price. Make sure it lines up with your plans.
• Vacant Possession or Subject to Lease: Will the property be empty when you move in, or is there a tenant? If there’s a lease in place, you could be stuck with the tenant for a while.

Cooling-Off Period

In Victoria, you usually have a three-business-day cooling-off period after signing the contract. This means you can change your mind within that time and walk away, although there are some exceptions, like properties bought at auction.

Easements and Encumbrances

These terms refer to limitations on how you can use your property. For example, a shared driveway might mean your neighbour has the right to use part of your land. Always check for easements or other encumbrances to avoid surprises later.

Sunset Clauses

If you’re buying off-the-plan, meaning the property hasn’t been built yet, the contract may include a sunset clause. This sets a deadline for when the property should be completed. If the developer misses the deadline, you might be able to cancel the contract. However, it also means the developer might cancel it if market prices rise and they want to sell the property at a higher price.

3 Red Flags to Watch For

1. Inconsistent Names

Always double-check that the vendor’s name is the same across all documents. Inconsistencies could signal issues with ownership.

2. Unreasonable Special Conditions

Some contracts might include conditions that seem unfair to the buyer, like asking you to pay for the seller’s legal costs or adding terms that override general conditions in the contract.

3. High Penalty Interest Rates

If there’s a delay in settlement, you may have to pay penalty interest. The standard rate in Victoria is 12% per year, but some contracts try to sneak in higher rates, so make sure you check this.

Who prepares the contract of sale?

Typically, the contract of sale is prepared by a conveyancer or solicitor, with the involvement of a real estate agent in some cases. The process depends on how the property is being sold and how complex the sale is. For private sales, the real estate agent might draft the initial contract, but it’s the conveyancer or solicitor who make sure everything is legally sound and up to standard.

Conveyancers are essential in reviewing the contract to make sure all the legal details are correct. They handle any necessary negotiations on behalf of the buyer or seller, working closely with the real estate agent to make sure the contract is fair and protects everyone’s interests. Choosing a good conveyancer is essential to avoid any issues and to make sure the contract works in your favour.

Keep Reading: A Guide to Property Contract of Sale Review Costs 

Let the Experts at Settled Guide You Through the Process

Buying property is a major milestone, and understanding the fine print of your contract is crucial to protecting your investment. At Settled, we’re here to help you navigate every step with confidence. If anything in your contract feels unclear, don’t hesitate to reach out to our expert conveyancers. It’s always better to clarify now than face issues later. Let us make sure everything is in place, so you can move forward with peace of mind.