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Quick Guide to Common Special Conditions in a Contract of Sale

  • Tags: Property Investment, First Home Buyer

Quick Guide to Common Special Conditions in a Contract of Sale

Quick Guide to Common Special Conditions in a Contract of SaleIt can be difficult to get your head around the many conditions included in a contract of sale. This article gives a very brief description of the most common conditions (clauses) you may come across, and may require down the track when you go through the process of buying or selling your home.
*This article provides general information and opinions only and should not be mistaken for, or relied upon as legal advice. It is strongly recommended you contact a legal professional before making any decisions.
 

Typical Conditions A Buyer Might Require:

Subject to Finance
This clause gives the Buyer time to have their finance approved by their bank or lending institution, and terminate the contract without penalty if they are not approved. For more information, read our article on Common Mistakes to Avoid with your Finance Clause.
 
Subject to building and pest inspection
This clause allows the Buyer time to organize a building and pest inspector to inspect the property for faults and defects. If the inspection report uncovers serious faults, the Buyer may terminate the contract without penalty.
 
Subject to settlement of a sale of another property
This clause gives the Buyer time to settle a property they are selling and already have a signed contract of sale on. Usually, this clause is included because a Buyer needs to settle the property in order to pay for the new property. If the first property does not settle, the Buyer may terminate the contract without penalty.
 
Subject to sale of another property
This is similar to the above ‘subject to settlement of a sale of a property’, except in this case the Buyer does not already have a contract of sale on the property they are selling, and are requesting an amount of time in order to secure a contract of sale. If they are unable to do this, they may terminate the contract without penalty.

Typical Conditions A Seller Might Require:

Sunset clause
A sunset clause allows the Seller of the property to continue to market the property for sale after a contract of sale has been signed. This is usually in response to the buyer requesting special conditions over a long term – for example, ‘subject to the sale of another property’, which could take several weeks or more.
If during the period in which the contract is conditional the Seller receives another more favourable offer, they can activate the sunset clause which gives the Buyer 2,3 or 4 days (or whatever timeframe is stipulated in the contract) to make their offer unconditional. If the Buyer is not able to do this, the contract is terminated without penalty, allowing the Seller to proceed with a contract with the new Buyer.
 
Subject to a prior contract terminating
This clause allows the Seller to actually enter into another contract with another buyer, while their existing contract of sale is still enforceable. This clause is typically used in conjunction with the Sunset Clause, where the Seller has reason to believe the contract with the original Buyer will be terminated. If the original contract is not terminated, the Seller can terminate the new contract without penalty.

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Quick Guide to Common Special Conditions in a Contract of Sale
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