Blog

What is the Difference Between a Conditional and Unconditional Home Contract?

  • Tags: Property Investment, First Home Buyers

What is the Difference Between a Conditional and Unconditional Home Contract?

When preparing a contract of sale, the buyer and the seller may request their lawyers include special conditions (clauses) in the contract. Conditions in a contract of sale give buyers and sellers time to essentially get all of their ducks in a row and do their due diligence, protecting them from having to go through with the sale agreement if their conditions aren’t met.
 
What is the Difference Between a Conditional and Unconditional Home Contract?Typical conditions from a buyer include:
- subject to finance 
- subject to building and pest inspection
- subject to sale of a property
- subject to settlement of a sale of a property
 
Typical conditions from a seller include:
- sunset clause
- subject to settlement of a sale of a property

For more information, read our Quick guide to common special conditions in a contract of sale.
 
All conditions, including the settlement date, must have a timeframe for the condition to be met by. If the condition is not met during the timeframe, an extension must be requested (but need not be given) from the other party.  
 
While the contract has conditions that need to be met, the contract will be ‘conditional’. While the contract is conditional, a party unable to fulfill a condition may terminate the contract without penalty, on the basis that the condition cannot be met.
 
For example, if the buyer does not receive finance approval within the time given  in the contract, they may terminate the contract. Also, if a buyer discovers from their building and pest inspection report that the property has termites or other building faults, they may terminate the contract.

When all conditions in the contract are met, the contract becomes unconditional and proceeds to the agreed settlement date. Once a contract becomes unconditional, neither party can terminate the contract without incurring heavy penalties.
 
Not all contracts of sale include conditions. A buyer may put forward an unconditional cash offer and a seller may not have any need to include any conditions of their own, in which case the contract will become unconditional fairly quickly.
 
All special conditions are said to be for the benefit of the person they protect and can be waived by that person at any time.
 
*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.

You may also be interested in:
What is the Difference Between a Conditional and Unconditional Home Contract?
palmbeachfn.com.au
First National Palm Beach
15 Palm Beach Ave Palm Beach, Queensland 4221
Phone: 07 5559 9600
Enter your email address below to subscribe to our newsletter.