What are contract conditions?
Steps that must be taken in relation to conditions to which the Contract is subject (such as a finance condition or a building and pest inspection report condition) and the exercise of rights of termination that may arise.
What steps must I take to ensure compliance with the conditions of the contract?
It is important to undertake all steps related to these conditions to ensure compliance with the terms of the contract. For instance, if a finance condition is in place, Buyers must take all reasonable steps to obtain finance approval by the finance date. This includes making a finance application promptly after the Contract Date and pursuing the application diligently. If a Buyer fails to take reasonable steps to obtain finance approval, they may be prevented from relying on the finance condition to terminate the Contract. The Seller may request evidence of reasonable steps or a letter of declination from the Buyer’s lender.
If a Buyer does not obtain satisfactory finance approval from the financier specified in the Contract, they can terminate the Contract or seek an extension of time for finance. Agreement from the Seller is required for any extension and the request may be declined.
If a Buyer does not notify the seller in writing that finance is approved, waived or not approved by the finance date then the condition is deemed to have been satisfied and the Contract continues.
If the Buyer does not have sufficient funds to pay the balance purchase price (including any adjustments) at settlement the Seller may terminate the Contract or seek specific performance of the Contract, and in both instances, can claim compensation.
Similarly, if the Contract is subject to satisfactory Building and Pest inspection reports on the Property, Buyers must take all reasonable steps to obtain the report. They must use a registered building practitioner and licensed pest control operator to conduct a building and pest inspection and provide written reports. Otherwise, they may not be able to terminate the Contract on the grounds that they are not satisfied with the Building and Pest inspection as the Seller may request supporting evidence.
Buyers must notify the seller in writing on or before 5pm on the inspection condition expiry date if they are unsatisfied with their B&P reports and wish to terminate the Contract. If a Buyer does not notify the Seller in writing before 5pm on the building and pest inspection due date of satisfaction or dissatisfaction, then the condition is deemed to have been satisfied and the Contract continues.
If a Buyer does not have a report by the inspection date they can seek an extension. However, the Seller may not agree to the extension.
If a Buyer is satisfied with the report, they may give notice to the Seller that the B&P condition is satisfied.
If a Buyer is not satisfied with the results of the B&P reports due to major structural defects or major pest infestation, then they terminate the contract. If a Buyer terminates, the Seller may request a copy of the report from the buyer.
If a Buyer is not satisfied with the results of the B&P reports due to minor defects, the Buyer does not have a right to reduce the purchase price or to require the Seller to carry out any works. However, parties may negotiate in relation to a price reduction or for works to be carried out. Any price reduction may affect an existing finance approval or prompt the financier to require a further valuation of the property or to impose additional conditions in relation to the finance approval.
Understanding and adhering to these procedures helps safeguard the Buyer's interests and ensures that all contractual obligations are met in a timely and efficient manner.
Failure to comply with these conditions can result in the forfeiture of deposits or other penalties, making it essential to manage these steps diligently.
