Fiveby5, Author at Stanford Legal

Understanding finance clauses on a contract of sale is crucial for anyone buying or selling property.

These clauses can impact your ability to secure financing and influence the success of the transaction.

This guide will help you navigate these clauses, explain their significance, and ensure you’re fully informed about your financial obligations and rights during the sale process.

Being well-versed in these aspects can lead to a smoother and more confident property transaction.

Do I need a finance clause when buying or selling property in Queensland?

Yes, including a finance clause in your contract of sale is highly recommended when buying or selling property in Queensland. A finance clause, often referred to as a “subject to finance” clause, provides a safeguard for buyers who need to secure a loan to complete the purchase. This clause stipulates that the contract is conditional upon the buyer obtaining finance approval by a specified date.

For buyers, the finance clause protects you from being legally obligated to complete the purchase if you are unable to secure financing. This means you can cancel or terminate the contract and recover any deposits paid if your loan application is not approved by the set due date.

For sellers, including a finance clause can attract more potential buyers who may require a loan to buy the property. It ensures that the sale process is transparent and sets clear expectations regarding the buyer’s financial obligations.

What does “subject to finance” mean on a contract?

If you are in the process of buying a home and are under contract, one of the conditions might be “subject to finance”.

This means that if the Buyer does not obtain financial approval by a set due date, they can cancel or terminate the contract and recover any deposits paid.

A contract will usually be subject to finance if any portion of funds are needed to cover the purchase price of a property.

These required funds indicate a need for a loan.

In Queensland, to make your contract subject to finance, you will be required to submit a finance amount, financier and finance date that must be sufficiently met to execute a contract.

Once a Buyer obtains formal approval from a lender or bank, they are able to satisfy the Finance Condition and the contract becomes unconditional.

What is the difference between conditionally approved finance and unconditionally approved finance from your lender? (not to be confused with an unconditional contract of sale)

On a typical contract of sale where the buyer is financing, there are two stages of approval:

conditionally approved
unconditionally approved finance

Being conditionally approved is the first stage, where the lender has tentatively approved the loan.

However, certain conditions need to be met before the final approval is granted, such as providing additional documentation or fulfilling specific requirements (like waiting for a property to register, or signing a Contract to sell your current residence).

When these obligations are met, the finance is unconditionally approved.

Unconditionally approved finance means that all of the bank’s conditions have been met, and the loan is fully approved by the lender, subject only to the completion of the contract sale.

You will then need to make a decision if you are happy with the loan you have been offered and whether you wish to proceed with the Contract of Sale.

If you are happy to proceed, you must notify your solicitor, in writing, that you are satisfied with your Financing.

It is not enough to simply be approved by the bank, your property Contract has its own conditions with due dates that need to be manually satisfied.

Need assistance with a contract of sale?

If you need assistance with understanding or finalising a contract of sale, contact our expert conveyancing team at Stanford Legal.

Book a free consultation today to ensure your property transaction proceeds smoothly and confidently.

Whether you’re navigating a conveyancing process or considering a property purchase, it’s essential to understand the differences between Tenancy in Common and Joint Tenancy.

Knowing the definitions, implications, and benefits of each ownership structure can help you make informed decisions, protect your investment, and ensure smooth property transactions.

This guide will provide you with key insights into these co-ownership arrangements, helping you choose the best option for your specific needs and circumstances.

What does “joint tenants” mean?

Joint tenancy (joint tenants) refers to a co-ownership, where two registered owners of a property share a 50/50 split in the interest (ownership) of the land. When you buy a house, to finalise the legal proceedings, you will have to elect how you and your co-owner would like to hold the property. What distinguishes joint tenancy, is that if one of the registered title holders passes away, their share automatically transfers to the surviving joint tenant. This is known as a “right of survivorship”, where the mortgage on a home is transferred based on the co-ownership agreement on the title.

What does “tenants in common” mean?

Tenancy in common (tenants in common) is the other form of co-ownership over a property. However, unlike joint tenants which requires an equal half split, the two registered title owners can decide to split their interest in the land to be weighted in favour of either person. For example, two property owners can have any share of the property (10/90, 30/70, etc.). Similarly to joint tenancy, the share can be an equal split of 50/50 as well. The key difference regarding tenants in common is that if there is a death of one of the owners, their share or interest of the land is decided according to according to their will.

This means that rather than the sole survivor having full ownership of a property, they are still only entitled to their original portion, with the beneficiaries of the deceased usually holding their previous co-owners share. These beneficiaries can inherit, sell or transfer their share.

Is Joint Tenants or Tenants in Common better for me?

To understand which ownership is best for you, it is important to understand the advantages and disadvantages of each option. Keep in mind that you can always change the tenancy from joint tenants to tenants in common (or vice versa) after taking possession of the title on a land registry. However, there may be registration fees involved

Joint Tenant Advantages

Right of survivorship – If one of the owners dies, their share automatically transfers to the surviving owner(s) without going through probate (a long legal procedure validating a deceased person’s will in the Supreme Court). This is very common for couples.
Shared responsibility – All of the owners possess equal responsibility and rights for the property, including maintenance and taxes.
Simplicity – Joint tenancy is the most common ownership agreement and is relatively straightforward to establish and maintain.

Joint Tenant Disadvantages

Finite control – Each owner cannot independently sell or mortgage their share without the agreement of the other owner(s).
Potential conflict – Disagreements among owners, or separations, can arise regarding decisions related to the estate and lead to divisions of the property. In cases of a divorce, the tenants often require division by agreement, where typically one spouse will have to buy out the other’s share or sell the property and split the shares.
Equal ownership – The ownership shares are equal, regardless of financial contributions, investments, or maintenance efforts.

Tenants In Common Advantages

Flexibility – Owners can hold an unequal divided share of the property based on their financial contributions or agreements.
Individual control – Each owner possesses the right to sell, mortgage, or transfer their share without requiring the consent of the other owner(s).
Estate planning – Owners can specify their share to pass to their chosen beneficiaries through their will.

Tenants In Common Disadvantages

No right of survivorship – There is no automatic transfer of ownership to the remaining owners, and the deceased owner’s share passes according to intestacy laws or their will.
Probate – In the circumstances of an owner’s death, their share would become subject to probate which causes a major delay in the distribution of their assets and estate. The value of their share can also be subject to inheritance tax if it exceeds certain thresholds set by taxation authorities.
Potential conflict – In many cases, disagreements among owners may arise regarding the estate and will decisions. Similarly to joint tenancy, in cases of a divorce, the tenants often require division by agreement, where typically one spouse will have to buy out the other’s share or sell the property and split the shares.

Key Takeaways?

Joint tenancy is defined as an ownership of property with an equal share of land and right of survivorship where the death of an owner automatically transfers their share to the surviving owner. The definition of tenancy in common is the ownership of any share of land with no right of survivorship, where the death of an owner transfers their share according to their will.

When understanding rights inter se, as well as balancing the pros and cons, there is no “right” answer, as everyone’s ownership situation is different. It is important to acknowledge each owner’s financial contribution and maintenance exertion before coming to a title agreement.

It is also important to remember that the ownership title deed can always be transferred or amended, no matter the length of the tenure. This means the decision you make can always be changed in future if all owners consent.

Need Guidance on Property Ownership and Title Deeds?

Understanding the nuances between joint tenancy and tenancy in common is crucial for making informed decisions about property ownership.

If you need guidance on which ownership structure is best for you or assistance with amending your title deed, contact our expert conveyancing team at Stanford Legal.

Book a free consultation today to ensure your property ownership aligns with your needs and future plans.

From understanding the significance of these conditions to navigating the process seamlessly in conveyancing, it’s crucial to be well-informed about building and pest conditions and reports in QLD real estate transactions.

This guide covers critical aspects, helping you identify potential issues, negotiate effectively, and ensure a smooth property sale or purchase.

Whether you’re a buyer or seller, knowing these details can protect your investment and facilitate a successful transaction.

What is a building and pest condition on a contract?

A building and pest clause in a standard contract gives a buyer the opportunity to have a building and pest inspection conducted to ensure the property is in a condition acceptable to them. It is the buyer’s responsibility to obtain quotes and engage a Building and/or Pest Inspector they are happy with. In some instances, you can hire a Building Inspector and a Pest Inspector separately.

Any inspection must be conducted by a Licensed Inspector, and it is preferable that a written report be provided.

Once the buyer receives their building and pest report, under the standard terms of an REIQ contract, they have two options:

Accept the property in its current condition; or
Terminate the contract on the basis that they are not happy with the current condition of the property.

However, in the spirit of keeping the contract going, a buyer may choose to request that the Seller fix certain items of concern, or alternatively, negotiate a price reduction.

It is important to note that the Seller is under no obligation to enter into any negotiations of this type, and it is their choice entirely as to whether they engage in the process. There is nothing in the contract that forces a seller to negotiate.

What is a building and pest report?

A building and pest inspection is a comprehensive assessment of a property’s condition and structural soundness conducted by qualified professionals.

This ensures that the property you would be purchasing is structurally maintained and that there are no pest concerns.

Depending on who is hired to perform the inspection, each building and/or pest report is written differently, however, they all assess the same aspects of a property. These inspections usually include:

Visual inspections of the building/s
Roof systems (internal and external)
Bedrooms
Rooms
Bathrooms
Kitchen
Laundry
Toilets
Exterior
Footings
Garaging
Site
Services
+ more

The assessor will highlight building materials, conditions and defects and whether such defects are major or minor for all these areas, as well as attaching required photographs and comments. Near the conclusion of the report, the assessor will typically mention any recommended actions to take for any renovations, repairs or rectification that is or may be needed.

Please note there are other specific types of inspections available in addition to the above being:

Thermal and Infrared for suspected moisture readings; or
Illicit drug residue using laboratory testing and/or service dogs; or
Asbestos

You would need to engage specific qualified inspectors to conduct these types of inspections.

The report will also outline the possibility of a pest infestation. Termites are typically the most common pests discovered in building and pest inspections; however other rodents might create issues to be considered by potential buyers. Cockroaches, mice, rats and other rodents are examples of pests that commonly reside in dwellings.

Why is a building and pest condition important?

Being one of the conditions that is commonly used in a standard purchase of a property, it is the buyer’s responsibility to arrange a qualified inspector to conduct the search. The buyer then needs to consider whether to continue with the sale or terminate the contract. The report provides crucial information, identifying any underlying structural issues, damage from pests or other problems that might not have been mentioned or visible during a regular inspection.

Should the contract already be signed, terminating through an unsatisfactory building and pest report is a valid termination and can be done without a penalty unlike the “cooling off” penalty – which can be thousands of dollars. Once all other conditions are met (including deposits, finance and special conditions), the contract goes unconditional, where there is no further right of termination of the contract, unless another party fails settlement.

Therefore, it is vital that you are completely satisfied with the building and pest report before satisfying the condition.

Who pays for building and pest reports?

As a buyer, it is your responsibility to arrange for a qualified professional to conduct the building and pest inspection. You have the option of getting a referral from your real estate agent, but it is always good to do your own research and find the best inspector for you.

As the buyer is responsible for arranging the inspection, they will also incur any costs of the assessment. Each company varies in price, so it’s good to get multiple quotes to ensure you are confident you are getting a good price. This cost will be invoiced directly to you around the time of the inspection and is not payable as part of the fees for the purchase of the property and stamp duty etc.

What can I do if I’m not happy with the results of my building and pest report?

As a buyer, if you receive your building and pest report, and are unsatisfied with any of the findings, under the terms of the contract, you have the right to terminate the contract or continue and satisfy the clause. You may choose to request for items to be fixed or a price reduction, however as noted above, the Seller is not obliged to enter into these negotiations.

Key Takeaways

Building and pest conditions are essential for ensuring the property is in acceptable condition before finalising the purchase.
It is the buyer’s duty to obtain and review the building and pest inspection, conducted by a licensed inspector.
Buyers can accept the property as is, request repairs or price reductions, or terminate the contract based on the inspection report.
Inspections cover structural soundness, pest infestations, and recommend necessary repairs or actions.
The buyer is responsible for arranging and paying for the building and pest inspection.
Sellers are not obligated to negotiate or make repairs based on the inspection findings.
Ensuring satisfaction with the report before finalising the contract is crucial to avoid penalties or future issues.

Are you buying or selling a property?

Our experienced Ipswich conveyancing team is here to help. We offer expert guidance to navigate the complexities of property transactions, ensuring a smooth and hassle-free process.