The contract says what? Part 1
Friday, 22 July 2011
It can be said that when entering into a life changing decision, there is much benefit to the notion of forethought as opposed to afterthought.
Yet one of the most common phrases people say to their solicitor when purchasing a property is... “The contract says what?”
The most common response of their solicitor (usually given immediately after a dramatic retelling of just how very uncool it is to shoot the messenger) is, “But you read the contract before you signed it, right?”
Now there’s a tip for those of legal mind... answer a question with a question... you’ll look intelligent, but that won’t solve your problems if you didn’t read the contract before you signed it. Unfortunately, very often your solicitor won’t be able to solve your problems if you have signed something you didn’t even read, let alone understand.
When you are buying a house there is something which seems to make everything go just that little bit more smoothly... have you ever thought about retaining a solicitor to review your contract before you sign it?
There is a raft of reasons why it is very important to have your solicitor review your contract before you sign it.
To begin with, here are two:
- The real estate agent is no doubt a lovely, accommodating sort of person and has only your best interests at heart, but they are not particularly worried if you sign the contract or not. Due to this, they sometimes forget to ask if you have any middle names, or even how to spell your name, or if there is anything else about your name that they need to know. The problem with this casual approach is that it makes your solicitor look nasty when they charge you a few hundred dollars to draw up a Deed of Amendment to include your full and correct names and any other details essential to the contract’s validity. If your solicitor can review the contract prior to you signing it, then all that is required is adding in the extra details and a few initials here and there and the contract is ready to go without the need for an expensive Deed of Amendment at a later date.
- There are a few of the standard Terms of Contract which may not mean much to you when you read them, but which will mean a whole lot to you when the other side of your transaction is enforcing them.
8.1 Risk
The property is at the Buyer’s risk from 5pm on the first Business Day after the Contract Date.
In a practical and fiscal sense this means that from the day after you sign the contract you must have appropriate insurance over the property in case of fire, cyclone or imbecile. This is the case even though you will not be given possession of the property until you hand over the money... which makes sense, right? But when dams fail to hold back the flood waters and the house you are buying starts to slip into a river, it’s at your risk (which means at your cost).
How can this be when you haven’t handed over any money, you only just signed the contract, you’re not living in the house (in fact the owners haven’t even moved out yet)? Clause 8.1 is how.
The contract says what?
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