Selling your property? How to make a binding contract and not be sued! – Part 2
In our previous newsletter, we started discussing some of the common issues that Sellers must disclose to Buyers and what happens to the sale when they are missed.
This article, we will continue the discussion on disclosures that need to be made to Buyers when selling property.
Adversely Affected Property
If the Buyer can establish that the property was affected by any of the following matters as at the date the Contract was signed and such matters were not disclosed in the Contract by the Seller, then the Buyer may be entitled to terminate the Contract up until settlement:
1. the use of the property described in the Contract was not lawful under the town planning scheme;
2. the access to the property is not by way of a road dedicated for public use or a registered easement;
3. the land was affected by any proposal of a competent authority to widen or re-align any road or railway abutting the road;
4. any electricity, telephone, sewerage or other service connected to the property which passes through another property is not protected by a registered easement or by law;
5. the land is affected by a current notice to treat or notice of intention to resume issued by a competent authority;
6. the property is dedicated as a protected area or is affected by a conservation agreement or plan pursuant to the Nature Conservation Act 1992;
7. the property is affected by any claim for an interest by any Australian Aboriginal people; or
8. the property is affected by the Queensland Heritage Act 1992 or is included in the World Heritage List.
To prevent a Buyer terminating a Contract on these grounds, a seller can either:
a) conduct any necessary searches over the property to discover whether any of these matters affect the property (although a seller should receive directly any notices relating to any resumption or conservation agreement issues) and then if required, include any necessary disclosures in the Contract; or
b) include a clause in the Contract that no warranties are provided about these things and the Buyer must attend to their own investigations and enquiries prior to entering into the Contract (or during a due diligence period once the Contract has been signed).
Boundary Errors or Encroachments
If there are errors in the boundaries or area of the land, encroachments onto neighbouring properties or encroachments from neighbouring properties onto your property, and these are not disclosed, Buyers have the right to either:
a) terminate the Contract up to settlement - if the error in the boundary or encroachment is material or substantial in nature; or
b) seek compensation from the Seller following settlement - if such error in the boundary or encroachment is not of a material or substantial nature.
To avoid the termination of a Contract or being sued by the Buyer following settlement, a Seller can insert a clause into the Contract to confirm the Buyer accepts that the Seller is not providing any warranties in relation to boundaries or encroachments on the land, that the Buyer relies on their own investigations of the property and where the property is rural, the Buyer accepts that any fences are ‘give and take’ fences and may not be on the actual boundary of the property.
Whenever selling property, it is essential that you engage an experienced property lawyer to assist you and to draft the Sale Contract on your behalf – making sure all the appropriate information is provided, necessary disclosures are made and clauses are included to prevent your Contract from terminating or you being sued for failing to make the required disclosures.
Likewise, if you are buying property, it is important that you engage a property lawyer to review the draft Sale Contract to pick up on any missing disclosures and also to conduct searches to identify any potential issues with the property during the conveyance process.