Articles

Property Pitfalls

From time to time we come across unfortunate examples of where property transactions can come to grief. More often than not, these can be avoided by having us check agreements before signing. Here are some examples of when good deals go bad.

Some trusting clients have accepted real estate agents' assurances that they don't need their lawyer to check their property agreement before signing because the agreement may have a "requisition" clause – however this is not as water tight as you might think. There are a couple of myths that should be dispelled ...

Myth

One client was told that if their solicitor checked the title after they signed and found something was not satisfactory then they could cancel the agreement using the requisition clause (a requisition clause allows the agreement to be cancelled if the title has serious defects or restrictions and the vendor cannot or will not rectify them).

Fact

There are many restrictions on titles that you cannot requisition or it is not clear whether you can or not. Serious title defects that allow cancellation of an agreement are in fact very rare.

Myth

Another client was told that a solicitor's approval clause the agent put in the agreement meant they could cancel if there was anything about the title or transaction that was unsatisfactory.

Fact

The Courts are very reluctant to allow an agreement to be cancelled even though the clause says it can be. This is because the purchaser should not have signed the agreement if they did not want be bound by it at the time of signing. The range of grounds for a solicitor withholding approval are in fact extremely narrow.

Myth

Some agreements contain conditions that are "automatically satisfied" if written notice is not given by a certain time.

Fact

Agreements should never contain clauses like this.

Moral of the story

We strongly advise you to fact a copy of your proposed agreement to us prior to signing so that we can quickly check it and conduct an internet title search before you sign.

If you do sign an agreement before sending it to us, simply ring us immediately so that we can make sure it is faxed to us promptly so there is time to try and satisfy conditions. We have had instances where we have not received agreements from agents for five days and condition dates have passed by the time we get the agreement.