05 October 2022

Buying and Selling Residential Land in Western Australia

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I am often contacted by buyers and sellers of residential land when something goes wrong, or a dispute arises in relation to the contract. It is not uncommon to discover that individuals buying or selling the biggest asset that they own or will own, severely misunderstand how the process works or simply haven’t read the relevant documents before signing. This isn’t that surprising – many documents are provided to buyers and seller by the real estate agent for signing during the sale process, and whilst it is true that many of them are commonplace and considered standard to those in the industry, it is often first time a buyer (in particular) is seeing them. It is imperative that buyers and sellers understand the documents they are signing and realise that even if a document is a ‘standard’ document, it will still be binding on them and can have a major impact on how the transaction progresses.

The Documents

Firstly, let’s have a look at the actual documents that you would commonly see in a standard residential sale/purchase. The Real Estate Intuition of Western Australia (“REIWA”) publishes several documents which are commonly used, but different real estate agents and settlement agents may also have their own variations of these documents.

Contract for Sale of Land or Strata Title by Offer and Acceptance

This is the document that contains the important particulars of the transaction, and is often referred to as the ‘contract’. It is the document whereby the buyer ‘offers’ to purchase the property from the seller by signing and submitting it, and the seller then ‘accepts’ the offer by also signing.

The Contract will set out, the buyers name, address and email address, the property details, the amount of the deposit and when it needs to be paid by, the purchase price, when the settlement date will be, if any chattels are included in the sale, if the Contract is subject to finance, and if any other special conditions apply.

If finance is applicable to the Contract (i.e., the purchaser can only proceed with the purchase if they are successful in obtaining a loan), then the specific conditions around obtaining finance is also contained in this document.

If any other documents are incorporated in the Contract (including the documents outlined below) or any conditions that are not necessarily standard, they will be noted it the ‘special conditions’ panel of the Contract.

An entirely separate article could be written about the points mentioned above and the things to consider and the common pitfalls, both from a buyer’s and a seller’s perspective. Whilst it is unfortunately not common (and I imagine, probably discouraged by many real estate agents so as quickly to finalise an offer), it is a good idea to have someone look over the Contract and other documents before signing.

COVID-19 Virus Annexure

Obviously this a relatively new documents to be included in land transaction contracts, following the COVID-19 pandemic. This annexure allows for the extension of the settlement date if a party is affected by a ‘COVID-19 Event’, and for the disinfecting of a property if a seller is required to self-quarantine in the property prior to settlement.

Australian Pre-Purchase Inspection for Major Structural Defects Annexure

Every buyer of residential land should have a structural report undertaken by a qualified inspector to ensure that there are no major structural defects to the property, and every buyer should insist that this annexure is included in the Contract. This annexure will set out when the report must be completed by and provided to the seller, and the process by which any major structure must be rectified (and the consequences and rights of the parties if the defects are not rectified). It is imperative that the buyer observes the strict time periods stipulated in this annexure, otherwise they are taken to waive the benefit of the contained clauses. While there may be some exceptions, the old idiom ‘buyer beware’ is still very much applicable to land transactions, so buyers need to do their homework.

Australian Pre-Purchase Inspection for Termites Annexures

Like the Pre-Purchase Inspection for Major Structural Defects Annexure, it is important that buyers make sure there are no issues with termites and other destructive pests prior to settlement of a contract. This annexure will set out when the report must be completed by and provided to the seller, and the process by which any pest issues must be dealt with.

Gas, Electrical and Plumbing Annexure

I see the most variations of this annexure, as many real estate agents will use their own version. But, the general meaning and effect of them is the same – that the seller is providing a warranty to the buyer that all gas, electrical and plumbing fixtures and fittings will be in working order at the date of settlement.

State Government Regulations Annexure – Swimming Pool/Spa/Smoke Alarm(s)/RCDs

There are certain State Government Regulations properties and sellers of properties must comply with before a property is sold, specifically in relation swimming pool/spa barriers and the installation of compliant Smoke Alarms and RCDs. This annexure contains representations and warranties that the seller is giving to the buyer that the property is compliant with the relevant regulations. It is also common during the settlement process for the buyer to request the seller to provide an Electrical Safety Certificate from a qualified electrician to show compliance of the Smoke Alarms and RCDs. If a property is sold and it is not compliant with the relevant regulations, there are civil penalties that apply for the seller.

Joint Form of General Conditions for the Sale of Land

All land contracts in Western Australia incorporate the Joint Form of General Conditions for the Sale of Land (“the General Conditions”). The current 2022 General Conditions were produced jointly by REIWA and the Law Society of Western Australia and were published in June 2022. This document is often presented to buyers and sellers as ‘standard’ and something that needs to be includes – which is true – but it is also arguably one of the most important parts of the contract. The General Conditions set out everything you need to know about how a settlement progresses, and most importantly – what happens when something goes wrong and what each parties’ rights and obligations are.

The most common reaction I get when buyers and sellers actually start to delve into the General Conditions when a problem arises, is total surprise that there is no automatic right for a party to opt out or terminate a contract when something goes wrong (like when one party is in breach of the contract). When a party is in breach, there is a very specific procedure that must be followed giving the Defaulting Party the opportunity to remedy the Default, which still may not (depending on the circumstances) give rise to a right to terminate the Contract.

Get Advice

Above is an extremely brief outline of the most common documents you may encounter in a land transaction in Western Australia. Contracts can be long and complicated, and it is easy, as a seller or a buyer, to overlook a small detail which can cause major headaches as the transaction progresses. It pays to spend a little more time to properly consider the contract and have a qualified professional look over the contract before it is signed. This is especially true if you are an interstate seller or buyer, as the laws governing land transactions differ from state to state.

Brandon Hetherington has considerable experience across the realms of Wills and estate planning, probate and family provision claims, property law, commercial law and litigation. Brandon’s work has seen him appear frequently across the Magistrates Court, District Court, Supreme Court, and the State Administrative Tribunal.