Four tips for drafting special conditions


Warning: Invalid argument supplied for foreach() in /home/redchip/public_html/wp-includes/post-thumbnail-template.php on line 82
Man signing a contract when buying a new house

Although the standard form Contracts of Sale issued by the Real Estate Institute of Queensland and the Queensland Law Society are sufficient for most property sales, frequently sellers and buyers will request special arrangements for their transactions which are required to be recorded as special conditions.


Care needs to be taken when drafting special conditions for contracts. All too often, poorly drafted special conditions give rise to disputes between parties, or give one party rights to terminate or claim compensation against the other party.

Below are four tips to help you accurately draft special conditions and ensure your clients do not face the consequences.

1. Include these elements

When drafting special conditions, consider the following and include all relevant details:

1. Does the special condition impose an obligation on a party?

Details to include:

  • Whether the seller or the buyer must comply with the obligation.
  • The time and/or date by which the obligation must be complied with. For example: within X days of the Contract Date/prior to settlement of the Contract.
  • Exactly how the obligation may be satisfied.

2. Does the special condition give a party a right to terminate the contract?

Details to include:

  • Whether the seller, the buyer, or both parties have a right to terminate.
  • The circumstances in which the termination right may be exercised. For example: if a party fails to comply with a certain obligation (such as the seller failing to carry out certain repairs to the property)/if a specified event occurs or does not occur (such as the buyer entering into an unconditional contract to sell its existing property).
  • The time and/or date (if any) by which the right of termination must be exercised in order to validly terminate the contract. For example: within X days of the Contract Date/after 5:00pm on a certain date.
  • How the right of termination may be exercised. For example: by written notice to the other party.

2. Use clear language

The language used in drafting special conditions must be clear and unambiguous. It must allow both parties to accurately determine their respective rights and obligations. If the wording of the special condition allows it to be interpreted in more than one way, then the special condition may be completely ineffective and unenforceable. Depending on the nature of the special condition, the entire contract may be invalidated by the special condition.

3. Develop precedents

Given the importance of special conditions, we suggest developing a bank of precedents to be used in contract preparation when required, rather than risking the need to draft conditions on the fly and write them in by hand. Using precedents will ensure that contracts are prepared correctly, that disputes do not arise and that contract performance and settlement occur smoothly.

4. Transfer the risk

If there is any doubt as to whether a special condition has been drafted correctly, it is a good idea to liaise with a solicitor to review the condition prior to contract signing. Doing so will avoid contracts having to be rescinded and/or re-executed, and will save all parties involved time and money.

For any assistance in drafting real estate contracts please contact us on 07 3223 6100 or email property@redchip.com.au.

Back to Articles
Redchip

Recent Articles

empty hall
Major change to the Commercial Building Disclosure Program

From 1 July 2017, expansion of the CBD Program will require most sellers and lessors of office space 1,000 square metres or more to obtain a Building Energy Efficiency Certificate before the building goes on the market.

Read more
With House Model And Stack Of Coins On Desk
GST and new property sales

From 1 July 2018, purchasers of new residential premises (new homes or apartments) and subdivided residential lots will need to pay any applicable GST on the sale directly to the ATO.

Read more
aircraft Wing
Investors lose depreciation and travel deductions

From 1 July 2017, Australian Residential Property Investors will lose two long-standing tax deductions for residential properties as a result of the Federal Budget 2017.

Read more