How to Terminate a Contract of Sale of Land
Have you just signed a contract of sale to purchase land? Whilst this should be a happy experience, it is often plagued with difficulties, such as trouble obtaining finance and buyer’s remorse. Legally terminating a contract is difficult – so follow these tips to keep you out of trouble.
Lack of Finance
If your contract is subject to finance and you don’t receive finance approval – you can lawfully terminate the contract. Be sure to terminate promptly and within the subject to finance period.
Our tips for terminating for a lack of finance are:
- Make sure you have a letter or email ready to go from your financier which clearly states your finance has not been approved. You will need to provide this to the vendor if requested;
- Be sure that you have complied with all of your other obligations under the contract. This is generally a pre-condition to terminating the contract;
- Ensure you have applied promptly for finance and given the financier all the documents they have requested from you;
- If you are a couple of days away from the finance approval date in the contract and your financier has not approved your finance, ask the vendor for consent to extend the due date. In our experience, it is rare for a vendor to refuse an extension;
- If you do not get an extension for finance, terminate the contract before the finance approval date. If not, you risk the contract becoming unconditional and being refused finance.
Hidden Issues with the Property
If you find issues with the property prior to settlement, you may be able to terminate the contract. The ability to terminate though will depend on whether the issue should have been disclosed in the Vendor’s Statement. This could include problems such as you finding out that the land is contaminated, does not have essential services connected or the home has been constructed by an owner-builder.
In order to terminate the contract:
- The Vendor’s Statement must have supplied false information or failed to supply all of the information in relation to the issue;
- You should check whether all of the certificates have been provided from the council, water authorities, land titles and owners corporation;
- The vendor must not have acted honestly and fairly;
- You are not in as good a position by reason of the issue you have uncovered.
As you can see, steps to terminate a contract are complex. For this reason, we recommend you seek legal advice immediately upon discovering any issues with the property. The key is to act quickly.
Any hidden issue with the property is also likely to open the vendor up to other claims, including a claim of damages for misleading and deceptive conduct.
Off The Plan Purchases
There is no template off the plan contract of sale and as such, the right to terminate the contract will depend on its wording.
However, off the plan sales do allow purchasers to terminate the contract within the cooling off period. To terminate within this period, our tips are to:
- Check that you are actually terminating within the required time (being 3 clear business days from the date you signed the contract);
- Terminate in writing;
- Deliver the termination notice correctly, by either delivering it to the vendor or the vendor’s agent;
- Consider whether you fall into a category that is exempt from the cooling off period. In our experience, the most common is if you purchased the property at auction, on the day of auction or within 3 clear business days before the auction was to be held.
Remember that where you terminate during the cooling off period, you are not entitled to all of your money back. You must forfeit $100 or 0.2% of the purchase price (whichever is greater).
If you need assistance reviewing your contract or determining if a termination has been lawfully terminated, please contact one of our experienced property lawyers at Taurus Legal Management on (03) 9481 2000 or at firstname.lastname@example.org.