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Apartment Specialists Podcast No: 129

Summary:

This is part two of the series about putting in an offer when buying an apartment. In this podcast, you will learn more about General Terms of the Sale and how it protects both the purchaser’s and the vendor’s rights. How important is the General Terms of the Sale? Find out more from video.

TRANSCRIPTION:

Good day, this is part two of making an offer on an apartment. From the last podcast, you saw previously that we went over the first page, which is this one here. And now we are going over to the General Terms of the Sale. Now there are 17 General Terms of Sale and these terms are put under numbers.

Basically, they are in there to protect the purchaser’s and the vendor’s rights. What actually has to happen in the conveyance or the change of ownership basically? There are 17 odd, I will very briefly go through each one, otherwise, we will be here for a very long time. If you want to go through them further, I would recommend that you read them, or go through them with your lawyer.

You have got General Terms of Sale and you got your definitions pages. When they are using particular words, what they mean is will include the ones I have highlighted here. Some that say Building Act, which means “The Building Act of 1991,” so everything that comes under The Building Act applies, when you use those terms. Now another obvious one is LIM, which means Land Information Memorandum.

That is when you want a LIM report. It has said L.I.M. instead of VIPS agreement, but that is what it means. OIA Consent, that means Overseas Investment Act 2005. If you are buying a huge super-value property or that type of property, and you are an overseas investor. Under the Unit Titles Act, and so that applies hugely when you’re buying an apartment. There are rules which means by the Corporate Rules under the Unit Titles Act, so that applies as well.

Working Day means any day of the week, where it is not a statutory holiday, or a weekend. Now, I am just going to go through very briefly to give you an idea of each one. The Deposit. The purchaser shall pay a deposit to the vendor, or the vendor’s agent immediately upon execution of this agreement.

If not paid on the due date for payment; the vendor may at any time therefore serve on the purchase notice. This will require payment. You will see what I mean is each one is going in and outlining what has to be done. A lot of it can be seen as common sense, but it is very important that is why it is a contract that they have put in place.

Number three, Possession and Settlement, which is unless particulars of a tenancy are included in this agreement, the property is sold with vacant possession. That one is pretty obvious and the property is sold with vacant possession and subject to the right of any tenants in the property. So, that’s what it means and if there’s a tenant in the property, a tenancy agreement is in the simple form, a tenancy agreement is more powerful than a Sale and Purchase Agreement.

If there is a tenant in there, you have to give them reasonable notice. Then you’ve got possession shall be given and taken on settlement date. You are getting the gist of it, so we will just go through them very quickly. There also the 17 of them. ‘Risk and Insurance’ the property and chattels, shall remain the risk of the vendor, until possession is given and taken.

For example, even once the agreement has gone unconditional, the chattels and property, it still hasn’t changed ownership. If a fire occurred or something was included in the sale. Another examples is when the washing machine breakdown; well then that is the responsibility of the vendor or the owner, and not the purchaser. Until that settlement has occurred.

You also got your Title and Boundaries. That means the purchaser is deemed to have accepted the vendor’s title. Terms on your purchaser and you have gone unconditional, you accept the title and that is correct. Unless if you do ‘Objectional Requisition’ which means the lawyer has that ability to object for something on the title. This could be an event or anything that they think is incorrect. And if it is incorrect, the owner has a certain amount of time to rectify it.

For example, number six, you have got Vendors and Warranties and Undertakings. A vendor warrants and undertakes that all, at this date of the agreement. The vendor has not, for example, have things owing on the property, or any outstanding requirements under the Legal Management Act, for example. So, they have not done anything they should have done with the property and have not disclosed.

Protecting you as the purchaser, Claims for compensation. A purchaser can claim the right to compensation under subclause 5.4 for an equitable set off. Now, if you go back to number 5, that means and we will go back there to show you. If you go in to there, now that means you can see 5.4 regarding this description. That means if the property has been described differently, you can cancel it, or you can get a compensation for something that was described incorrectly.

We will go back to where we were, then we are back to Agent. The vendor shall pay the agent’s charges, including G.S.T. for affecting such a sale, if an Agent is on the Sale and Purchase Agreement. Goods and Services Tax. It is the agreement for the purchaser to pay any G.S.T. that is payable, if that is part of the agreement. If you remember what I mentioned earlier in that last podcast about G.S.T. It is best thing to ask your accountant’s advice before you go in to the agreement.

Also there’s zero rating and that’s when you are dealing with the commercial aspect to the agreement. The vendor warrants a statement on the front page again and the vendor’s G.S.T. registration status. In respect of the supply and the agreement is correct. If there is a commercial aspect to when you are purchasing an apartment, if it is in a hotel pool. What they have said is correct.

Supplying of a Going Concern, that’s again, applies to when you are purchasing an apartment that has a commercial use. If you are in a hotel or something like that. Limitation of Liability, if the vendor first enters the agreement as a trust, then that person warrants that they should have the power to do so. Counterparts, that means this agreement can be copied and signed and executed by other parties.

So, that is when you email it to one person and then one person signs and you email it to another person. This means it’s still the same agreement. Otherwise, you’ve got some vendors that are all over the world and their trustees are somewhere else and wives and husbands are apart. Then you have got your ‘Further Terms of Sale’, that is where you put in your own terms, because you always put in the number 18 and it runs after 17.

I have just put in four. The ones that I recommend that you should always put in. A lawyer or solicitor may ask you to put other ones in, but this one is just basically, “This agreement is conditional upon the purchase solicitor’s approval.” Another one on this last two corporate minutes and E.G.M’s. These will include the building report and another one on when it warrants it, all appliances prior to the settlement will be in working order.

I went through that very quickly, talked very quick, very fast, because we had a lot to cover. But that basically covers the second part of the podcast on really understanding the Sale and Purchase Agreement, before you go in and make them the offer.

On the next podcast, we are going to go through the chattels, and this last page is involved in G.S.T. and the signature of the vendor and the purchaser.

I hope that helps. Cheers.

Summary:

4 conditions that every buyer should have no matter what type of apartment you are buying are as follows.

You must have your solicitor look over the agreement for you – it is crucial you know what you are signing and understand it completely.

Having this within your purchase agreement with a time line is imperative.

The next clause required in your agreement is the purchaser’s solicitor being satisfied with the last two years’ of body corporate minutes and future maintenance being noted if any.

A building inspection is a must and this should be written into your conditions of purchase. Not many people know enough about construction to do this themselves.

The final clause that should be put into your agreement is a small but important factor. The clause is around appliances and should go along the lines of ‘The vendor warrants that all appliances, light fittings and outlets will be in good working order prior to settlement’.

TRANSCRIPTION:

When making an offer, what conditions should you give?  In buying an Apartment, there is a whole host of conditions you can use depending on the circumstance. For example, the price of the Apartment would depend if it is in a hotel or it is a leasehold property. These kinds of things. There are four conditions, I think, that you should always use no matter what type of apartment you are buying. These are the things we will tackle on this podcast.

The first one is regarding your solicitor. When you go and enter into a sale and purchase agreement and you are with a real estate agent, they need to write it up with you. How often have you done a sale and purchase agreement before? Unless if you are buying a property on a regular basis, very few of us are, it is a very fine issue. You should make sure your solicitor reviews the contract and make sure it is all in order, because real estate agents get very anxious about it. They get very lazy about it because they are doing it so often. You really need to understand what you are entering into and that is why your lawyer’s approval is an absolute must.

You can say this agreement is conditional on the purchaser. Being the buyer, a purchaser’s solicitor being satisfied with all or any aspects of this contract including title and the conveyance of this property. If this clause is not satisfied by 4:00pm on the fifth working day, then this agreement will be at an end. Now, what I am talking about is, if this clause is not satisfied by 4:00pm on the fifth working day, then that means you have got five working days. For example, Monday to Friday not including Saturday and Sunday, your lawyer can only give the sale and purchase agreement the thumbs up. So it is plenty of time.

The next clause I will talk about is about the reviewing of, I suppose it is a health check of the building. Looking at the annual general meeting minutes – if any. Very few people ask about is your extraordinary general meeting that is called the EGM. I will just take a quick look in here so I can show you what I am talking about. Now, this one is really important and very few people actually put it in. They will put in minutes but not the EGM minutes, so I will just read it out.

“This agreement is conditional upon the purchaser’s solicitor being satisfied with the last two years’ of body corporate minutes including any extraordinary general meeting minutes – if any.”

I put if any because extraordinary general meeting minutes are generally, if something has happened that is out of your area. One good example is, when there is leakage, or best case scenario, there is a change of body corporate rules. It is one where a meeting has to be held in-between the annual general meetings to deal with a particular amendment. Obviously, if this order is not satisfied by 4:00pm on the fifth working day, then this agreement will be at an end. Hopefully, that one helps and I hope every single one of you is using that one. That is an absolute must.

The next one is, this is about getting a building inspection and very few people actually do. It is quite surprising, because very few people actually know much about construction. How Apartment complexes are built? This is one that when I bought one of my first apartments a long time ago I wish I did because now it leaks. If I had this clause in it, it probably would have put us off. This agreement is conditional upon the vendor obtaining and being completely satisfied with a building inspection report. If this clause isn’t satisfied by 4:00pm on the seventh working day this agreement will be at an end. Pretty self-explanatory and It means you have a building inspector come in and look at the apartment in the building.

Give you a report on the condition of the building; the materials and all that kind of thing. It will also give you an insight into the building and some confidence with your purchase. At the end of the day you are spending a lot of money. As soon as you do this you could save thousands or tens of thousands of dollars later on. The final clause is a small one, it’s actually not a condition. It’s a warrant because it’s about the appliances. This is one most people get caught out in, because we will go and look at the apartment. But how many of us actually turn on every appliance? How many of us actually put the washing machine through a cycle, I’ve never seen it?

It actually happened when my parents bought one. They just learned the hard way and I learned from my mistakes I suppose we could say. It was a while ago now, but anyway.

“The vendor warrants that all appliances, light fittings and outlets will be in good working order prior to settlement.”

What that means is you go into the agreement, by the time it settles and you actually become the owner, all the appliances are working. And that means if you missed one, when you are looking at it, it is in the chattels list and you didn’t check that and it still has to be working.

if you did not check it at the time of inspection, which most people do not; and if it breaks down in-between the time that you have gone unconditional to the time that you own the property, which is generally about two, three or four weeks’ time, your appliances should still be in working order. It is very very important and it is a pretty simple one, but it can be really frustrating when you move into an apartment and you find that things do not work. Especially things like light fittings and maybe the plumbing’s wrong. Things can get quite expensive.

Anyway, I hope that helps. Obviously, there are a lot of other clauses you can put into a sale and purchase agreement, but these ones I think are standard ones. I think everyone should put these in. I hope that helps.

If you have any other questions, just give me call or book an appointment below and I will answer it.

Cheers.

Apartment Specialists Podcast No: 126

Summary:

Do you know how much money you should deposit when making an offer to buy an apartment? Watch this video to get some insights and to provide you with a clear guide about apartment buying.

TRANSCRIPTION:

How much should you put as a deposit when making an offer on an apartment?

This is a question I get every single time when I am writing up an offer on an apartment. The question is, there are actually no rules. I can give you a clear guide about putting in an offer when you want to make sure the owner or vendor thinks you are serious. What I mean by this is that when you are putting in your offer you want it to make the vendor wants to feel that you cannot walk away.

Upon the agreement going unconditional, you have to put a deposit down. If you put down $1,000.00, the vendor is going to think, “Well he is not that serious. He could walk away from the deal at any time, but why should I accept his offer?” Generally speaking, if it is a $500,000.00 property, you want to be putting at least $20,000 – $30,000.00 down. If It is a $1,000,000.00 property, then about $50,000.00 is fine. But the rule of thumb is a lot of people just say, “ten percent is probably the easiest way to go.”  So, if it is a $200,000.00 property, you are putting $20,000.00. If it is $500,000, you putting $50,000 and so on.

Do bear in mind is, you do not actually have to put in a deposit. It is more about how that is perceived by the vendor. Also, a lot of people are not aware as a real estate agent, it will often push for a commission. They will push for a deposit that will cover their commission. For example if they are selling a $500,000.00 property, they will need the deposit to cover the commission. If you put a $10,000.00 deposit, it is not going to cover their commission. You have got to be asking, “Okay, who is driving this? The agent or the vendor?”

Anyway hope that helps and yeah, talk soon.

Cheers.