Dangers of cheap conveyancing

Data Source: Lawcover CEO’s report, see Law Society Annual Report 2018

Although it may be enticing to go with the cheaper alternative when choosing a conveyancer or solicitor to represent you, consider the outcome. A mishandled conveyance can result in an unsuccessful sale and turn a good buy to a bad buy. In 2018, 27% of notification of complaints made against solicitors and conveyancers was in conveyancing. Conveyancing related complaints for negligence makes up almost one third of all negligence related complaints against solicitors and conveyancers, even out stepping the highly risky area of litigation which comes in at 19% of complaints.

What is Conveyancing?

Conveyancing is the process of buying or selling land which involves the transfer of legal title from one registered proprietor to another. This process will normally involve engaging a legal representative to deal with all the paperwork, both legal and non-legal, from beginning to end of a sale or purchase transaction.

The process of a sale or purchase of land is linear and work is generally “triggered” by a key date. Key dates will vary depending on the type of conveyance. Generally, the two main key dates are the date of exchange and the date of settlement. There can be other key dates such as expiry of cooling off period, time limit for making requisition, time for compliance with various contractual conditions.

The date of exchange is the date when the Vendor and Purchaser become legally bound by the terms of the contract. This means unless a party has a right to cool-off, terminate or rescind the contract, both the vendor and purchaser are required by law to complete the sale and purchase.

While the overall process of a conveyance transaction can be very streamlined, it would be a mistake to treat all transactions as if they were the same. Every person and every property is unique and requires distinct advices, searches, and enquiries based on factors such as intention, location, zoning, value etc.

The type of work conducted in a sale transaction varies from the type of work required in a purchase. A vendor’s main objective is to sell their property. If a contract is poorly prepared, it will give the purchaser a right to get out of the contract or force the vendor into an unexpected and unwanted price reduction. In a market with high supply and low demand, it could be difficult to find another buyer at that price.

A purchaser’s main objective is to buy a property in its current state and at a price they can live with. One of the biggest concerns as a purchaser is that the law in New South Wales is “Caveat Emptor” which means buyer beware. The onus is placed on the buyer to be satisfied with the condition or state of repair of the property and other legal issues before signing the contract. If insufficient enquiries are made before or after (as applicable) the exchange of contracts and problems are later discovered, it could be difficult to get out of the contract without forfeiting the deposit. And risking a claim for damages and costs

Before exchange

Vendors

Agency agreements must be amended before signing. There are certain clauses in an agency agreement that must be amended to protect a vendor from paying commission in the event the sale falls through.

Example: a client signs an agency agreement without sending it through for review and amendment. Contracts were exchanged and the sale subsequently did not proceed. The purchaser was entitled to recover their full deposit, however, the client was stuck paying approximately $40,000 in agent’s commission with no proceeds of sale.

As a vendor, you want to secure your sale. You do not want to give the purchaser the opportunity to get out of the contract. There may be many reasons why a purchaser may want to get out of a contract, such as buyer’s regret, finance falling through, change of financial status, found another suitable property, etc. A common factor relates to the market and off-the-plan purchases. Buyers who purchase a property off-the-plan, particularly during the market’s peak, have expressed that they feel they have paid too much for the property and as a result will find any possible way to get out of the contract. There are prescribed warranties and documents under the Conveyancing Regulations that vendors must disclose and annexed to a contract. Breach of these warranties by not attaching a prescribed document or failure to disclose is an avenue of a purchaser to rescind the contract. Therefore, an essential preparation for successful conveyance from exchange to settlement is to have solid contract.

Real life example: a purchaser exchanged contracts for an off-the-plan unit on the expectation that completion is only a year away. The developer continually extends the sunset date and subsequently delays completion for another year. Two years have gone by since exchange and the property market has drastically changed. What would have been considered a reasonable price at the time of exchange is now too much for current standards. The purchaser is now stuck with the property and is forced to complete the contract unless they can find a breach in the contract which entitles them to rescind. When the purchaser in this example approached the representative handling their matter with their concerns and frustrations, they were advised that there would be very difficult to get out of the contract and made no effort to assist the purchaser.

This purchaser then approached Antunes and sought our advice. We were able to advise and provide them with a plan of action which was executed immediately after our meeting. We successfully rescinded the contract and recovered the full deposit within 3 business days. The time it took for us to reach this outcome does not suggest that the matter was easy. At Antunes, we have the experience and resources to reach an outcome favourable for our clients. In this particular matter, we understood what our client wanted, we knew how to find what we needed to look for to rescind the contract and we made sure that all bases were covered in terms of service of the rescission notice (email and personal service at 2 locations).

Purchasers

As a smart buyer, the rule of thumb before entering into a binding contract is:

  1. To be satisfied with the terms of the contract;
  2. To be satisfied with the state of repair of the property; and
  3. To be certain that you have the means to fund the purchase.

The terms of a contract are a major component of the entire conveyance. These terms govern how the conveyance is conducted. Contracts for sale of land are drafted from a vendor’s perspective and often contain special conditions that are favourable to the vendor. The purpose of a contract review is for a legal representative, someone who is familiar with the various aspects of property law, to identify any unreasonable or unworkable conditions, potential affectations to the property and read the plans, advise and request the relevant amendments to the contract prior to exchange.

Why Antunes?

We care, we go the extra mile, we are persistent and we take the time to know our clients. Conveyance at Antunes is not just another transaction and clients are not just another file number.

Talk to one of our expert lawyers today.