Q: The purchaser, before settlement has discovered that the property has a number of defects such as defective drainage and cracked walls. Can the purchaser avoid the contract?
No, provided s 137B of the Building Act 1993 (Vic) does not apply. The principle of caveat emptor still applies, and a purchaser should complete inquiries prior to signing the contract. In the absence of fraudulent concealment, misrepresentation or express agreement, a vendor of real estate is not liable to a purchaser for defects in a building or land rendering it dangerous or unfit for occupation, even if the vendor has created the defects him or herself or is aware of their existence.
Under s72 of the Property Law Act 1958 (Vic), a person can transfer his or her interest to him or herself to sever the joint tenancy and create a tenancy in common. However, the duplicate certificate of title will need to be produced to the Land Registry before the nature of the interest can be changed.
Cooling-Off and Exchange
Q: I act for the purchaser, who signed a contract seven days ago and the agent took the contract away to have the vendor sign but has not been back in contact. My client wishes to cool off.
The purchaser will have lost the right to cool off after the expiration of three clear business days. However, if the vendor has not yet signed the contract and the purchaser is aware of this, the purchaser may withdraw his or her offer to purchase the property on the basis that the vendor has not yet accepted the offer.
Q: My client has conducted an inspection of the property prior to settlement and has discovered that the vendor has removed the curtains which were included in the contract. Settlement is today. Can I deduct the estimated cost of replacement from settlement money?
The 2008 Contract requires the vendor to deliver the property and goods/chattels in the same condition as when the contract was signed, fair wear and tear excepted. However, this does not entitle the purchaser to make a deduction at settlement as the condition specifically states that if any goods/chattels are not in the required condition, the purchaser may claim compensation from the vendor after settlement. The procedure for claiming compensation is set out in General Conditions 24.2 to 24.6 of the 2008 Contract.
Q: My client has conducted an inspection of the property prior to settlement and has discovered that there is substantial rubbish on the property. Is the vendor required to remove the rubbish?
If the rubbish was on the property as at the day of sale then the vendor is not obliged to remove the rubbish unless there is a special condition in the contract requiring the vendor to do so. Unfortunately this is an all too common occurrence.
Q: We act for a purchaser of real estate; the vendor is a company. We have conducted a company search which has disclosed that there is a fixed and floating charge over the company. The vendor's solicitor has refused to provide a Form 312. Can we insist on the vendor providing a Form 312? Can we adjust the ASIC fee against the vendor?
The vendor must provide at settlement a Form 312 if requested in writing to do so at least 21 days before settlement, except where the chargee is the proprietor of a registered mortgage over the land. The vendor must pay the registration fee for the registration of the Form 312. General Condition 7, 2008 Contract.
Q: I act for a vendor who recently sold her house. When preparing the contract the estate agent did not include the refrigerator under the heading of "goods" in the Particulars of Sale. A dispute has now arisen with the purchasers as my client arranged for the refrigerator to be removed last week. It was built in and connected to the water inlets and outlets. The purchasers' solicitor wants to withhold money at settlement. Is the refrigerator a fixture or a chattel?
Practitioners should refer to common law tests of degree of annexation and intention of annexation to determine whether the refrigerator is a fixture or a chattel (or “good” for the purposes of the 2008 Contract) The refrigerator will likely be a fixture if it is annexed using a relatively permanent method of annexation. However, the intention of the person/s who brought the refrigerator onto the premises must also be considered.
Certificate of Occupancy
Q: At settlement the purchaser is insisting that the vendor provide a copy of the certificate of occupancy. Is the vendor under an obligation to do so?
No, the vendor is not under an obligation to provide a certificate of occupancy.
Q: During the course of the contract the vendor asked the purchaser to settle one week early. The purchaser agreed to this request and an appointment to settle on the earlier date was made. At the last moment the purchaser was unable to settle on the earlier date but was able to settle prior to the original date fixed for settlement. Is the purchaser obliged to pay penalty interest?
Yes. Where an earlier or later date is agreed between the parties and confirmed, either in writing or orally, then that date becomes the settlement date and failure to settle on that date constitutes a breach of contract.
Yes, if adjustments are effected in error.
Yes, adjustments should be as at the day of settlement.
Simple rule – treat it as a part-payment and remember that the vendor must receive the ultimate benefit. General Condition 15.2(d), 2008 Contract.
Usually adjustment should be based on proportion by area.
Suggest that the vendor pay the rates in full at the first settlement and provide proof of payment at subsequent settlements.
Q: My clients are purchasing a house. I have discovered that there is a land tax liability affecting the land. The vendor is a company which owns no other land. My clients intend to use it as a principal place of residence. Should an apportionment of land tax be calculated for settlement purposes? The vendor's solicitors insist I do so.
Yes, although this may be unfair to your clients. Obviously in future years the principal residence exemption will apply to your clients and they will not be required to pay land tax. General Conditions 15.1 and 15.2(b) of the 2008 Contract apply
The vendor is entitled to the rent which accrues on the day of settlement. General Condition 15.2(a), 2008 Contract.
Q: The lease provides that the tenant is responsible for payment of all rates. Rates have been assessed although they are not yet overdue. Can the vendor insist that settlement proceed without adjustment on the basis that the tenant is liable to pay?
No. The vendor is liable for the periodic outgoings up to and including the day of settlement. General Condition 15.2(a), 2008 Contract.
SOURCE: Law Institute of Victoria
Contact Matt Duker
Director & Licensed Conveyancer (Licence No 000935L)
Matt, many thanks for your input, you've given me some excellent points which I certainly wouldn't have thought of, so I'm very glad I went to you for help!William L