Mistakes made when listing a property for sale is unfortunately a common occurrence. These “Listing Sins” can often be very costly to correct or may be used terminate the contract or litigate aspects of the transaction. The most frequently made property listing 7 deadly sins include:
1. Not performing a Title Search
Performing a Title Search ensures that you disclose the correct names of the Sellers on the contract and
identify any registered encumbrance or matters which should be addressed such as writs or caveats.
Seller’s names are often different to the name on the Title, commonly excluding a middle name or issued with a previous surname.
Registered encumbrances must always be disclosed on the contract (except mortgages). Should there be a writ or caveat over the property, it will have to be resolved prior to settlement.
Registered Easements must also be identified and disclosed in the contract.
Obtaining a Title Search will also identify contracts to which QBCC disclosure obligations apply.
2. Not performing a Dial Before You Dig
“Encumbrances” include unregistered encumbrances on the Title that may still affect an owner’s use of the property under the current REIQ contract. Sewer lines and manholes are common areas of concern. If not disclosed, the buyer may have the right to terminate and seek costs associated with the contract.
3. Not having a compliant Form 6
Having a compliant Form 6, signed by all Sellers and compliant in relation to expenses such as marketing expenses, is imperative. You should ensure that any exclusive agency period does not extend beyond that permitted by law, currently 90 days.
Where the registered owner is deceased, the Personal Representative/s (typically the Executor/s) should sign the Form 6.
4. Not ensuring the Seller has a Pool Safety Certificate
While it is not technically a legal requirement to check if the Seller has a Pool Safety Certificate, it will so often avoid problems during the contract period. You should make sure that a Seller has a Pool Safety Certificate at listing.
Common issues in the absence of a Pool Safety Certificate include:
- The Buyer uses pool safety report in order to terminate the contract when the issue wasn’t really pool safety related.
- Even if the Seller agrees to supply a Pool Safety Certificate prior to completion, the contract doesn’t permit the Seller to make any modifications to the property. An issue can arise where obtaining a Pool Safety Certificate requires modifications to the property.
5. Not clearly identifying included Chattels and excluded Fixtures
Seek clear instructions from the Seller about included Chattels and excluded Fixtures at listing. This helps avoid disputes during the contract process between the Buyer and Seller over items which are included in the sale.
Typical items which require clarification include:
- Wall mounted TV’s
- Entertainment Systems
- Pool cleaning equipment
- Gym Equipment
- Garden furniture and small sheds
- Large pot plants
- Plumbed Fridges
- Washing Machines
6. Failing to advise the Seller to obtain an ATO Clearance Certificate (properties $750,000 or more)
The Seller must have an ATO Clearance Certificate for GST purposes as at the date of settlement for properties of $750,000 or more. Should the Seller not obtained a Clearance Certificate, the Buyer is required to remit a percentage of the purchase price to the ATO.
The absence of a Clearance Certificate does not prevent a settlement occurring, but it could result in a Seller not wishing to proceed with settlement on settlement date and look for a way to terminate a contract. It might otherwise delay a contract from settling. When listing a property that is likely to sell for $750,000 or more, ensure that all Seller’s (being all registered proprietors) obtain an ATO clearance certificate.
Australian Residents who are natural persons, can typically obtain an ATO Clearance Certificate within 48 hours, although the ATO says it can take 28 days. Certificates last for 12 months and there is typically no downside to arranging for all Seller’s to obtain a clearance as part of the listing process.
7. Failing to arrange a Disclosure Statement (for Community Titles)
For Community Title (which includes virtually all units and townhouses in Queensland), the Seller must provide the Buyer with a Disclosure Statement at settlement. As part of the listing process, the seller should make arrangements to have a Disclosure Statement ready when a contract is prepared. Delays in obtaining the Disclosure Statement could delay a contract. A Disclosure Statement, signed by the Seller must be provided to the prospective Buyer when a contract is entered into. Ideally the Disclosure Statement should be personally signed by the Seller/s.
More information on drafting contracts and commonly used clauses are available in our Conveyancing Manual.
Should you need advice or assistance with property contracts or conveyancing, please contact us.