The property market is booming and everyone is scrambling over each other to get into it. We get calls all week: there’s an auction Saturday, can you review a contract quickly. Well, we sure can, but there is an unfortunate circularity around real estate due diligence – how do you get over the property quality issues and the legal issues in sufficient time to make an informed decision before you buy?
The Property: What should you look for?
Very rarely do you find a property where the vendor is offering expert reports by builders, engineers, town planners and the like about the property quality. Critically, the property quality is almost never covered in the contract or in any disclosure documents. This means you must start as early as you can to elicit this information, particularly as you often need the owner’s cooperation to properly brief your experts. Your due diligence experts will be commissioned to provide reports such as:
- Pest Report
- Building Report
- Strata Report
- Survey Report
- Building Certificate
Whether you need these reports will turn, in part, on advice from your lawyer after reviewing the contract. Further, these reports can take some time to finalise. You need a strategy before you are ready to purchase to ensure you have time to determine what inspections are necessary and review the findings with your solicitor.
The Contract – What should you look for?
What does the contract say? The contract sets out the rights and obligations of the parties.
Most contracts will contain standard conditions covering issues such as the investment of deposit, transfer documents, requisitions on titles, errors or misdescription and late completion.
Contracts will also include additional or “special” conditions canvassing issues such as interest for late completion, how the deposit will be dealt with, commission payable to agents, the condition of the property, and other clauses which may favour the vendor.
All contracts will include details about the title to the property, the sewerage supply and the council zoning. The contract might also attach a copy of a survey and home building insurance evidence.
You must have legal input on the Contract, at the outset, as this will affect what further due diligence you do, and any changes to the contract required to be negotiated with the vendor.