Purchasing a home is a significant financial commitment, and understanding the legal process ensures a smooth transaction. The contract of sale is a key document that outlines the terms of the purchase and becomes legally binding once both the buyer and seller have signed. This guide provides an overview of the process and the legal considerations involved.
Making an Offer
Once a suitable property is identified, a prospective buyer may submit an offer in one of the following ways:
- Verbally through the seller’s agent
- In writing via a formal offer form provided by the agent
- By completing the contract of sale with the proposed offer details
Verbal offers do not create a legally binding agreement. Even if a seller accepts, the sale will only proceed once a written contract is signed by both parties. If an offer is accepted, the seller’s agent will prepare a contract of sale for the buyer to review and sign. Before signing, it is advisable to seek independent legal advice to ensure the contract accurately reflects the agreed terms.
Reviewing and Signing the Contract
The contract of sale specifies key terms, including:
- The purchase price
- The deposit amount and payment schedule
- The settlement date
- Any inclusions, such as fixtures, appliances, or furniture
- Special conditions such as finance approval, building inspections, or the sale of an existing property
It is essential that any agreed conditions are clearly documented in the contract, as they will not be enforceable unless expressly included. Legal advice should be sought prior to signing to ensure the contract is fair and does not contain any clauses that may be disadvantageous to the buyer.
Cooling-Off Period
In Queensland, most residential property purchases are subject to a five-business-day cooling-off period. This period allows the buyer to terminate the contract without needing to provide a reason. However, if the buyer exercises this right, a termination fee equal to 0.25% of the purchase price will generally apply.
It is important to note that contracts entered into at auction are not subject to a cooling-off period. Buyers who purchase at auction should conduct all due diligence before bidding.
If a buyer wishes to terminate a contract during the cooling-off period, they must provide written notice to the seller before the period expires.
Conditional Sale
Many contracts are conditional, meaning the sale will only proceed if specific conditions are met. Common conditions include:
- Finance approval – Ensuring the buyer secures a loan from their lender
- Building and pest inspection – Confirming the property is structurally sound and free from infestations
- Sale of an existing property – Allowing the buyer to sell their current home before proceeding with the purchase
- Foreign Investment Review Board (FIRB) approval – If the buyer is not an Australian citizen or permanent resident, FIRB approval may be required before purchasing
Buyers who require FIRB approval should ensure the contract is subject to FIRB approval to avoid penalties if their application is declined. A solicitor can assist in drafting appropriate clauses to protect the buyer’s interests.
Warning Statement
Under Queensland law, all contracts of sale must contain a warning statement that appears immediately above the buyer’s signature. This statement advises buyers of their cooling-off rights and recommends obtaining independent legal and valuation advice before signing.
The required warning statement states:
“The contract may be subject to a 5-business-days statutory cooling-off period. A termination penalty of 0.25% of the purchase price applies if the buyer terminates the contract during the statutory cooling-off period. It is recommended the buyer obtains an independent property valuation and independent legal advice about the contract and their cooling-off rights before signing.”
If a contract does not contain this statement, the buyer should seek legal clarification before proceeding.
Paying the Deposit
Once the contract is signed by both parties, the buyer must pay the deposit as specified in the contract, usually within two to three days. Deposits are typically held in a trust account managed by the seller’s agent or the buyer’s solicitor until settlement.
If the seller does not accept the buyer’s offer, any deposit paid will be refunded in full.
Final Steps Before Settlement
Once the contract is signed and all conditions are satisfied, the transaction progresses towards settlement. The key steps leading up to settlement include:
- The buyer’s lender issues formal loan approval (if applicable).
- The buyer’s solicitor conducts title searches and due diligence to ensure there are no outstanding encumbrances on the property.
- A pre-settlement inspection is conducted to confirm the property’s condition has not changed.
- On settlement day, the buyer’s solicitor facilitates the transfer of funds, and legal ownership is officially transferred to the buyer.
Failure to settle on the agreed date may result in penalties or contract termination. Buyers should ensure all financial arrangements are in place well in advance of the settlement date.
Seeking Legal Advice
Purchasing a property involves significant legal and financial considerations. A solicitor can assist by:
- Reviewing and negotiating contract terms before signing
- Ensuring that necessary conditions (e.g., finance, FIRB approval, building inspections) are included
- Conducting property searches and handling settlement procedures
- Advising on legal obligations and potential risks
At Ensure Legal, we specialise in property law and provide expert guidance to ensure a smooth and legally compliant transaction. If you are purchasing a home in Queensland, contact us for professional legal assistance.
