Selling your property? How to make a binding contract and not be sued!

When selling property, there are a few disclosures that you may need to make to a Buyer before you enter into a Contract. Failure to provide these disclosures could mean that the Buyer can walk away from the Contract at any time up to the settlement date or worse – they could have rights to sue you for compensation following settlement.

How do you avoid this? Understand your disclosure obligations.

In the next few articles, we discuss the most common types of disclosures that are often overlooked by Sellers who don’t obtain legal advice before entering into a sale contract.

Encumbrances affecting the Land

You are required to disclose in a Contract, all title encumbrances which will remain registered on the title after settlement.

For example: registered easements, covenants, local government agreements, vegetation notices, registered leases or any other notations on your title.

Not only does the obligation to disclose extend to what is registered on your title, but can also extend to statutory easements for sewerage and drainage which may not appear on a title search.

Failure to disclose these encumbrances may entitle the Buyer to terminate the Contract or sue you for compensation following settlement.

Contaminated Land

The Environmental Protection Act 1994 (Qld) (“EPA”) requires that you make a specific disclosure before entering into an agreement with the Buyer if any of the following are applicable to the land:

1. the land is listed on the Contaminated Land Register or Environmental Management Register;

2. a show cause notice has been issued over the land;

3. an environmental evaluation that includes requirement for site investigation has been issued over the land;

4. a clean-up notice that includes requirements for a validation report has been issued over the land;

5. a notice that a draft site management plan must be prepared has been issued over the land;

6. a notice that a site management plan has been prepared over the land, or

7. a court order allowing a person to enter the land to carry out work to prevent or minimise environmental harm, remediate the land or conduct a site investigation has been issued over the land.

If any of these situations arise and you do not disclose them under the EPA before the Buyer enters into the Contract then they may terminate by notice given before the earlier date of settlement or possession. If you do not comply, you may still give disclosure after the Contract has been entered into, but then the Buyer has 21 business days after your disclosure to terminate.

If the Buyer terminates the Contract because of your failure to make relevant disclosure, all money paid by them under the Contract must be refunded.

To find out if your land is on the Contaminated Land Register or Environmental Management Register, your solicitor can conduct a search over the property (for approx. $60 a lot) to check the records before a Contract is presented to the Buyer.

If you have received any of these notices or orders set out above, then legal advice should be obtained and these issues must be dealt with in the Contract to avoid the Buyer having rights to terminate the Contract or seek compensation from you following settlement.

The content of this column is to provide a general guide on this topic. Please contact our team for professional for advice about your specific circumstances.