July 13, 2021

In NSW the standard form Contract for Sale of Land provides that the property is to be in the same state and condition at settlement as when Contracts are exchange subject to fair wear and tear

The Contract also provides that in the event the property is not in the same state and condition then the Purchaser can make a claim for compensation against the Vendor for up to 5% of the purchase price for the property. 

Such a claim can be made by the Purchaser at anytime up until settlement without the Vendor being able to rescind or pull out the Contract.  

However, it is relatively common practice when Contracts are prepared that the right to make such a claim is removed altogether or reduced to an amount less than 5%, normally to 1%.  This will then allow the Vendor to pull out of the Contract if a claim is made at all or has a value of 1% of the purchase price.  This is less than ideal when you are purchasing a property!

Here’s an example of this scenario:

A Purchaser enters into a Contract to purchase a house in Coffs Harbour for $850,000.  When they inspect the property prior to settlement they find that the Vendor has removed the stove from the kitchen which was marked as an inclusion on the Contract.  The Purchaser obtains a quote to replace the stove for $3,500.00 and makes a claim for this amount against the Vendor. 

As this amount is under 5% of the purchase price the Vendor cannot rescind the Contract and settlement must proceed as scheduled. 

If the parties cannot sensibly agree to resolve the claim the funds are held back (usually by the agent) and the parties will need to arbitrate the matter post-settlement.

It is very important when you are considering entering into a Contract to purchase a property that you have it reviewed by a Solicitor prior to signing to ensure you are familiar with all of your rights and remedies available to you. 

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