Claire and David were looking at buying a rental property. They had spent numerous weekends over several months going to open homes to view different properties and one weekend they found what they thought was an ideal investment property.
On Saturday Claire and David were advised that there were other interested buyers and they felt pressured to sign an agreement that day. Claire and David were fairly confident with proceeding so signed an agreement but made it subject to a “solicitor’s approval clause” which they thought would allow them to easily pull out of the agreement.
The day after the agreement was signed, David got cold feet and he discussed his concerns with Claire during the day on Sunday. Together Claire and David decided they did not want to go ahead with the purchase because the property was not going to make the required rental returns.
On Monday morning David phoned their solicitor and asked them to cancel their purchase agreement. David was surprised when the solicitor advised they could not simply change their mind and they had to have valid legal reasons for cancelling the agreement. The solicitor’s approval clause was limited to approving the form of the contract and title to the property. The solicitor spent some time trying to assist but, because the agreement was a standard form with usual terms and conditions and there were no interests registered on the property title, there was no reason the solicitor could give to validly cancel the agreement.
Claire and David had no other conditions in their purchase agreement other than the solicitor’s approval clause and had no choice but to proceed with their purchase. Claire and David have now settled on the purchase of a property which is not a good investment.
This scenario outlines why it is important to seek legal advice before signing an agreement to purchase property. A solicitor’s approval clause is very narrow and is not an easy way to cancel an agreement. It is important for purchasers to undertake thorough research on a property. A solicitor can help review the terms of an agreement to ensure it incorporates appropriate conditions for the type of property being purchased.
Claudia Holmes, 09 601 8885