When entering into property transactions, whether buying, selling, leasing, or developing, the devil is often in the details. Certain clauses in contracts can expose you to unexpected liabilities, financial losses, or legal disputes if not carefully considered. In this post, we highlight common contract clauses that can be detrimental and offer tips on how to protect yourself.
Indemnity clauses require one party to compensate the other for certain damages or losses. While they can be beneficial, they may also shift significant financial responsibility onto you. Similarly, Hold Harmless Clauses prevent you from holding the other party liable for damages, even if they were at fault. These clauses can be particularly risky in property management and construction contracts.
Tip: Seek legal advice to understand the full implication of these clauses and negotiate terms that fairly allocate risk.
These clauses outline responsibilities and liabilities concerning damage to property during the execution of a contract. Without clear terms, you might be held responsible for damages beyond your control.
Tip: Ensure the clause specifies who hears the risk of loss and under what
Common in off-the-plan property purchases, sunset clauses allow developers to cancel contracts if certain conditions aren’t met by a specified date. While intended to protect developers, they can leave buyers stranded if the developer decides to terminate the agreement.
Tip: Negotiate for a clause that limits the developer’s ability to cancel the contract and ensure compensation if cancellation occurs.
These clauses allow buyers to back out of a contract if a property inspection reveals significant issues. However, if not properly drafted, they might not provide the intended protection.
Tip: Ensure the contingency specifies a reasonable timeframe for inspections and clearly defines what constitutes a valid reason for contract termination.
These clauses state that the property is sold in its current condition. Without warranties/ Niuers might unknowingly accept properties with hidden defects or legal issues.
Tip: Avoid “as is” clauses or ensure they are accompanied by thorough inspections and disclosures from the seller.
Some contracts include penalty clauses that impose financial penalties for specific actions or inactions. These can be disproportionately high and financially burdensome.
Tip: Review any penalty clauses carefully and negotiate terms that are fair and reasonable.
Special Conditions
● These are custom-written clauses that override the standard terms. They can include:
○ Extended settlement dates
○ Finance conditions
○ Even clauses that let the seller stay in the property post-settlement
○ Always read the conditions, or better yet, have a lawyer do it.
Time is Of the Essence
● Miss a key date – like a settlement or finance approval – and you may lose your deposit or deal entirely. No grace period. No excuses.
Termination Clauses
● (Favouring the other party)
● Some contracts allow the other side to pull out under broad or vague conditions while locking you in tightly. This is something to watch for and be aware of.
Property contracts are legally binding documents that can have long-term implications. It’s essential to understand every clause and its potential impact. Always seek legal advice before signing any contract to ensure your interests are protected.
If you need assistance reviewing or negotiating property contracts, our experienced team is here to help. Contact us today to help schedule a consultation.
For more information, contact:
e: lawyers@mcpgroup.com.au
p: (03) 9620 2001
w: www.mcplegal.com.au
The information contained within this post does not constitute professional legal advice
