September 18, 2017

As we enter spring, the real estate market traditionally booms. Warmer weather sees the market flooded with homes for sale and purchasers know that it’s a great time to snap up a dream property. It’s also a time when competition to buy can be fierce, so it can be tempting to make an offer on a property without really thinking through the legalities of the transaction.

However, when it comes to one of the biggest investments you’ll ever make, it’s wise to be prudent. Getting legal advice on a contract of sale of a property is in many cases an essential step. It may help you clarify what’s important, put your mind at ease about certain things, or even save you from making a poor investment. Here’s what you need to know about the legalities of a contract of sale of real estate

Buying a House: Get advice on the contract of sale, before you sign

Contract of Sale – How does it work?

In South Australia, you can purchase a property in two ways:

  • By private treaty.
  • By auction.

For a private treaty, you make an offer to buy a property and if the seller (vendor) accepts it, you enter into a contract of sale and then pay a deposit on the property.

At auction, if you are the successful bidder, you sign the contract of sale and pay the deposit as soon as the auction is over.

The contract of sale is legally binding once both the purchaser and vendor have signed it. Many purchasers are unaware that once signing a contract, it is their responsibility to insure the property. Purchasers should not wait for settlement date before arranging insurance.

If you’ve entered into a private treaty, there is usually a cooling off period of two business days. In this time, if you change your mind, you can withdraw from the contract and your deposit will be refunded. There won’t be any other legal consequences. For example, if you have a building inspection that gives the property an unfavourable  report, you may decide to cool off.

But if you’ve purchased at auction, usually you have no rights to cool off.

In both cases, if you decide to withdraw from the contract after the cooling off period, or if there is no cooling off period, there can be serious legal consequences. For example, if the vendor is forced to sell the house to a different purchaser at a lower price, they may take legal action against you to recover the shortfall, as well as any additional fees and expenses that they have incurred (for example, advertising costs and auction or agent expenses). You’ll also lose your deposit, which is usually about 10 percent of the property’s sale price. This can amount to tens of thousands of dollars.

That’s why it’s really important to understand your legal rights and obligations before you sign a contract of sale of real estate (also known as a contract to buy real estate).


Under South Australian laws, the vendor (usually through their real estate agent) must disclose certain things before they enter into a contract of sale with the purchaser. The purpose of this is to make sure that the purchaser is properly informed about the property before deciding to buy it.

This information is contained in a Form 1 (also known as a Section 7 Vendor’s Statement) and it must set out information including the role of the agent and more specific information, for example:

  • Certificate of Title details.
  • Current mortgages held over the property.
  • Any easements over the property (easements are rights that another party has over the land, for example underground pipes or wiring).
  • The zoning of the land.
  • Water rates and other information.

The contract itself should include information about which chattels are included or excluded from sale (usually items that are fixed to the land are included while moveable items such as furniture are excluded. But exceptions to this can be specified in the contract.)

There is also a Form R3 known as a Buyers Information Notice. It sets out some important things that the purchaser should consider before signing the contract of sale. They include:

  • Whether the property has asbestos or other structural defects, for example salt damp.
  • Whether there is defective wiring, gas or plumbing.
  • Whether any swimming pools or spas are in good repair and meet building and safety standards.
  • Whether there are termites or other infestations
  • Whether the property is connected to the mains sewer.
  • Whether there are any illegal extensions or additions to the property.

When to seek legal advice

We recommend getting legal advice before signing any contract that involves a significant sum of money.  For real estate, it’s particularly important because of the size of the investment.

If there is any information in either the Form 1 or contract that causes you concern or if you’re not sure what it means, you should get legal advice as soon as possible. You should also seek legal advice if you discover any of the following:

Encumbrances over the property

Encumbrances restrict the land in some way, for example, you may be prohibited from building a shed on your property. It’s really important that you investigate the encumbrance and how it affects you.


For similar reasons, you need to understand the easement and how it affects you. For example, if there’s a water pipe on your property and you build a structure over it, you may later be required to remove the structure at your own expense.


If the property is tenanted, you need to understand the lease and your rights and obligations as landlord.

Conditions of sale

You may want to include certain conditions of sale in the contract. The most common ones are that the sale is subject to finance or building inspection. For more unusual conditions, legal advice is always a good idea.

Recent building works or renovations

If you are looking to buy the property within five years of completion of building works or renovations, you may be covered by warranties for the workmanship. A conveyancing lawyer can provide you with advice about how to protect your rights in this regard.

Other issues

It’s crucial that you seek legal advice if you wish to withdraw from the contract after the cooling off period because you must have an accurate picture of the risks.

It’s also important to understand that the vendor doesn’t have to disclose any information about the boundaries of the property. If you have any questions or concerns about this, you should speak to your lawyer and consider getting the land independently surveyed.

When you find a home to buy, it’s easy to get carried away with the appearance of the property, rather than looking a bit deeper to work out what you’re actually buying. It’s a good time to stop and remember the enormous investment that you’re about to make and to put measures in place to make sure that you’re spending your hard-earned dollars in the best possible way.

Getting legal advice before you sign a contract of sale is a great way to try and protect yourself from being saddled with a lemon of a home. Here at Websters Lawyers, we have an experienced property team that also handles conveyancing. This ensures that the service to you is seamless.

Contact us today for a free first interview. Because the sooner you act, often the better off you’ll be.