Property Contract Drafting & Review
In any property sale, for both the purchaser and the vendor, once contracts are exchanged the rights and obligations of both parties, the settlement arrangements, the deposit risk, the consequences of default and any restrictions affecting the property are all governed by the terms of the contract.
For a vendor, a complete contract of sale usually needs to be prepared before the property is listed. If the contract documents are incomplete, the disclosure is inadequate, or the special conditions are poorly drafted, this can affect the listing, slow down negotiations, and even give rise to disputes after the transaction. For a purchaser, failing to review the contract carefully before signing or exchanging may mean accepting unfavourable terms without fully understanding the risks — for example, waiving the cooling-off period, overlooking title restrictions, failing to identify limits on how the property may be used, or not including the protective conditions that are needed.
The purpose of reviewing a property contract is to give you confidence on the things that matter: whether the property can be used as you intend, whether the contract terms are reasonable, whether the proposed timing is workable, and whether matters such as finance, building inspections, strata reports and title restrictions have all been properly dealt with.
NS Legal can assist both purchasers and vendors with the drafting, review, amendment and negotiation of contracts for the sale of property — helping you identify the risks, confirm your obligations and put a more secure transaction in place before you reach the critical points of the deal.
Drafting the vendor’s contract: what needs to be ready before listing?
In NSW, a vendor is generally required to have the contract of sale prepared before the property is formally listed. The contract does more than record the price and the settlement date — it must also include the key documents relating to the property’s title, land use, planning, drainage and any restrictive interests.
If the vendor’s contract is not properly prepared, the purchaser’s lawyer may raise a long list of questions, exchange may be delayed, and the purchaser’s willingness to make an offer can be affected. Particularly in a fast-moving market, a contract that is clearly structured, fully disclosed and reasonably drafted will often help the transaction proceed more smoothly.
Drafting a vendor’s contract usually calls for attention to:
- whether the title details are accurate, including the registered owner’s name, the land particulars, the property address and any title restrictions;
- whether the required disclosure documents are complete, such as title searches, planning certificates, sewerage diagrams and other relevant documents;
- whether the contract clearly sets out which items are included in and excluded from the sale, such as fixtures, appliances, curtains, air-conditioning or other fittings;
- whether the settlement date is reasonable and aligns with the vendor’s relocation, the discharge of any mortgage and any onward purchase;
- whether special conditions are needed to deal with the condition of the property, early access, existing leases, repair obligations or other specific arrangements for the transaction.
The purchaser’s contract review: what really needs checking before you sign?
When a purchaser reviews a property contract, it is not enough to look only at the price, the address and the settlement date. Property transactions usually involve large sums, and once contracts are exchanged there is very little room to change your mind. In particular, where a section 66W certificate is signed and the cooling-off period is waived, the purchaser is generally bound by the contract immediately upon exchange.
A purchaser’s contract review usually needs to focus on:
- whether the title is clear, and whether there are any mortgages, easements, restrictive covenants or other third-party interests;
- whether the permitted use and planning details match your expectations, for example whether there are development restrictions, land-use limitations or special planning requirements;
- whether the contract contains unusual terms that favour the vendor, such as limiting the purchaser’s right to claim, broadening the vendor’s exclusions of liability, or imposing unfavourable consequences for delayed settlement;
- whether protective conditions need to be added, such as finance approval, building and pest inspections, or review of the strata report;
- whether the settlement date fits with loan approval, your funding arrangements, your moving plans and your stamp-duty arrangements;
- For an apartment, townhouse or other strata-titled property, whether the strata report, levies, sinking fund, major works or owners’ corporation disputes need to be reviewed more closely;
For example, a purchaser may have found an apartment where the price and location are right, but the strata report shows that major repairs to the building are imminent, which may give rise to additional special levies in the future. If these issues are not identified before signing, the purchaser may only discover after settlement that the true cost of ownership is much higher than expected. The value of a contract review lies precisely in identifying these issues before the transaction becomes irreversible.
Before contracts are exchanged, make sure the risks and obligations have been properly dealt with.
Special conditions: why you can’t rely on the standard contract alone
The standard contract only deals with the most basic framework of a transaction, yet every property sale has its own particular circumstances. The role of special conditions is to write into the contract the matters that need specific treatment in that transaction, so the parties do not later fall into dispute because they understood things differently.
For a purchaser, the special conditions commonly worth considering include:
- a condition for final finance approval;
- a condition that the building and pest inspection results are satisfactory;
- a condition for review of the strata report;
- the vendor completing specified repairs before settlement;
- retaining or removing specified items before settlement;
- arrangements for the purchaser to enter the property early for measuring, obtaining renovation quotes or carrying out inspections.
For a vendor, special conditions may involve:
- making clear that the property is sold in its current condition;
- restricting the purchaser from making unreasonable requests after contracts are exchanged;
- dealing with tenants, early vacant possession or occupation before settlement;
- specifying which fittings are included and excluded;
- setting a reasonable settlement period and how any default will be dealt with.
The greatest danger with special conditions is one that “looks like it has been written, but cannot actually be enforced”. If a clause is vague — for instance, simply stating that “the vendor agrees to repair issues with the property” without setting out the scope of the repairs, the time for completion, how the work will be inspected and accepted, and the consequences if it is not done — disputes can easily follow. The focus of a lawyer’s review and drafting is to make these arrangements clear, specific and workable enough to be relied upon.
The cooling-off period and section 66W certificates: risks you must understand before signing
In a competitive transaction, the vendor or agent may ask the purchaser to provide a section 66W certificate to show that the offer is more certain. For the purchaser, however, this is a high-risk step.
Before signing a section 66W certificate, a purchaser should usually confirm that:
- the contract has been legally reviewed;
- the finance arrangements are sufficiently certain;
- the building and pest inspection, strata report or other due diligence has been completed;
- there is no difficulty in paying the deposit;
- there is a clear understanding of the settlement date, the consequences of default and the terms of the contract.
If a purchaser waives the cooling-off period without an adequate review, and only later discovers that finance cannot be approved, that the property has defects, or that the contract terms are unfavourable, it is usually very difficult to withdraw from the transaction safely.
The consequences after exchange: why you must be careful before signing
Once a contract for the sale of property has been formally exchanged, and the cooling-off period has either expired or been waived, the contract is generally legally binding on both parties. After this point, the transaction is no longer merely an “intention” or a “negotiation” — it becomes a legal relationship that must be performed.
If the purchaser fails to complete the transaction without proper justification, they may face loss of the deposit, damages for breach, and even further losses pursued by the vendor. If the vendor refuses to complete without proper justification, the purchaser may also seek specific performance of the contract or claim damages.
How can NS Legal help?
NS Legal provides legal services relating to contracts for the sale of property for both purchasers and vendors, including:
- preparing the contract of sale and related disclosure documents for vendors;
- reviewing title, planning, drainage, restrictive interests and other transaction documents;
- drafting or amending special conditions;
- reviewing the contract for purchasers and flagging potential risks;
- advising on the cooling-off period, section 66W certificates and the consequences of exchanging contracts;
- liaising with the other party’s solicitor or conveyancer on contract amendments;
- assisting with contract disputes and risk issues before and after settlement.
Preparing to buy or sell? Having a lawyer review the contract before exchange is often the most reassuring step you can take.
Frequently Asked Questions
I’ve found a property I like — should I make an offer first, or have a lawyer review the contract first?
The safer approach is to obtain the contract and have it reviewed first, and then decide whether and how to make an offer.
In NSW, a vendor will usually have the contract of sale prepared when the property is listed. When a purchaser is seriously considering buying, they can ask the agent for the contract and provide it to a lawyer for review. The purpose is not to slow the transaction down, but to confirm before making an offer whether the contract contains any significant risks, such as title restrictions, unfavourable terms, unreasonable settlement arrangements, or the absence of necessary protective conditions.
If you are buying before an auction, a contract review is especially important. There is generally no cooling-off period once a property is sold at auction, so a successful bidder usually has to sign the contract and pay the deposit immediately.
What does a purchase contract review mainly look at?
A lawyer will usually focus on the contract terms, the title documents, the planning information, the drainage diagram, the special conditions, and anything that may affect the use of the property or the security of the transaction. For an apartment or other strata-titled property, the strata report, levies, sinking fund, major works and owners’ corporation records also need closer attention.
The most important questions are: whether the property is subject to any legal or practical use restrictions, whether the contract shifts too much risk onto the purchaser, and whether the purchaser needs to add further protective conditions before signing.
Why must the contract be prepared first when selling?
A vendor generally needs to have the contract of sale prepared before the property is formally listed, because prospective purchasers rely on the contract to understand the title, the land particulars, the planning position and other important disclosure.
If the contract is incomplete, purchasers may be unable to review it promptly and the transaction can easily be delayed. For a vendor, preparing a clear, complete and reasonably drafted contract in advance helps to reduce purchasers’ concerns and makes it easier to move to exchange more quickly once the right buyer comes along.
What is a section 66W certificate?
The core of a section 66W certificate is that the purchaser waives the cooling-off period. In other words, once contracts are exchanged, the purchaser can generally no longer rely on the cooling-off period to withdraw from the transaction.
Before signing a section 66W certificate, a purchaser should confirm that the contract has been fully reviewed and that the finance arrangements, building inspection, strata report and funding have all been properly considered. Otherwise, if problems come to light later, the cost and difficulty of withdrawing from the transaction increase significantly.
What happens if I no longer want to proceed after contracts are exchanged?
Once contracts have been formally exchanged, and the cooling-off period has ended or been waived, the purchaser is generally bound by the contract. If the purchaser refuses to complete without a lawful reason, the most immediate risk is usually loss of the deposit. In NSW property sales, the deposit is commonly 10% of the purchase price, which for most purchasers is already a very substantial financial loss.
The risk does not necessarily stop at the deposit. If the vendor suffers further loss as a result of the purchaser’s breach — for example, the property later sells for a lower price, or there is additional interest, re-sale costs or other expenses — the vendor may in some cases pursue further compensation. The actual outcome will depend on the terms of the contract, the reason for the breach, the vendor’s actual loss and how the matter is subsequently dealt with.
Need legal advice? Contact NS Legal
We provide purchasers and vendors with clear, practical advice on contract drafting and review, helping you identify the risks and confirm your obligations before the transaction reaches its critical points.
