Putting in an Offer: General Terms of the Sale (Part 2)
Apartment Specialists Podcast No: 129
This is part two of the series about putting in an offer when buying an apartment. In this podcast, you will learn more about General Terms of the Sale and how it protects both the purchaser's and the vendor's rights. How important is the General Terms of the Sale? Find out more from video.
Good day, this is part two of making an offer on an apartment. From the last podcast, you saw previously that we went over the first page, which is this one here. And now we are going over to the General Terms of the Sale. Now there are 17 General Terms of Sale and these terms are put under numbers.
Basically, they are in there to protect the purchaser's and the vendor's rights. What actually has to happen in the conveyance or the change of ownership basically? There are 17 odd, I will very briefly go through each one, otherwise, we will be here for a very long time. If you want to go through them further, I would recommend that you read them, or go through them with your lawyer.
You have got General Terms of Sale and you got your definitions pages. When they are using particular words, what they mean is will include the ones I have highlighted here. Some that say Building Act, which means "The Building Act of 1991," so everything that comes under The Building Act applies, when you use those terms. Now another obvious one is LIM, which means Land Information Memorandum.
That is when you want a LIM report. It has said L.I.M. instead of VIPS agreement, but that is what it means. OIA Consent, that means Overseas Investment Act 2005. If you are buying a huge super-value property or that type of property, and you are an overseas investor. Under the Unit Titles Act, and so that applies hugely when you're buying an apartment. There are rules which means by the Corporate Rules under the Unit Titles Act, so that applies as well.
Working Day means any day of the week, where it is not a statutory holiday, or a weekend. Now, I am just going to go through very briefly to give you an idea of each one. The Deposit. The purchaser shall pay a deposit to the vendor, or the vendor's agent immediately upon execution of this agreement.
If not paid on the due date for payment; the vendor may at any time therefore serve on the purchase notice. This will require payment. You will see what I mean is each one is going in and outlining what has to be done. A lot of it can be seen as common sense, but it is very important that is why it is a contract that they have put in place.
Number three, Possession and Settlement, which is unless particulars of a tenancy are included in this agreement, the property is sold with vacant possession. That one is pretty obvious and the property is sold with vacant possession and subject to the right of any tenants in the property. So, that's what it means and if there's a tenant in the property, a tenancy agreement is in the simple form, a tenancy agreement is more powerful than a Sale and Purchase Agreement.
If there is a tenant in there, you have to give them reasonable notice. Then you've got possession shall be given and taken on settlement date. You are getting the gist of it, so we will just go through them very quickly. There also the 17 of them. 'Risk and Insurance' the property and chattels, shall remain the risk of the vendor, until possession is given and taken.
For example, even once the agreement has gone unconditional, the chattels and property, it still hasn't changed ownership. If a fire occurred or something was included in the sale. Another examples is when the washing machine breakdown; well then that is the responsibility of the vendor or the owner, and not the purchaser. Until that settlement has occurred.
You also got your Title and Boundaries. That means the purchaser is deemed to have accepted the vendor's title. Terms on your purchaser and you have gone unconditional, you accept the title and that is correct. Unless if you do 'Objectional Requisition' which means the lawyer has that ability to object for something on the title. This could be an event or anything that they think is incorrect. And if it is incorrect, the owner has a certain amount of time to rectify it.
For example, number six, you have got Vendors and Warranties and Undertakings. A vendor warrants and undertakes that all, at this date of the agreement. The vendor has not, for example, have things owing on the property, or any outstanding requirements under the Legal Management Act, for example. So, they have not done anything they should have done with the property and have not disclosed.
Protecting you as the purchaser, Claims for compensation. A purchaser can claim the right to compensation under subclause 5.4 for an equitable set off. Now, if you go back to number 5, that means and we will go back there to show you. If you go in to there, now that means you can see 5.4 regarding this description. That means if the property has been described differently, you can cancel it, or you can get a compensation for something that was described incorrectly.
We will go back to where we were, then we are back to Agent. The vendor shall pay the agent's charges, including G.S.T. for affecting such a sale, if an Agent is on the Sale and Purchase Agreement. Goods and Services Tax. It is the agreement for the purchaser to pay any G.S.T. that is payable, if that is part of the agreement. If you remember what I mentioned earlier in that last podcast about G.S.T. It is best thing to ask your accountant's advice before you go in to the agreement.
Also there's zero rating and that's when you are dealing with the commercial aspect to the agreement. The vendor warrants a statement on the front page again and the vendor's G.S.T. registration status. In respect of the supply and the agreement is correct. If there is a commercial aspect to when you are purchasing an apartment, if it is in a hotel pool. What they have said is correct.
Supplying of a Going Concern, that's again, applies to when you are purchasing an apartment that has a commercial use. If you are in a hotel or something like that. Limitation of Liability, if the vendor first enters the agreement as a trust, then that person warrants that they should have the power to do so. Counterparts, that means this agreement can be copied and signed and executed by other parties.
So, that is when you email it to one person and then one person signs and you email it to another person. This means it's still the same agreement. Otherwise, you've got some vendors that are all over the world and their trustees are somewhere else and wives and husbands are apart. Then you have got your 'Further Terms of Sale', that is where you put in your own terms, because you always put in the number 18 and it runs after 17.
I have just put in four. The ones that I recommend that you should always put in. A lawyer or solicitor may ask you to put other ones in, but this one is just basically, "This agreement is conditional upon the purchase solicitor's approval." Another one on this last two corporate minutes and E.G.M's. These will include the building report and another one on when it warrants it, all appliances prior to the settlement will be in working order.
I went through that very quickly, talked very quick, very fast, because we had a lot to cover. But that basically covers the second part of the podcast on really understanding the Sale and Purchase Agreement, before you go in and make them the offer.
On the next podcast, we are going to go through the chattels, and this last page is involved in G.S.T. and the signature of the vendor and the purchaser.
I hope that helps. Cheers.