Investing in real estate is one of the biggest and most important decisions you can make in your life. Before signing any contract it is important that you know what exactly you are buying and the terms under which you will buy. While you may think it sounds straightforward, it is surprisingly easy to become unstuck.
Just like any other sale process, it is common for a seller to employ a range of measures designed to entice you into buying. These will often include written advertisements, as well as verbal statements about expected rental income, the condition of the property or any other matter. If these advertisements and statements successfully entice you to buy the property, but later prove to be overstated or untrue, where do you stand?
A real life example of this kind of issue can be seen in the recent decision of Cooper v King. After signing and exchanging contracts and after paying half the deposit price, an argument arose about certain verbal statements and written adverts the seller had provided to the buyer. These included statements about the condition of the property and the expected rental income. The buyer argued that these statements and adverts formed ‘terms’ of the contract which the seller would be bound to honour. The buyer also argued they were entitled to ‘undo’ the contract because they had been misled by the seller’s various statements.
As a general rule, when you buy property the terms of sale are expressly limited to the written contract. That is, the terms and conditions on which you are buying are strictly limited to those that are in the written contract. This means that if you wish to be able to rely upon any statement or advertisement made during the course of the sale at a later date, these must be reduced to writing and put into the written sale contract.
If you fail to accurately record all the sale representations in the written contract and you later feel that you have been misled, it will be very difficult to ‘undo’ the contract on the ground that you have been ‘induced’ into signing. Essentially, if you had reasonable opportunities to make enquiries into the reliability of the seller’s statements but did not do so, you are not then entitled to ‘undo’ the contract that you have otherwise signed.
If you have any questions about this article, require assistance clarifying and negotiating the terms of your contract or are seeking more information, please contact us on (02) 9525 8688.