Top 5 Mistakes in Real Estate Contracts

Our property lawyers have helped hundreds of people buy their first home. 

We know how exciting it can be, but we also know how daunting it can be.

Given that purchasing your first home may in fact be the biggest purchase of your life, it’s important to get it right.

To help you on your way we’ve compiled a list of common mistakes that we see in Real Estate Contracts.

Hopefully by being aware of these mistakes you’ll be able to avoid them and work towards a smooth purchase and a wonderful investment for your future.

Top 5 mistakes:

 1.     Incorrect spelling of names and including middle names

Man Signing ContractVendors and purchasers of property must prove their identity when selling and buying property.

Having a Certificate of Title issued in the wrong name can cause a lot of headaches when trying to sell a property down the track.

Too often we see Contracts of Sale that have incorrect spelling or names or shortening or exclusion of middle names.

To avoid such problems, buyers should consider how they wish to purchase a property before they sign the contract, and if signing in their own name they should ensure to include their full legal name in all contracts for the sale or purchase of real estate.

 2.     Failing to disclose encumbrances in the contract such as easements

Contracts of Sale should note all easements that affect the property.

Easements give third parties the right to use your property in a particular way (i.e., a shared driveway).

If an easement materially affects the purchaser’s right to use the property then the purchaser is generally entitled to terminate the contract unless the easement has been disclosed under the Contract of Sale.

3.     Failing to disclose leases in the contract

Generally property is sold with vacant possession unless the Contract of Sale discloses a tenancy and any options under the lease.

Often however, vendors fail to disclose leases because they assume that they will be able to end the lease prior to settlement.

This is of course not always possible.

As a purchaser of property it is prudent to make enquiries about whether or not there are any leases in place, and if so, whether the tenant will be vacating prior to settlement.

 4.     Expired conditions

Purchasers often insert conditions into contracts such as ‘subject to finance’ or ‘subject to a building inspection’.

However, inserting these conditions doesn’t automatically give a purchaser the right to cancel the contract if the conditions are not met.

The purchaser must make every effort to fulfill the conditions and if the conditions cannot be fulfilled, the purchaser must ensure that he or she notifies the vendor that the condition has not been met prior to the expiration period.

Otherwise the purchaser risks the contract becoming unconditional.

 5.     Ineffective Building Inspection Conditions

Often purchasers think that inserting a building inspection clause will mean that if the building report shows that the property is not in ‘good condition’ (i.e. leaks, rust etc.) then they will have a right to cancel the contract.

In fact, most building inspection clauses only entitle a purchaser to terminate if the property is not ‘structurally sound’.

In worst-case scenarios this may mean that something as big as a major termite infestation may not render the property ‘unsound’, thereby requiring the purchaser to continue with the contract and purchase a property with a very significant termite problem.

The point here is to ensure you hire a lawyer or conveyance early on to negotiate the special conditions under the contract on your behalf.

Want more of this type of information?

Mira Stammers


Mira is a solicitor and CEO of Legally Yours, has been working as a lawyer since 2007 in both Melbourne and London, and founded Legally Yours with the aim of make the law more accessible and affordable for all Australians. Visit Legally Yours.

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