HI,
A friend of mine recently put an offer in for a house subject to building and pest. The report came back that 2 years ago the place had termites. Termites were treated, repairs made. However there were two things that came up. The wood that was replaced due to infestation was not removed from the premises. It was just left sitting under the house. The report also said that there was a high risk of reinfestation.
Due to this report she backed out of the deal. The REA now wont return her holding deposit. They are also quoting some REIV document that has fine print saying she is not entitled to the return of this deposit and may actually be liable for 0.2% of the agreed purchase price.
Does this sound right?
Any information would be greatly appreciated.
Many thanks,
Andrew
itsandrew
Go as far as you can see and you will see further.
Her first point of contact should be her solicitor. In the ACT, I couldn’t see there being any grounds for the REA to retain the holding deposit. I’m not sure how things work in Vic but it doesn’t sound right.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Was this a holding deposit or had they exchanged contracts? If the purchaser withdrew in the cooling-off period, then they would be liable for the 0.2%
Had the S32 been prepared?
Just when you think you’ve covered yourself, you find another hole.
Thanks for your replies.
Scott, it was the holding deposit. The main thing is that it was subject to building and pest and the pest came in suspect. I thought that's why you put a building and pest clause, so if something comes up you can legitimately withdraw the offer without penalty.
Is it really ok to keep the holding deposit in those circumstances?
Andrew
itsandrew
Go as far as you can see and you will see further.
Hi Andrew
I wouldn’t have thought so. However, a “satisfactory” building and pest inspection could be interpreted in different ways. Get the legal guys onto it.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
It should be covered in the contract. Read the contract and look for a clause relating to this.
What state is the property in?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Victoria
itsandrew
Go as far as you can see and you will see further.
Poorly written clauses can cause real issues.
You need to go back and read, word by word what the 'inspection' clause says as this seems to be your 'out' – for some reason the vendor hasn't accepted the out you are using. I suspect the clause wording was clumsy.
In QLD the contract has a warning statement (30C). In this statement it says that if the purchaser withdraws during the cooling off period the seller must refund your deposit within 14days BUT may deduct a termination penalty equal to .25% of the purchase price.
So I guess the grey area is if you terminate after the cooling off period expiry but before it goes unconditional… hmmm?
It sounds like the answer to your question is going to be in the wording of that building and pest clause (this is the sort of stuff that worries me.. I need to get a clear set of appropriately written clauses).
It is the termination penalty that has discouraged me from submitting offers.. Agents often ask me to put the offer in writing by this they mean they want to present the seller the offer in the form of a signed contract and they say stronger offer with deposit also. I understand this and would be happy to do so but this .25% (which they say is never charged) deters me, seems to easy to get in the situation your in…
Is it better not to pay the deposit until conditions have been met?
Is it better to add a clause to contracts to counteract this termination penalty.. is that even possible?
Is it just exectionally important have the words 'satisfactory to the buyer' in the clause.. but then as Jamie M says, what does satisfactory mean…Hmmmmmmmm
How did you go itsAndrew?
I realise I am in a different state and things might be diferent but out of interest I asked an RE friend of mine yesterday.
He advised that In my state QLD, if you terminate due to the building and pest clause after the cooling off but before the expiry of the building and pest condition date, then no termination penalty should apply.
So the question would be – did you terminate during the cooling off period?
What was the specific wording of the building and pest clause?
I haven't seen the exact wording but I will try and find out. Maybe she didn't word it correctly. My friend just told me that she made a conditional offer and that after receiving the pest report she was not happy to proceed.
Maybe it was bad wording or maybe the REA is working off the cooling off period and not the conditions. I'll have to find out more.
BTW, how long is the cooling off period in Victoria?
Andrew
itsandrew
Go as far as you can see and you will see further.
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