With our property management packages, service, and recommendations from our existing and past owners, we take on a lot of new managements after an owner buys their new investment property. All too often we come in after it is too late to add in essential clauses to the sale contract.

Based on some of our owner’s negative experiences with sales agents as well as some recommendations from Westpac we have created some great clauses you should include in every sale contract when you buy a property.

Photos

You want to be able to start marketing your new property a week before settlement to maximise your exposure to the rental market before settlement and reduce your vacancy period after settlement, so we want good quality photos before we can get access to take our own marketing shots.

In almost every situation the sales agent wants to provide you with a great experience so you either buy with them again or you sell with them when it comes time to sell, so will assist with getting you photos. In some cases the sales agent will think short-term and will work against you in this respect.

Usually issues with getting photos only happens when you advise the agent you are not going to have the property managed by the agency the sales rep either works for or recommends.

An agent may push the agency they work for or recommend another agency because they because receive a commission or a benefit for bringing in the property management, as well as when they sell the property,m. With your property being managed by the same agency it is more likely that you will buy or sell again with them in the future, so they are protecting future income by directing you to use their agency or associate agency’s services.

All too often we hear that the sales agent is claiming a “copyright” exists on photos and those photos are owned by the contractor they employed to take them. If you employ someone to take photos you are employing them for a service. The employee doesn’t own the fruit of their labour the employer does. You do not employ someone to take photos so you can rent those photos from them in the future. The fruit of their labour has already been paid for.

Imagine paying a photographer to take photos at your wedding only to be told “oh, you don’t actually own the photos, you are paying me a license to view the photos, I own the photos of your wedding.” If an agent is genuinely being told by the photographer that they are buying a license to use the photos they should immediately fire that photographer and get a real contractor like Red Carpet Photography. We pay Red Carpet Photography to take photos for us, so the owner owns the photos, and they do a fantastic job.

Property management reports and tenancy documents

It is very rare for a property manager not to handover documents but it can happen. Including details of tenancy documents in this clause means the seller has to get those documents for you prior to or immediately after settlement.

Building inspection

You would be amazed at how many sales we see come across with limitations on the building inspection such as “only the building under the main roof” or limiting the building inspection to “structural” issues only. You want your building inspection clause to specify that it has to be at the buyer (purchaser’s) satisfaction, not any definition designed to limit your rights or options.

I recently took on a new management after a sale where the neighbouring property was slowly sliding into the back yard of the new management. The sales agent didn’t let any buyer into the back yard so no one saw this major structural defect. The building inspection specifically spoke about the major structural defect, but the REIWA building inspection special condition clause was vague to the point that it could be interpreted as “only the building under the main roof” if not crossed out and written properly. The sales agent also avoided giving a pre-contractural strata disclosure so the buyer didn’t know that the roof structural issues were his responsibility and not strata, the shower was also leaking into the wall. At least this item was disclosed.

It is for this reason you should avoid all REIWA and agent created special conditions clauses. They are not in the buyer’s best interest, these additional conditions are solely for the sales agent’s and seller’s benefit.

You should note that WA is the only state still pushing a separate “joint forms of general conditions” which may or may not have anything to do with the sale of the property you are trying to buy, when every other state has all conditions built into the specific sales contact. Real estate contract creators such as REAforms create significantly better standard clauses and their forms are far superior to REIWA forms in my opinion.

It should be noted that disclosed defects in the sales contract and shown at the viewing are not covered under any building inspection clause and should be addressed separately.

Pest inspection

I see a lot of contracts that miss the pest inspection clause completely. I haven’t had a property falling apart by termites yet but recently I did see an owner forced to settle on a property with active termites throughout the external premises of the property without any recourse to quit the contract or have the seller treat for termites. “At the purchaser’s discretion” is essential wording in any pest inspection clause.

Pre-settlement, final inspection

Another issue I have with REIWA and other agent clauses is that they only give you 3 days before settlement to conduct a final inspection. This means there is no time between the final inspection and settlement for any issues raised at the final to be rectified by the seller. All too often I hear “there wasn’t enough time so they gave me $500 towards the job” only to find out a week later that costs will be thousands to rectify the issue. 7-14 days allows the seller time to rectify the issue or get quotes and have funds withheld and given to the buyer at settlement to rectify any of those issues. Shower leaks are all too often left to the buyer to rectify.

I am in discussions with a new investor in this situation. They are looking at over $1,000 to rectify the leaking shower and settlement will happen before quotes are even received.

Essential special conditions for any property sale contract

These clauses are standard in all sales through Crash Realty.

RIGHT TO PHOTOS AND TENANCY DOCUMENTATION

The seller grants the purchaser all rights to all marketing photos, property condition report photos, and routine inspection report photos. If the seller has employed a contractor to take photos or generate reports and then rents or purchases a “license” for the items the seller at their own expense is to purchase all rights to the photos without watermark or alteration and gives to the purchaser.

BUILDING INSPECTION

This contract is conditional upon the purchaser(s) obtaining at their expense a Building Inspection Report accepted as satisfactory by them within 14 days of acceptance of this contract. If the report is not to the purchaser’s satisfaction, the purchaser(s) may at their option, terminate this contract by written notice, supported by a copy of the report, to the vendor’s agent prior to date of 14 days from acceptance.

PEST INSPECTION

This contract is conditional upon a Pest Inspection Report being obtained at the expense of the purchaser and accepted as satisfactory by them within 14 days of acceptance of this contract. If the report is not to their satisfaction, the purchaser(s) may (at their option) terminate this contract by written notice, supported by a copy of the report, to the vendors agent prior to the date of 14 days from acceptance.

PRE-SETTLEMENT (FINAL) INSPECTION

The purchaser may conduct a pre-settlement inspection 7-14 days before settlement. The inspection is to check that the property is in the same condition as when the purchaser(s) first viewed the property and all appliances are in working order excluding any excluded items listed in this Contract, and is not to request upgrades or improvements at the vendor’s expense after this Contract has been signed.

Example Checklist:

• Appliances, hot water system, heating and cooling are in working order.
• Structure, walls, light fittings, window and floor coverings are in the same condition as when the purchaser(s) first viewed the property.
• Locks, keys and automatic garage door controls are supplied and working.

– Written by David Crash.