In the day of the cheap conveyancer who is judged on speed and not on effectiveness, we are now seeing some negative results by way of litigation. Sometimes, solicitors and conveyancers rush out contracts to keep the agent and the vendor happy, but it leaves them and the agent completely vulnerable.
Leverage receives warning from its insurance company, Law Cover, on a fortnightly basis. Follow this link to read the latest of these bulletins: https://lawcover.com.au/wp-content/uploads/2018/04/Transcript-Sale-of-Land-Contract-Prescribed-Document-Changes.pdf Or follow this link to watch a video on this update: https://vimeo.com/264913845
A solicitor was appointed by a vendor to prepare a contract. The contract was prepared without one of the prescribed attachments, the loose fill asbestos warning. The property was going to auction but the solicitor realised a couple of days before the auction that the contract was not complete.
The solicitor sent a letter to the agent asking for a substitution of documents. The letter indicated what needed to happen but still forgot to attach the asbestos report.
The agent ignored the solicitor’s letter and proceeded with the auction on the basis of the old contract. The purchase price was 3.85 million and was exchanged on the day.
After the auction day, the purchaser suffered buyer’s remorse and sought advice from a solicitor on how to withdraw from the contract. The contract was rescinded on the basis that all the prescribed documents were not attached to the contract.
In the written link, the list of prescribed documents has been provided to us by Law Cover. These are for your reference and if you are an agent, should be added to your checklist. If a contract fails to contain all those prescribed documents and it’s exchanged, the contract will always be exempt.
The solicitor is the current person being sued for his failure to complete the contract. The agent, however, continued to run the auction knowing that something was wrong with the contract and may still be completely liable. They may also be in breach of Rule 6 of Schedule 1 of the Property, Stock and Business Agents Regulations 2014. This rule requires that the agent must do everything in their vendor’s best interest. Continuing an auction where there is a known problem clearly wasn’t acting in the client’s best interest.
There are a number of strategies which should be adopted by agents when a contract arrives in their office:
- Check the front cover to ensure that the vendor’s names are spelt correctly;
- Check the front cover to ensure that the agent’s details are properly detailed;
- Check the inclusions to see that they are the same as the inclusions in the agency agreement;
- Check the special conditions for any special disclosures which may form part of material fact; and
- Do a checklist to ensure that every attachment is attached to the contract.
It is a waste of time doing the work to sell a property if you lose it. The 3.85 million dollar property probably carried a 1.5% commission. For the lack of a little bit of caution, the agent lost $57,750 in commission.
This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.
To get in touch with Bailey, please email email@example.com