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Property Law

Beware of the Representations Made to You in the Lead Up to Signing a Property Contract

Are you thinking about buying a property? Or a business?

If you are, you need to be cautious and vigilant about the statements you are tempted to rely on, and who is making those statements.

Let me explain.

I act for large numbers of people who are buying (or selling) property. When I meet the purchasers or speak to them on the phone they frequently tell me “the auctioneer said” or “the developer said” or “the seller said”.

I have to tell them to ignore, or at the very least treat with a great deal of caution, these statements because from a legal perspective they cannot rely on them. Because invariably when the auctioneer’s sales advice note issues or when the contract is issued by the vendor’s solicitor there will be disclaimers and conditions along the lines that the purchaser cannot rely on any statement outside of the written contract of sale.

And that the contract contains the entire agreement between the purchaser and vendor.

In other words, the vendor’s solicitor will go to the trouble in many cases of inserting a special condition similar to the following:

Entire Agreement and Representations

  1. The purchasers agree and accept that no statement or measurement contained in any brochure or advertisement issued by the Vendor or any agent on behalf of the Vendor relating to the Subject Property shall constitute a representation inducing the Purchasers to enter into the sale or any warranty forming part of this Agreement.
  2. Any statement, description or measurement contained in in any such particulars or in any verbal form given by or on behalf of the Vendor is for illustrative purposes and are not to be given as matters of fact.
  3. Any misstatement or omission or mis-description or incorrect information given verbally or in form of any printed particulars by any person on the Vendor’s behalf shall not give rise to any cause of action claim or compensation or to any right of rescission under this Agreement.
  4. The Purchaser shall have no right of action against any agent, employee or any person whatsoever connected directly or indirectly with the Vendor whereby any mistake, omission, discrepancy, innaccuracy, misstatement or misrepresentation may have been published or communicated to the Purchaser during the course of any representation or negotiation leading up to the sale.
  5. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes and extinguishes any representations or warranties (if any) previously given or made accepting those contained in the Agreement and no variation shall be effective unless agreed and signed by the parties or by some person duly authorised by each of them.

You will also note that the sales advice note from the auctioneer/estate agent will be “subject to contract/without prejudice/contract denied” which is an indication that you will only be able to rely on what is contained in the contract or is clarified/confirmed between the solicitors as they negotiate a binding contract.

It can be a struggle for the solicitor to temper the enthusiasm of the inexperienced purchaser because they will assume what is being said to them by the agreeable vendor or estate agent can be relied on. Maybe it can, maybe it cannot and if there is a dispute you will need to look to the written agreement between the parties to see exactly where you stand.

And the written agreement between the parties is the Law Society Standard Conditions of Sale 2019 edition.

IDENTITY

11. (a) The Purchaser Accepts the evidence of identity as may be gathered from the documents specified in the Documents Schedule. The Vendor confirms that he has furnished to the Purchaser such information as is in his possession relative to the identity and extent of the Subject Property, but the Vendor is not and shall not be required to define exact boundaries, fences, ditches, hedges or walls or to specify which (if any) of the same are of a party nature, and the Vendor is not and shall not be required to identify parts of

the Subject Property held under different titles.

RIGHTS – LIABILITIES – CONDITION OF SUBJECT PROPERTY

13. The Vendor confirms that he has disclosed before the Date of Sale, in the Particulars the Special Conditions or otherwise, all easements, rights, reservations, exceptions, privileges, covenants, conditions, restrictions, rents, taxes and other liabilities (not already known to the Purchaser or apparent from inspection) which are known by the Vendor to affect the Subject Property and are likely to affect it following Completion.

14. Subject to General Condition 13, the Purchaser Accepts that the Subject Property is sold and the Purchaser shall be deemed to buy:

(a) with full notice of the actual state and condition of the Subject Property and

(b) subject to (i) all Leases (if any) mentioned in the Particulars or in the Special Conditions and (ii) all easements, rights, reservations, exceptions, privileges, covenants, conditions, restrictions, rents, taxes, liabilities, outgoings and all incidents of tenure affecting the Subject Property (each a “Relevant Provision”) and

(c) notwithstanding any partial statement or description of the Lease or the Relevant Provision in the Particulars or in the Special Conditions or in any document specified in the Documents Schedule.

Conclusion

I hope you see from these conditions in the contract for the sale of property are sufficient to cast aside any warranty or representation that was made in the run up to the binding contract coming into effect.

And that you simply cannot rely on these statements, no matter how well intentioned or helpful or clarifying they were intended to be.

Categories
Property Law Property Purchases and Sales

The Contract for the Sale of Land and Real Property in Ireland-the Essentials

contract-for-sale

When conveyancing, solicitors nowadays will use a standard contract for sale, first introduced in 1976 by the Law Society of Ireland.

The introduction of this standard contract was intended to eliminate the need for individual solicitors to draft their own contracts and sought to give a fair balance of rights between buyer and seller.

The standard contract has changed many times since 1976 but comprises the following:

  1. A memorandum of the agreement
  2. Particulars of the property and tenure (eg freehold/leasehold)
  3. A documents schedule
  4. A searches schedule
  5. Special conditions
  6. Non title information sheet
  7. General conditions of sale-51 of them.

In a standard conveyancing transaction, the vendor’s solicitor, once he has obtained instructions from his client and has investigated his client’s title, will draft the contract for sale.

Memorandum of agreement

This will include the purchase price, names of vendor and purchaser, deposit payable on singing the contract, the closing date, and the interest rate payable by the purchaser in the event of a late closing.

The deposit is generally 10%; the closing date, if one is not specified, is 5 weeks from the date of sale. The closing date can also be specified by way of a special condition in the contract.

The date of sale is the date a binding contract comes into existence. This happens when the vendor signs the contract in duplicate and sends one part back to the purchaser.

Particulars and tenure

This will contain a physical (particulars) and legal description (tenure) of the property in sale eg

Particulars

ALL THAT AND THOSE the premises known as [xxxxxxxxxxxxxxxxxxxxxxxxxxx] being the property comprised in Folio [xxxxxxxxxxxxxx]F Co. Kildare

Tenure

HELD in Fee Simple

Documents Schedule

This will list the documents being provided with the contract and will include the root of title, planning documents, and any document referred to in the special conditions.

Searches Schedule

This will only be applicable in respect of unregistered property.

Special Conditions

These will be drafted by the vendor’s solicitor, but the purchaser’s solicitor may also request a special condition (for example in respect of finance) being inserted. Special conditions, if required, should be framed to suit the particular property and transaction.

If there is any conflict between a special condition and general condition, the special condition will prevail.

Purchaser’s Pre-Contract Enquiries

These can be broken down into 2 categories:

  • Relating to the physical location and condition of the property
  • Relating to the documents furnished.

Physical State of the Property

The purchaser buys the property in the condition it’s in, and the vendor is not obliged to disclose any physical defects.

For this reason, a structural survey is strongly recommended.

Other Pre-Contract Matters

Things to check include:

  • Road access
  • Water supply
  • Any planning proposals which may affect the property eg a dump next door
  • Other services eg sewerage disposal
  • Any outgoings.

Documents

The purchaser’s solicitor will need to carefully go through the documents furnished and check he is satisfied to proceed, or raise queries.

Signing the Contract

Once the purchaser and his solicitor are happy the purchaser signs the contract in duplicate and returns them to the vendor’s solicitor.

The purchaser should arrange insurance from the time he pays the 10% deposit as he has an insurable interest in the property.

When the vendor signs both copies and returns one to the purchaser’s solicitor there is a binding contract in place.

Working Towards Completion

The parties then work towards completion with the purchaser’s solicitor raising objections and requisitions on title and getting satisfactory replies to them.

Completion

With the completion of the sale the purchaser gets the keys and all closing title (and other) documents, and the vendor’s solicitor receives the balance of the sale price.

General condition 40 of the Contract for Sale makes provision for the serving of 28 day completion notices where the sale does not close on time. This notice does not terminate the contract but makes time of the essence.

Problems

Other general conditions provide for circumstances where problems arise in relation to completion, including clauses dealing with

  • Arbitration (general condition 51)
  • Forfeiture of deposit and resale (general condition 41)
  • Damages for default (condition 42)
  • Rescission (conditions 37, 38, 39)

Conclusion

If you are buying a property, don’t overlook the enquiries you yourself can carry out, especially the physical state and location of the property, and access to services.

Need a quotation for buying or selling? Just send an email: terry at terrygorry.com or use this contact form.






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Categories
Property Law Property Purchases and Sales

Buying a New House or Apartment-The Differences from Buying a Second Hand Property

buying-a-new-house

Buying a new house or apartment in the course of construction is significantly different from buying a second hand property. This piece will look at the major differences.

Here are the main differences:

1. at contract stage when buying a new property there is usually only a site which will only be a fraction of the overall value of the transaction. A second hand property will be fully built and will have all the necessary services;

2. when buying new, the vendor is usually a limited company. A private individual or couple are the typical sellers of a second hand house/apartment;

3. the new property will be built in accordance with a building agreement and to certain agreed standards; the legal principle of “caveat emptor” (buyer beware) applies to a second hand property;

4. there can be massive differences in the closing date of new versus second hand; second hand would be typically 4/5 weeks from the date of signing the contract.

The Contract for Sale and the Building Agreement

One of the key differences between buying new and second hand is there are 2 contracts when buying new:

1. a building agreement in respect of the house/apartment to be built and
2. a contract for the transfer of the site/agreement for transfer.

The building agreement is the most important contractual document when buying a new house/apartment. It sets out the obligations of both parties and the buyer is considered to be the “employer” and the builder the “contractor” in this agreement.

The Director of Consumer Affairs, at the urging of the Law Society, took a High Court action looking for an order to prohibit builders from using certain onerous and unfair terms and conditions. The High Court agreed to grant the order and made one which contains 15 unfair terms which are prohibited.

However builders can, if they choose, ignore the Order and use unfair terms.

The Building Agreement

The standard Building Agreement contains a covenant by the builder to build the property to a high standard and in accordance with the plans and specifications.

The purchaser should engage the services of an architect/building surveyor/engineer to assist with ensuring that the property is built according to the plans and specifications.

The payment clause in the building agreement will provide for 10% of the purchase price of the property to be paid on signing the contract. It used to provide for stage payments being payable at different stages of the build. These payments would only be allowed by the lender on production of an interim stage payment certificate by an architect/engineer confirming that the particular stage of building has been carried out.

Generally there were 3 stages:
1. At wall plate level
2. At roof level and
3. At the internal plastering stage.

However in 2007 the use of stage payments was done away with through agreement between the Government and construction industry representatives.

They can still apply though to one off houses since 2007.

General Conditions

The general conditions of the building agreement cover

• Possession of the site clear and fit for human habitation
• The materials to be used
• Planning permissions and building regulations
• Interest penalties being imposed for not closing on time
• Insolvency of the contractor
• Price variation
• Insurance
• Liability for defects
• Limitations on the builder’s liability
• The common law rights of the purchaser
• The estate services
• The completion date
• Provision for arbitration in the event of dispute.

The Contract for Sale

The Contract for Sale (or Agreement for Transfer or Conveyance) will be the standard Law Society contract and provides for the transfer of the site on which the new house is built. (You can learn more about the contract for sale elsewhere on this site).

The most important thing to note is that it deals with the legal title to the site and the physical location, boundaries, and dimensions of the site.

The main parts of the contract will therefore contain:

• The parties
• The closing date
• Purchase price (normally a fraction of the overall cost, often 25%)
• The particulars and tenure of the property
• Special conditions
• General conditions of the standard Law Society contract.

Other critically important documents which will be required include:

1. A booklet of title showing the vendor’s title

2. Replies to objections and requisitions on title

3. A section 72 declaration which will deal with deaths/voluntary dispositions on title within the last 12 years and with burdens which affect registered land, whether registered or not

4. A declaration of identity confirming that the site and all easements and services are within the boundaries of the vendor’s folio/title

5. An indemnity in respect of roads and services which provides that pending the taking in charge of the estate by the Council that the developer/builder will give an indemnity to maintain them; also that there is a right to reach the public highway from the property

6. An indemnity in respect of footpaths, grass margins, and kerbs

7. The deed of assurance of the site or a lease in the case of an apartment

8. A family law declaration/certificate confirming the home is not a family home within the definition of the Family Home Protection Act, 1976.

Structural Defects

If any structural or physical defects become apparent after taking possession of your new house there are 3 avenues open to you:

  1. A claim to the National House Building Guarantee Company pursuant to the Homebond guarantee scheme or Premier Insurance
  2. a legal action against the builder based on the grounds of negligence of the builder (time limit of 6 years from when the defect became apparent for commencement of legal proceedings)
  3. a legal action against the builder based on breach of contract on the basis that he failed to comply with some term(s) of the building agreement.

Conclusion

As you can see, buying a new house or apartment is significantly different from buying a second hand property.

The building agreement is the biggest single difference and will almost certainly require your architect/engineer to certify that the property has been built in accordance with planning and building regulations and according to the plans and specifications.