Tom Panos 00:00
really excited today because we haven’t had you on Jarrod to talk to our real estate community, though you have been talking to the real estate agents that you do. You are the number one Convancing real estate firm in the country. The volume that you do is Extraordinary. You’ve turned that business into a McDonald’s of conveyancing, I think.
Jared Zak 00:23
Thanks, I’ll know, yeah, we were doing okay. Um, yeah, it’s, it’s doing pretty well I.
Tom Panos 00:28
Would say, if I, if I’d it’s, if I’d studied law, if I’d studied law and come out a Lawyer, I would have done exactly what you would have, you know, done. I would have set up a firm that I would have specialized on just one thing so I wouldn’t get distracted, and I would. I would make sure that I Was able to work with one sector. Obviously, real estate is the right sector to be working in In conveyancing, and you’ve done that, and I thought you would be the best person today to Talk about seven things that agents need to know about contracts. I want to preface right from the outset the contents of this webinar. That Jarrod’s gonna deliver from drought and CrossFit is relevant to New South Wales, victoria and Queensland predominantly. Can I confirm that?
Jared Zak 01:22
Tom Panos 01:22
Yeah, in fact, all the states and territories is some general principles on contracts we’re gonna touch on okay so this is important and I’ll tell you why because I’ll do 10, 11 in spring, 12, 14 options on a Saturday and I’ll often, just before an auction starts, I’ll have a real estate agent come up to me, or sometimes, when the auction’s finished, and they’ll ask me questions I’ll make can I, can I cross this out? Can I, can I put five percent there? Can I do this? Like? If they’re only gonna give me this, what are they liable for? So there’s a lot of stuff that I think agents and often I’m unclear as well. Jarrod, I’m unclear. Often I feel like I’ve got to pick up the phone and ring up. You know a lawyer on a mobile phone because you need mobiles on the weekends, and that’s the other thing I’ve heard about you. You do very well, you will take calls on Saturdays, on auction days, correct? I do do that.
Jared Zak 02:24
My wife hates it, do I do, do it yeah.
Tom Panos 02:27
So I want to go through it because the real estate industry seems to attract a lot of people that come in, they’re told, pick up the phone, hustle, get appointments, get listings, get sales, and Then what you notice is that they’re good on the sales side but underneath the bonnet, often they’re actually unsure of even things like breeding contracts or, you know, finding when the sewer line runs in a you know, in a contract you know. So let’s kick it off. We’re gonna go through seven things. We’re gonna try and get this done in 20 minutes. Number one what do you think is something that they should know? We’ve got a list that we’re gonna work through, but what’s the first one?
Jared Zak 03:15
Well, the first one. I’m getting a little bit now, more so a couple of months ago when the when the market was looking dicey. But I had the question that was asked by both buyers and also the agents If I default as a buyer, what am I liable for? Am I just liable for the 5% deposit I put down? In fact, sometimes we get buyers asserting that, saying I look, I’m not gonna complete, I’m just gonna lose the 5% I mean there’s.
So you probably already guess is you’re not just liable for the 5% as the buyer, you’re probably liable Automatically as a liquidated debt. So it’s a straightforward, simple debt for an additional 5% if they put one of those fancy clauses in there, and even that that brings you to 10%, right. And then if the vendor Resells the property and a loss in the market, and if that loss exceeds 10%, well, the buyer will be liable for that as well. So I always say to my buyers who are approaching financial difficulties Don’t just walk away, because the losses that you may suffer are Unquantifiable. We don’t know what they could be. They could be they could be 5% if we’re lucky, but they could be a lot, lot more. So always try and negotiate some kind of firm settlement or resolution or an extension.
Tom Panos 04:30
Okay. So point number one even if there’s an agreement by the vendor to accept a 5% deposit, if you don’t settle and don’t fulfill, don’t go to settlement and you pull out. You’re also liable for a further 5%.
Jared Zak 04:53
So you can be liable for a further 5%. I use the word as a liquidated debt and that just means automatic. You don’t need to put on affidavit and establish that you’ve incurred these losses. You are owed an additional 5% by way of what we call these structured deposit clauses, and it’s as simple as that. You say you, you’ve defaulted. I’m taking the 5% now from the trust account. You owe me another five. Know that. Yeah, it’s called.
Tom Panos 05:21
Sorry, jerry, we’ve gone through two points then. Firstly, we’ve talked about and they really are supposed to two separate ones. One of them is the 5%. What you’re saying is you could be liable Depending. Is it depending if the clause is in the contract?
Jared Zak 05:36
Yeah, and those clauses, I’ll be honest, they’re more common in New South Wales. I don’t see them as much in my Queensland and Victoria practices, but you’ll often have these causes in New South Wales. It says even though we’re going to accept a slightly small, small deposit, say around 5%, you are liable for the full 10 if you default. You put those in your contracts. I always put those in my clock in my contracts.
Tom Panos 05:59
Okay, the the, the so. So the other one that we started off with was defaulting. And if you default, you, you tell your clients don’t just walk away, because what is a headache could get a hell of a lot worse.
Jared Zak 06:14
Yeah, we have no idea how bad it could get. It’s it’s unquantifiable. The vendor could, could. The market could absolutely just crap itself as soon as you default and the vendor may lose 20 30% vis-a-vis the contract price you agree to. So it could get really, really bad.
Tom Panos 06:33
Okay, okay, um. So in essence, what you’re saying to me is someone buys something for a million, they’re liable for the hundred thousand dollars and they don’t go ahead. That property gets resold four months later for 900, so they’re also liable for another hundred thousand dollars.
Jared Zak 06:54
No, no, in that, in that mathematical case you just mentioned, that’s it, because they’ve only lost. Oh sorry, you’re right. Yeah, so let’s assume it sells for 800. Correct, and now, in that case they’re liable for another hundred thousand dollars.
Tom Panos 07:09
Okay, okay, can I ask if the property and this has happened in Byron Bay the other week and I got asked the question and I wasn’t sure of the answer the buy had defaulted? The property went back on the market and Surprisingly in this market it actually Ended up selling for 300 more Yep. So the vendor was happy. Can I ask you what’s the original? Does the original buyer? What’s their position in?
Jared Zak 07:49
those the deposit is. The deposit is a deposit. It doesn’t matter that the vendor may have made money on the Resale. You still lose the deposit. Wow, you can’t. You can’t ask for a refund. That’s got nothing to do with it. You almost, you almost look at, look at them as two categories of things. First, you lose a deposit, and that’s irrespective. It’s a solemn, sacred rule of commerce going back hundreds of years. That’s a bursting. Then you look at the second thing is what has he additionally lost? If anything, and if it’s more than the 10% deposit, guess what? You got to pay that to.
Tom Panos 08:22
Well, this, this buyer, this buyer must be sitting back there thinking I’ve lost my 10% deposit and if I’d actually been the person that had just resold it and I would have got a three hundred thousand dollar increase, because they get none of the benefit of that either.
Jared Zak 08:37
See, he should have. You should have done everything. You should have hopped himself To the, to the eyeballs and and finest. And that’s what I always tell my clients. Just, you’re better off settling and managing it from there. They’re just walking away.
Tom Panos 08:48
Okay, let’s go on to the third thing that real estate agents need to know about contracts.
Jared Zak 08:55
Well it’s. It’s coming towards the end of the year, so what you’re gonna start seeing now is land tax adjustments. They’re gonna be more and more negotiated and I do get even the top agents in New South Wales. They’ll often say to me can you just remind me how this works again, and why is it that this mum and dad, who are gonna be owner occupiers, why they’ve been asked to pay land tax? So the answer is and land tax adjustments are a concept in across all states and territories. The concept is this is that commercial or sort of investor vendors they pay land tax.
Land tax is assessed at the stroke of midnight every year on the 1st of January and you have to prepay your entire year’s land tax. Now the OSR, in their wisdom, they do not give you a refund if you sell your property, for example, halfway through the year. As they know, you sort that out with your buyer. We just want our money, right. So the whole market it kind of makes sense. The whole market would grind to a halt, at least as far as commercial property and investors are concerned, because they would never sell the property After they’ve just paid their land tax. They would wait right towards the end of the year. So that’s where the concepts come, come into place. Is it as an adjustment? So if I’m an investor, I’ve paid $10,000 land tax for the first of January and I sell my property on the 30th of June, then I’m gonna ask for my buyer to make me good $5,000. So a 50% adjustment. Now I’ll ask that in the first is the instant, irrespective of whether he’s an investor himself or whether he’s a mum and dad who never pay land tax.
There are two different scenarios, though. The investor is probably gonna say, yeah, whatever, you know, I pay land tax. I’ve got my head around that. The mum and dad, they’re probably gonna panic, they’re gonna go well, hang on a minute, we don’t pay land tax. And it takes an agent to really settle them down and say no, no, this is a one-off payment that the investor vendor is asking you to pay for. So that’s the first thing I’d probably recommend Do is just calm everyone down. You’re not gonna pay land tax going forward. It’s a one-off adjustment.
The second thing is you probably you should probably do is work out exactly what the figure is, because a lot of people get really Emotional. Or she don’t have to pay land tax. But when you work it out, particularly if it’s towards the end of the year, the amount is actually quite small. So, yeah, that’s a land tax adjustment. Look, it’s sort of a commercial point for discussion. I kind of think it’s neater if you’re advising your vendors. I kind of think it’s neater and cleaner just to say look, just build it into your price, rather than try to confuse your buyers and getting the more emotional, just building whatever. Whatever you think the property owes you, that’s your price. You’re gonna accept.
Tom Panos 11:32
But if you have and do that and not ask the buyer to be paying that the.
Jared Zak 11:38
I think that’s way better. It’s way cleaner.
Tom Panos 11:40
So, Jared, let me give you a case study. Four weeks ago, property in the Southwest of Sydney, I’m about to start an auction and the real estate agent comes up to me and he says Tom Mate, two of the buyers and there was only two buyers right, he goes to registered. Two of the buyers feel uncomfortable about this clause. That’s there. And then I said yeah. I said Like, why we? Why are we having a chat like 30 seconds before the auction about them pulling out? Anyway, thankfully, well, I ended up being not so good and thanks, thankfully. But the vendor goes on. My lawyers a bit of a family friend. I’ve got their mobile so I ring up the vendors lawyer.
Now, this vendor was lawyer, was not in a good mood, I don’t know. They had a late night on Friday night. It was a 30 auction. Oh, what do you want? Oh, I’ll put you on to the auction here. I said this no, no, contract is as is, contract is as is. I said okay. I said while I’m letting you know, so you’re aware, there’s two registered buyers, both people have asked for it. Basically, you’re saying no, well, there’s a possibility, we’re gonna get no bids. Anyway, the long and short of it. I hand the phone over back to the vendor.
The vendor then speaks to the solicitor and it ends up being what you just said, like it’s a $3,000, 2000. It’s a two or $3,000 thing Exactly. I turn around and and the vendor goes to me time, it’s, it’s a two or three grand thing. I said, yeah, we’re trying to get 1.3 million dollars a year and we’re worried about two or grand. I said we should get that in one bit. You know, yeah, no, anyway, I’ll itself way over reserve but but thankfully. But you know, sometimes even Solicitors they don’t get the commercial aspect of it. You know, they get hung up and dry. It’s my contract, I’ve done it blow.
Jared Zak 13:35
Often they don’t, tom, and I thought I think the good agents they will probably try and vet the contract before it goes to market. No, not try and tell the solicitors what they should draft, but just have a bit of a think about it. Well, do we need this land tax adjustment? Because I know from experience we are gonna get pushback. And if the advice from the solicitor is oh yes, this guy’s got a massive land tax bill and you know we need to manage it and luckily, okay, that’s fine. But I think the vast majority of times, if it’s an auto occupied, or even if it’s an investor, it’s just cleaner Give it a Resi property just to keep it out. So I bought up.
Tom Panos 14:07
It’s funny we talk about it, because I just realized it happened to me. I was the purchaser and it was a negotiation and we were the same, you know. My partner turned around and said oh no, you know, the lawyers come back with with this and this and it ended up being a three or four thousand dollar. It was a three or four thousand it’s. It never seems to be a lot of money for some reason, jerry, it’s, it’s, it’s.
Jared Zak 14:30
It’s always like it seems to be under ten grand most of the time most that that would be the average Land tax bill on the average, the average property in Sydney.
Tom Panos 14:38
But so what happens? Is it helped in my negotiation? Because I turned around and I said to the agent in Byron I said, listen, I’ll go, I’m not going, this is my last and final figure and I agree that I will do the tax, no problems. Yeah, he goes over and speaks to the vendor. Look, I’ve got good and bad news and he’s not coming up the extra 50, but he’s agreed to take over the tax assessment, right, and then, though? Then then door goes. Oh well, we, you know, we’ve met halfway wasn’t really halfway, halfway at all, right, but you know what it’s like in negotiation people feel like they’ve had a win, you know. I mean, that’s what they want to feel like.
Let’s move on to the next one, and this one’s one of my favorites because I’m gonna learn from this one over. It’s always, it’s always. Oh, tommy, you’re at the option, make the contract here. He hasn’t got his company seal, he hasn’t got that with this, and that it’s always. It’s always seems like the chaos, right? Well, how do you sign a company, a contract, with the company as?
Jared Zak 15:51
as a purchase. Okay, so new dust, new South Wales, queensland, victoria, sa, tasmania, all the same, it’s it’s corporations law. You sign for a company with any two directors signatures, or the director and the company secretary, and if it’s a one director company, then just that director. So if you have a five director company, you don’t need all five directors, you just need any two, or the director and the company secretary. And then if you need you have a two company sorry, two director company then you need those two directors.
So what often happens is you get the you know the mum and dad sort of property shelf company when you’ve got husband and wife on as directors and only the husband signs. Now that is an invalid contract and we’ve had that quite a lot. The way that you sort of overcome that time before you ask is you know, particularly if it’s leading up to an auction Is when, when you register as a bidder, if someone’s put down a company name, you ask them to accompany you with a asic search showing who the shareholder Sorry, who the directors are. Shareholders are irrelevant, it’s the directors that you need to know.
Tom Panos 17:00
Okay, and can I confirm this thing? The old days are they bring their stamp? Yep, is that necessary?
Jared Zak 17:06
Well, it’s not necessary. It does still exist. It still is a valid way to Execute on behalf of the company. It’s actually mentioned in the corporations act. I have not been. I’ve been doing conveying since 2012. I’ve not seen, I’ve seen one one, one contract executed that way. So yeah, so it’s probably easy to do directors and and and and can I just confirm you write.
Tom Panos 17:30
You write as if they’re the purchaser. You write, the purchaser being the company. You have two of those people that you’ve indicated they’ve got to be. Yep, if there’s. If there is One that attends the auction and the other’s not there, what happens?
Jared Zak 17:49
Well, they can’t sign. They can’t sign. That that’s a, that’s a disaster. Um, okay can?
Tom Panos 17:54
can the person that is absent have provided a letter that says if we are successful, I give permission to such and such to sign on my behalf?
Jared Zak 18:07
Yeah, you can always do that, but the the way you’d probably naturally do that with a company is you’d probably get a corporate power of attorney. So you’d sort of say you respect the above and you’d have the two directors sign the power of attorney. That gives the power to the one director to sign. But you’d need to have that power of attorney.
Tom Panos 18:25
You might need to research what I’m about to ask you, so I’m not going to put you on the spot and say why don’t you know? But that’s all right, test me. So there’s one there. Property gets sold under the hammer. Yep, the agent goes to sign the contract, realizes is the other person is not present. Can they say the auctioneer sign on behalf of the other party? The auctioneer sign on behalf of the other party? Oh, definitely.
Jared Zak 18:55
Yeah, definitely that that’s a no letter needed, no, nothing.
Yeah, that’s definitely that. That’s a principle of common law. Yeah, okay, so that that that’s actually a good, a good foot. So, providing providing that they’ve been, so that With with that case, that’s a really useful tool and I find a lot of auctioneers are a little bit reluctant to do it. An auctioneer, as you would know, tom, at a common law they can sign for both vendor and purchaser. If they’re not there, a lot of the Auctioneers don’t want to do it. I’m not quite a see why, but they probably should. Um, that would take a lot of the guesswork out of. When it comes to companies and the like, the only thing is there it would still go back to the Registration. If you don’t have two directors who have filled out the the registration, then the company itself hasn’t validly been being a participant in the auction. So, providing you had that correct, then the auctioneer could sign.
Tom Panos 19:48
Okay, beautiful, so so. So there is. There is a bit. Look, I used to have apprehension Um and um. I don’t, because the bottom line is it’s permissible by law and it’s a practical way to actually end up executing a contract. Jared, for your own info, I had one. The buyer it wasn’t two parties, it was one party, it wasn’t a company the buyer buys the property under the hammer won’t sign the contract. I then say to them I’m going to sign the contract on your behalf and I’m letting you know that you’ve got to buy it. And it’s over to the lawyers. He said to me if you sign that contract on my behalf, something along the lines, you can say goodbye to the planet. And I said all right, I said okay, and he walked away. And when he walked away, I did sign it. I’m still alive and yeah. But you can Like. If you’re in a situation where a buyer can’t sign it, you have to. So it’s not a question of can you?
Jared Zak 20:58
you have to. You have to. I think you’ve got a duty of care to your vendor. Do you know why the auctioneer can sign no, Okay, it goes back to you’ve probably. Have you ever heard the people say that a dealing in land has to be in writing? It’s called the Statute of Frauds. You cannot, I can’t, verbally sell your property. That’s a pretty well-known principle. You have everything a dealing in land, lease, sale of property, something that has to be in writing, and the Statute of Frauds. It goes back hundreds and hundreds of years. So just give Statute of Frauds.
Tom Panos 21:27
Give it some other contract law which you can have, a verbal, isn’t it?
Jared Zak 21:32
Honestly, there’s very, very few exceptions. One of the key sort of principles in property law, statute of Frauds, is that you cannot have a dealing in land unless it is in writing. Okay, so how do auctions work? Because that is the opposite of a dealing in writing People are not writing. So the way that the courts and this is a you know, I don’t remember the name of the case, but it’s hundreds of years old that’s how the courts managed to reconcile this legal principle with auctions. They said well, well, auctions are valid because we will give the power and in fact, the responsibility to the auctioneer to sign the contract immediately afterwards. That’s what sort of marries that up. So it’s not something, it’s not a vague technicality, it’s actually one of the important sort of ways that auctions actually work.
Tom Panos 22:20
Okay, Very useful to know that. So, Jared, let’s move on to the next thing that real estate agents should know about contracts. By the way everyone, this is a webinar and it’s a Q&A with Jared Zach from Dot and Crossit. Probably do you actually think you do more convincing than other. I mean, I know I said it at the start, but I think that’s probably a fact, isn’t it?
Jared Zak 22:47
Yeah, so in New South Wales, we got the figures recently from PECSA, which are our online settlement platform. So yeah, we are number one in New South Wales. We’ve got a bit to go in New South Wales sorry in Victorian Queensland, but we’re up there as well, so Okay.
Tom Panos 23:03
Number five why and this is a question why do we need to guarantee if the purchaser is a company? Why do we need to guarantee if the purchaser? You sort of half covered a bit there.
Jared Zak 23:17
Yeah, why do we need so? When you’re executing with a company, you often you often sign the front page and then you’ll hear this list to say make sure you get the directors to guarantee. And it’s about halfway through the contract, it’s after the special conditions, it’s only a one page document and the directors sign again as personal guarantors. So it’s really important to get that and it’s not very often it’s not. You don’t get it, you miss it because it’s halfway through the contract. And the reason is I mean, you can probably work it out, but the vast majority of companies PTYLTDs that are used to buy properties. They don’t hold any assets, they’re just shelf companies that have been set up on the Friday before Now.
If you sign a contract and you put down that 5% deposit as a company and if you default remember the first question we said. I said what happens if a buyer defaults? Does he just lose a 5% or is he liable for more? Well, from a legal perspective, he’s liable for more. For a practical perspective, if it’s a PTYLTD company doesn’t hold any assets, well, that’s the end of the story. You’re not going to get any more money, but people are just going to let it go and solve it so that you really don’t have much skin in the game unless you’ve got a personal guarantee. So it is really important, particularly if you’re only getting a 5% deposit.
Tom Panos 24:33
So we’re going to answer a question that Anthony’s asked in a moment. I know I said to you three o’clock finish. Have you got 10 or 15 more minutes? Yes, absolutely, of course. So, jared, because I want to ask you before we move on to that question that’s come in from Anthony, I want to ask you what, if you in that case of the company, is that clause in every? Is there a section for directors guarantees in every contract?
Jared Zak 25:04
That’s a great question. It’s not, tom, because vendors, solicitors, are not always what was good, to be honest, and a lot of them will miss it out. I’d say they’re probably an 80%. I know that there’s at least. We picked this up on a teaching session I had with Stephen Bertram’s team if he’s watching out there where he sort of said, well, hey, we’re running a risk if we’re not guaranteed to have guarantees in every contract. And they said, yes, it is. Now. When they send out the request for contract to the vendor or solicitor, they always say in bold type please ensure your special conditions contain a guarantee. Because Stan is your question. Tom, no, they don’t. I’d say 70% or 80% do, yeah.
Tom Panos 25:51
Yeah, I look. I’m aware of the transaction where it was exactly that the company was set up on the Thursday, the auction was on a Saturday and the actual purchaser basically turned around and said we’re想 to go offer an insurance form for the с comprar then to a cameo in January. If I were you, I’d be going off and trying to sell it to someone else because you can sue us. You’re getting nothing with bright and I think the agent actually followed their advice and went to try to do a deal with the with the underbitter.
Jared Zak 26:26
So we asked to. That’s the smart thing to do there, because it has no guarantee. All you’ve got is 5%, which you know it cannot. It’s not a lot really, particularly in the markets going, when you’re reading the, when you’re a sort of a downward sliding market, as we were six months ago. It’s not a lot.
Tom Panos 26:42
Look at these questions that have come in. I’m just gonna read them out because they might be relevant to what we’ve just been speaking about. Anthony Funnevik. Back to question. In relation to directors, can one party sign and or nominee put down and or nominee?
Jared Zak 26:58
so that I Think I’d tell you this question is more talking about the and or nominees clause. Now, dang, that is a state-based thing, so I won’t propose to give an answer at the moment because it does very much depend if you knew South Wales, queens and Victoria. Why does it depend on the state? Because it goes to whether or not the officer state revenue Will determine as to whether or not that is a sub sale or effectively two transactions that they will, that they’ll duty as a. As a matter of contract law you can absolutely write and or nominees. That’s that. That’s fine in every state. In Terrapin you can do that. The question is will the office of state revenue Stamp you twice? General answer in most of the states and territories yes.
Tom Panos 27:43
Okay, that’s an interesting one, because I still think it it’s. It’s hanging around, because often you get a buyer, you know they’re signing the contract, jared, right? Oh, david, and look, I don’t know, I’m not, I’m not, I’m not putting in my. I might put in my son’s name too, just, I’ll just put on nominee and I’ll let you know. So there was always this assumption that if it was the wife or the children, correct it would be. Can you elaborate on that?
Jared Zak 28:14
Oh well, I can. Yeah, so that’s the top of my tongue. The section 18, three of the New South Wales duties acts and there’s equivalent in other states says that we, if you put and or nominees and it’s a husband, wife, boyfriend, girlfriend, son, daughter, I think, brother, sister, we won’t step you twice. But the Corollary is anyone outside that sort of family nexus where you are going to get stabbed twice.
Tom Panos 28:41
Okay, so I think if you’re an agent, the right thing to do is, if you’re doing that is that you actually say what you’ve just said, and that is I Can put whatever you want on here, 100%. I’m letting you know that the office of state revenue are going to decide on whether you pay stamp duty Once or twice, as long as you’re aware of it. That other last bit that you spoke about, the immediate relative Is that also a state-based?
Jared Zak 29:08
thing. Yeah, it’s a steady again, it’s all state-based but they most of the states team to seem to converge on that concept. So I’m fairly sure all the states have that concept of you know close family you can transfer. But look, if in doubt and if you want to move it to a business partner or you want to move it to a new company you set up on Monday by, I mean, it’s pretty easy thing to fix up. I mean I particularly me I’ve got no problems at all if I’m acting for a vendor and a buyer comes by, solicitor, comes to me on Monday and says, look, we stuffed up. We bought it in this name. We should have put in this family trust. No issue at all, we can fix that up. You just have to cover my legal fees, which are going to show you a pretty, pretty modest to do it as no issue. We all want to make the deal happen. We don’t want to kill it for a technicality.
Tom Panos 29:54
So Shane Fox has just asked if the contract is invalid. Can sorry, I think what he’s saying is is the contract invalid because only one director signs, and Can it also make and and sign? Can the vendor also make the contract void?
Jared Zak 30:16
Does he mean if the vendor was a director? Is the vendors a company that can?
Tom Panos 30:21
happen too. I mean one director. So let’s just make it. Let’s make the assumption that, well, we can look at both scenarios. So what happens is you, the vendor is a company and Only one of the vendors signs. Is that an invalid contract? Well, the purchase, that could pull out, yes. And then the other way around if it’s a purchase, yep, the vendor can pull out yet, exactly right and the buyer pull out.
Jared Zak 30:47
Well, they can as well. Yeah, it hasn’t been an effective exchange, so it’s an, it’s a nice, and I mean it’s family important to actually know the directors are of the company.
Oh, honestly, I don’t want to scare you guys, but if you see a company you should be thinking alone. Bells, that’s just yeah, right, look, I’ve had, and I’ve had one the other day where we were vendor, we were selling a property and the company all existed the mall, we know. We thought it existed the moment dad were on there. They owned the property for years and years and years. We did a asset search just before we went to auction and we found out the company had been Deregistered because moment dad had had been paying the asset fees. So under the Corporations law, a deregistered company, all of the assets of the company vesting asset when it gets to register it. So we had to, like, cancel the auction. It wasn’t the end of the world. We have to just pay the fees back and ask to give you money, give you your assets back. But, um, yeah, honestly, it’s um, it’s definitely worth stopping and thinking when you see a company, either as buyer or seller.
Tom Panos 31:54
Okay, beautiful. Next question and I know we’ve still got, I think, two more points to go, but I’ll get through these questions Do the guarantors require independent legal advice before signing personal guarantees, or is this waived under these circumstances?
Jared Zak 32:11
Yeah, good question and I know where it’s coming from. It’s coming from you always hear about Banks, cba, nab, all those big banks. They always require Garantores on mortgages to get independent legal advice. So is it the same contract? The answers no. With the guarantees with banks. It’s really a Royal Commission type thing. Yeah, there was a lot of scrutiny on you know, particularly Um elderly family who asked to go guarantee guarantor under loans and the whole transaction wasn’t explained to them properly. So banks have taken that approach Okay, any loan that requires a third-party guarantee needs independent legal advice. That doesn’t. That doesn’t follow across the contracts. There’s no independent legal advice required, particularly if it’s a director. Thank you for approach就是說, let’s go first. Okay, phil Come over.
Tom Panos 33:00
Have a water tank pick your name out there, deposit releases. You know deposit releases, this is another thing. Oh, mate, they wanna release the deposit. They wanna release the deposit. Sometimes can help in negotiation, but is there risks with releasing the deposit?
Jared Zak 33:17
Yeah, there’s risks, but it’s a fairly small one. Let me just tell you the quick story because I think it best illustrates the point. So I was acting for a buyer up in the Blue Mountains. They found this dream property they wanted in the Blue Mountains is pretty funny old, esoteric vendor. They agreed on price, albeit the vendor wanted a long settlement date and he was adamant that he have a release of deposit and he needed 200 grand release because he wanted to buy something down in the shire. Now, reluctantly, very reluctantly I still think back at this we agreed to it. So we agreed this long settlement date four months down. So there’s five months down the track. We released the deposit.
Now come a week before the settlement date, we go onto the PECSA dashboard to see how settlement’s looking and we see not one mortgagee on the vendor’s title, not two. But we see three. And we say well, shit, what’s happened between exchange and settlement? And we start to sort of write messages on PECSA you guys looking okay to settle, what’s going on? And we go to the settlement date. It gets delayed. It gets delayed again. We go what’s going on here? Oh, we’ve got to. We’re having a few problems with our banks. Yeah, no joke. And anyway it goes on for about 30 days and then we eventually say, well, you’ve obviously got some financial matter that you can’t release. Your security banks aren’t happy, so we’re going to terminate and we want to go our separate way. Oh, we want our money back. And they said, well, look about that. Remember when you released the deposit to us? Yeah, we went and bought that place down in the Shire.
Yeah yeah, that happened a few months ago and yes, we are in financial difficulty and yes, we got our deposit taken. So bad luck, oh wow. And my clients lost money in that situation. Terrible, terrible situation, I guess. Just to reflect on that, tom, it doesn’t.
That’s a pretty unlikely case, it’s a pretty rare case, but there are a few things that should have stuck out and then they’ll stick out in my memory when I look at my lease of deposits. The longest settlement dates right. The longer you give something to go wrong, the more likely it will go wrong. The other thing is financial distress. Now, when we looked at his title when we first reviewed the contract, there was it was only one mortgage on there, but it was to a subprime lender, like a sort of a no-name bank. That’s normally a little bit of an indicator that there’s financial distress and if you see two or three mortgages on there guaranteed, you should not be releasing the deposit. That’s the case. So if you are going to agree to them a little old lady who’s an unencumbered property you probably think, well, that’s okay, but some sort of developer type personality that’s got a lot of debt and looks a bit stressed out I think that’s probably high risk.
Tom Panos 35:48
Garrett, while we’re on that point, what advice can you give to the real estate agents watching this both on Facebook live here or watching it on replay, because we are going to send this out to our database for Queensland, melbourne and, sorry, queensland Victoria, new South Wales? What advice do you give them about how to work out the mortgage situation in a contract? I mean you can open up I know the New South Wales contracts and see it at a specific section. Can you just let us know? Is it in the contracts?
Jared Zak 36:22
Yeah, so New South Wales. As you know, tom, it’s about halfway through. In Queensland it’s at the back of the contract and sometimes it’s not there, so sometimes you won’t if you’re a buyer, or in Queensland the vendors are putting the contracts together Queensland agents. If you’re out there, I would strongly recommend, when you do that, to add the title search. It’s only a 10 bucks extra, or wherever it is, adds a lot of clarity to the situation and it may even help you because you might see on there or cave it on there or recover it or right of way, and that will help you with your discussions with buyers, with Victoria. It’s in the disclosure statement and also it’s in the disclosure statement in South Australia as well. Without going to the rest of the room, Last one, Last one, number seven.
Tom Panos 37:11
What happens if a vendor leaves items in the house? Can the purchaser delay settlement or pull out? So you go there to your final inspection before settlement and you see they’ve left behind. They haven’t left behind an antique $50,000 dining table, but there’s just a bit of rubbish all over the place. And you think to yourself, like what’s gonna happen to this? Can you turn around and say I’m not settling today?
Jared Zak 37:44
Yeah. So it’s a good question and it’s all around again. It’s a universal or an Australian-wide concept of vacant possession and what vacant possession means. So contrasted with the clause which says as is where. So sometimes you see that the old squatters houses and the hoarders houses. You might see a clause in there that says you just take it as it is, but the vast majority of properties are vacant possession.
So vacant possession, firstly, what does it not mean? It does not mean clean and tidy, so dust, dirt, even little small bits of rubbish. That does not mean you’re not being given vacant possession and you often get buyers, you know, crying and kick up a stink because they don’t have a clean house. Well, you’re not entitled to one, is the harsh truth.
Having said that, if there is a big item in the property and it’s a question as to what actually is so big that it would invalidate vacant possession I’m thinking something like a pool table, something like beds and that kind of thing that they weren’t meant to be in there the principle that they’ve laid, that the case law was laid down, has said the item left behind has to be so severe to be an impediment to your being able to enjoy the property in its natural use. So a box, a few bottles of wine? That’s probably not gonna be the case. But the bigger the items, the more likely it’s going to be in a failure to convey vacant possession. If you have not conveyed vacant possession at title, well yeah, it’s a breach of contract. You can’t pull out straight away. You have to issue a notice and say you haven’t complied with your vacant possession covenant. But if after 14 days they still haven’t provided that vacant possession got rid of that large item, whatever it is, then yeah, the buyer can pull out Okay.
Tom Panos 39:37
Jared. Fantastic, susan, if you’re in the background, I’d love you to put Jared’s details both on Facebook and in the chat box, if you don’t mind. And I just wanna confirm you have been listening for the last 45 minutes the great man, jared Zach from Dot and Crossit, representing real estate agents with their legal matters Queensland, new South Wales, gold Coast as well.
Jared Zak 40:15
Gold Coast. Good, cool, absolutely. We’ve got a Gold Coast office up there. Actually, you met your friend Jane up on the weekend. I had dinner with her. Jane Duggan from LJ Hooker, she said to say hi.
Tom Panos 40:25
Yes, yes, yes, so you visit the Gold.
Jared Zak 40:29
Coast. Yes, yep up there pretty frequently, yep.
Tom Panos 40:33
Now, jared, I don’t know what your movements are like, but I’ve got a real estate gym plus event on September the 8th. So just picture Friday it’s pretty much two Fridays from this Friday John McGraw joins me where we have these high performing agents we mentor. I would love it’s gonna be somewhere in the inner west. I would love, if you’re around, to come and do a half hour presentation. I can talk to you off there. That’s Friday, september. I’d love to. That’s the biggest part of the day. So if you, when you hang up here, if you can just go to your diary and just sort of block off, say like 1030 to 12 in the west, and we’ll let you know. But I wanna thank you so much. Absolutely outstanding, dot and cross it. This has been Jared talking to us about the seven things agents need to know about contracts, and I gotta tell you you’re gonna need to them because the stock is beginning to fly in. Surely at your end you must be preparing a lot of contracts at the moment.
Jared Zak 41:35
Apes, yeah, the most we’ve ever done last couple months. Yeah, Happy days. All right, thanks a lot. Thanks, guys.
Tom Panos 41:41
Thanks a lot.