Hey all, I have a question regarding contracts and access to the property before settlement, What happens if I commence a renovation and the seller decides they wont or cannot settle, what can I do in this situation given that the sale has not settle and therefore they are still the rightful owner?
Access to property prior to settlement
- Thread starter ZenMaster
- Start date
Why can't a vendor settle?? It's not like they have to pay any money out
There are many reasons why a vendor can't or won't settle.
Some just seem to change their minds and refuse. Others have problems with family law disputes. Others problems with the bank - they may owe more than the sale price and so the bank may refuse to release their security.
Based on our experience, we find it generally opposed by both side’s solicitors.
For example:
Q: What happens if the vendor cannot settle for some reason and you have installed a brand new kitchen in the property?
A: The vendor gets to keep your kitchen.
Q: What if you rip out the bathroom and then you cannot settle?
A: You leave the vendor with a hole where his bathroom once was.
Q: What happens if a contractor is injured on-site? Do they claim against you or the vendor? What if the vendor carries no insurance? (I know the contractor is supposed to carry their own insurances. But who will be made responsible for checking that they are all in order?)
Q: What happens if the vendor dies between exchange & settlement? Or is the same happens to any of the vendor parties?
It can be OK. It can be messy. It can take a lot of time to sort out.
Best, as someone has already said, to use the time to get quotes & measurements so that come settlement day everything is ready to go immediately.
Yep we did it.
Real estate tried to talk us out of it and said why not settle earlier.
The whole point was to get it renod by the day of settlement so it could be rented at top dollar the same day. No days not rented!!
It was a risk the agent had a "special" paper for us to sign. If I can find it I'll post what it said. Something like we take all the risk blah blah..
This was a deceased estate. There were clauses in there that did protect us if they didn't settle though.
A big risk as it was a cash offer that wasn't really cash with early possession.
All worked out. Bank valued 10% higher prior to posession and i then git a reval after reno and im another 10% higher.Rented on day of settlement!!! But still lost sleep over it!
Real estate tried to talk us out of it and said why not settle earlier.
The whole point was to get it renod by the day of settlement so it could be rented at top dollar the same day. No days not rented!!
It was a risk the agent had a "special" paper for us to sign. If I can find it I'll post what it said. Something like we take all the risk blah blah..
This was a deceased estate. There were clauses in there that did protect us if they didn't settle though.
A big risk as it was a cash offer that wasn't really cash with early possession.
All worked out. Bank valued 10% higher prior to posession and i then git a reval after reno and im another 10% higher.Rented on day of settlement!!! But still lost sleep over it!
That's a good job. Instant CG!
Damn this site is good! So in a nutshell (help Im in a nutshell) there are multiple risks involved, I had not thought about contractor injury thanks Propertunity!
Can I sue the vendorn, after all it is a contract? Looks like pre settlement measure and quote is as far as I will go at this stage.
I dont suppose there are ways to manipulate the contract in my favour?
Can I sue the vendorn, after all it is a contract? Looks like pre settlement measure and quote is as far as I will go at this stage.
I dont suppose there are ways to manipulate the contract in my favour?
There are always contract conditions that can be written to cover almost every scenario so that both vendor and purchaser are covered.....you just have to find a vendor (and his legal representative) that is agreeable.
We've agreed early access before settlement to paint, recarpet etc. but we were prepared to take the risk (most worse case scenarios don't eventuate most of the time).
We have done this on 2 out of the last 3 properties we purchased. The first one we did it on was a deceased estate so the property was vacant. We organised it through our solicitors and he explained to us the risks ie: them not settling, et . However we said that we just wanted to get in and get it rented and turned over. The REA handed over the keys and said so your just getting quotes, etc. We were like yeah yeah.
It was a normal 5 week settle. When it settled the REA came and handed us the keys at the house ?? and found a completely renovated property. New roof (the day we ripped the roof off i near had kittens when the rain clouds came over and all i kept thinking of was we dont even own it yet!!), new kitchen, new bathroom, polished floors, carpet, wardrobes, etc. By that stage we were doing the landscaping, and it was rented out about 2 weeks after settlement!
We decided that this was definately a huge advantage so negotiated it again on the next property. Again same scenario, except this was a much bigger renovation, and when the REA did his settlement handover his eyes nearly popped out of his head. This was very MID renovation of kitchen and bathroom but you could see his brain ticking over as to what we had done to the property whilst not technically ours. Ie: we had pulled walls out, the whole bit!
Again we had cleared it through our solicitor but had probably pushed it a bit much as far as what we had done! And with this one we had the property rented out within 4 weeks of settlement at $250 more than what it was renting for when we bought it.
The last property we purchased through the same REA as the 2nd last one. Funnily enough we werent able to arrange early access??? But this was less to do with the REA and more to do with the vendor wanting rent and with time constraints with hubbies business we decided it actually didnt suit us otherwise we would have taken them up on it.
So i guess what im trying to say is you can be lucky like us and snag free and easy early access, or they might charge you rent. There are risks and you've got to accept that for whatever reason IF they cant settle your sitting there with renovations that you cant realise any capital on as the property is not legally yours until they settle.
It helps to have a good relationship with the REA. You will also need to provide a certificate of currency for the vendor. Our solicitor now knows that this is something that we find advantagous in getting the property turned over and rented so as soon as we have exchange they put it to the vendor. Its definately not a bargaining tool so we only bring it up after exchange!
Sometimes you can have a win like we have.
It was a normal 5 week settle. When it settled the REA came and handed us the keys at the house ?? and found a completely renovated property. New roof (the day we ripped the roof off i near had kittens when the rain clouds came over and all i kept thinking of was we dont even own it yet!!), new kitchen, new bathroom, polished floors, carpet, wardrobes, etc. By that stage we were doing the landscaping, and it was rented out about 2 weeks after settlement!
We decided that this was definately a huge advantage so negotiated it again on the next property. Again same scenario, except this was a much bigger renovation, and when the REA did his settlement handover his eyes nearly popped out of his head. This was very MID renovation of kitchen and bathroom but you could see his brain ticking over as to what we had done to the property whilst not technically ours. Ie: we had pulled walls out, the whole bit!
Again we had cleared it through our solicitor but had probably pushed it a bit much as far as what we had done! And with this one we had the property rented out within 4 weeks of settlement at $250 more than what it was renting for when we bought it.
The last property we purchased through the same REA as the 2nd last one. Funnily enough we werent able to arrange early access??? But this was less to do with the REA and more to do with the vendor wanting rent and with time constraints with hubbies business we decided it actually didnt suit us otherwise we would have taken them up on it.
So i guess what im trying to say is you can be lucky like us and snag free and easy early access, or they might charge you rent. There are risks and you've got to accept that for whatever reason IF they cant settle your sitting there with renovations that you cant realise any capital on as the property is not legally yours until they settle.
It helps to have a good relationship with the REA. You will also need to provide a certificate of currency for the vendor. Our solicitor now knows that this is something that we find advantagous in getting the property turned over and rented so as soon as we have exchange they put it to the vendor. Its definately not a bargaining tool so we only bring it up after exchange!
Sometimes you can have a win like we have.
Karen Mcglinchey - solicitor
There are risks- but if there are incentives for the vendor and purchaser and a clear written agreement on what is to be done, who bears the cost, and what happens if it goes wrong - there is no reason why should not be worthwhile for both parties.
Clearly there needs to be incentives for the vendor for letting someone loose in their house with a jackhammer. This may be a higher purchase price, occupation fee, shorter settlement. In a slow market it may be just getting a sale at close to the asking price. If I were the vendor I would want to know the purchaser had a good track record and and examples of previous projects would help. I would want to know that only licensed tradespersons were being used and that insurances would be in place.
I am aware of clients who have entered a joint venture agreement with the vendor which includes a profit share - when the property is to be sold immediately after renovation.
There are risks- but if there are incentives for the vendor and purchaser and a clear written agreement on what is to be done, who bears the cost, and what happens if it goes wrong - there is no reason why should not be worthwhile for both parties.
Clearly there needs to be incentives for the vendor for letting someone loose in their house with a jackhammer. This may be a higher purchase price, occupation fee, shorter settlement. In a slow market it may be just getting a sale at close to the asking price. If I were the vendor I would want to know the purchaser had a good track record and and examples of previous projects would help. I would want to know that only licensed tradespersons were being used and that insurances would be in place.
I am aware of clients who have entered a joint venture agreement with the vendor which includes a profit share - when the property is to be sold immediately after renovation.
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