Process of "Subject to Sale" Contracts in Queensland

• 27 July, 2023
• Posted By: Edward Smyth

A "subject to sale" contract, often used in property transactions, is an arrangement where the buyer makes the purchase conditional upon them successfully selling their own property first. This ensures the buyer is financially capable of completing the new purchase. It provides a safety net for buyers, preventing them from owning two properties simultaneously, which could be a potential financial burden.

Here is a simplified step-by-step guide to help you understand how the "subject to sale" contract works:

1. Offer and Acceptance: The buyer makes an offer to purchase the seller's property. In the contract, the buyer includes a clause stating that the contract is "subject to the sale" of the buyer's property by a specific date.
2. Agreement: The seller accepts the offer and agrees to the "subject to sale" condition. The contract is then signed by both parties.
3. Marketing and Selling the Buyer's Property: The buyer must market and sell their existing property within the agreed timeframe.
4. Notification of Sale: Once the buyer's property is sold, the buyer must notify the seller as per the requirements set out in the contract.
5. Completion of Sale: The contract of sale for the new property will be completed only after the buyer's existing property is sold.

However, there are some important considerations for both buyers and sellers:

For Buyers:

• Time Limit: There is typically a time limit within which the buyer's property must be sold. If the property isn't sold within this timeframe, the contract could be terminated unless both parties agree to extend the deadline.
• Risk of a Sunset Clause: In Queensland, sellers can still entertain other offers after accepting a "subject to sale" contract. This means a seller can potentially accept a more appealing unconditional offer, known as 'a sunset clause'.

For Sellers:

• Continued Marketing: In many cases, sellers can continue to market their property and accept backup offers while waiting for the buyer's property to sell.
• 72 Hour Clause (a "Sunset Clause"): If the seller receives another offer that they wish to accept, a 72-hour clause can be invoked. This clause gives the original buyer 72 hours to either waive their "subject to sale" condition and proceed with the sale, or withdraw, allowing the seller to accept the new offer.

Here is an example of a "subject to sale" clause in a contract of sale:

Subject to Sale and Unconditional

1.0 Buyer Entering Contract of Sale

1.1 This contract is subject to and conditional upon the Buyers entering into a contract, on terms satisfactory to the Buyers, for the sale the Buyer’s property at [property address] on or before 60 days from the date hereof(hereinafter referred to as “the prior contract”). In the event that the Buyers do not enter into a prior contract by this date, or relevant extensions agreed upon, the Buyers may terminate this Contract by notice to the Seller given in accordance with the Terms of Contract, and this Contract shall be at an end and the Deposit must be promptly refunded without deduction.

1.2 In the event that special condition 1.1 is satisfied, then this contract is also subject to and conditional upon the prior contract becoming unconditional within 30 days of the date of the prior contract. In the event that the prior contract does not become unconditional as required herein, the Buyers may terminate this Contract by notice to the Seller given in accordance with the Terms of Contract, and this contract shall be at an end and the Deposit must be promptly refunded without deduction.

1.3 In the event that special conditions 1.1 and 1.2 are satisfied, then this contract is also subject to and conditional upon the settlement of the prior contract on or before 30 days from the date of the prior contract. In the event that the prior sale does not settle for any reason, the Buyers may terminate by notice to the Seller given in accordance with the Terms of Contract, and this contract shall be at an end and the Deposit must be promptly refunded without deduction.

1.4 The Seller hereby acknowledges that this special condition is for the benefit of the Buyers only and can only be waived or exercised by the Buyers.

2.0 Contemporaneous Settlement

2.1 Settlement of this Contract shall be effected contemporaneously with the buyers prior sale contract.

Here is an example of a "sunset clause" in a contract of sale:

Sunset Clause

In the event that the Seller gives the Buyer written notice that the Seller has received another offer to purchase the subject property, which is in the opinion of the Seller a better offer, the Buyer shall within three (3) business days of receipt of such notice advise the Seller whether the Buyer agrees to the waiving of all conditions to the Contract of Sale. Should the Buyer not give the Seller the notice referred to above, this Contract shall be deemed to be at an end and all deposit monies refunded in full.

Remember, each "subject to sale" contract is unique, and legal and professional advice should be sought before entering such a contract. It's crucial to understand your rights, obligations, and potential risks involved in this kind of transaction.

We hope this provides a clearer understanding of the process of a "subject to sale" contract. Please do not hesitate to contact our office if you have further queries or need more information.

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