Preparing and drafting a contract for sale of land

Practical Law ANZ Toolkit w-042-2027 (Approx. 18 pages)

Preparing and drafting a contract for sale of land

by Practical Law Commercial Real Estate

About this toolkit

This toolkit is a guide to Practical Law's resources to assist users through the key steps to prepare and draft a contract for sale of land.

Typically, the vendor to a real property transaction will prepare the first draft of the contract for sale of land to be issued to the purchaser, which will form the basis of their negotiations. The key steps to be undertaken by the vendor include:

Complying with any applicable statutory vendor disclosure obligations and preparing the relevant disclosure documents to be issued to the purchaser.
Preparing the terms of the contract for sale of land, which usually consists of the standard form contract for sale of land in a particular jurisdiction and any special conditions.

This toolkit does not include resources relating to:

Negotiating the terms of the contract for sale.
Exchange, post-exchange and completion matters as part of the sale of real property.
Ancillary documents that may be entered into by the parties to the contract for sale of land (for example, a guarantee and indemnity).

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Prepare statutory vendor disclosure documents

Order statutory searches and comply with disclosure requirements under state and territory conveyancing legislation

Under the conveyancing legislation in all jurisdictions (other than Tasmania), the vendor is required to make certain disclosures to the purchaser about the property being sold by doing one or both of the following:

Including the information in a prescribed statement.
Attaching specified documents to the contract for sale of land.

These disclosure obligations apply to the sale of properties generally and more specific disclosures may be required for certain classes of property (for example, residential property or a property sold under an off-the-plan contract or an option to purchase arrangement).

The required disclosures generally consist of information about the property that is available via public (or statutory) searches as well as information that is in the vendor's possession. For publicly available information about the property, the vendor (or their lawyers or conveyancers) should order the required statutory searches to be provided to the purchaser (for example, copies of a current title search and dealings). For information about ordering public searches for real property, see Checklist, Public searches for due diligence as part of a commercial property acquisition.

The conveyancing legislation typically provides that the vendor must make the disclosures to the purchaser before the purchaser signs the contract for sale of land.

For an overview of the statutory disclosure obligations for the sale of real property in Australian jurisdictions, see Practice note, Disclosure requirements for conveyancing transactions in Australia.

Practical Law's jurisdiction-specific vendor disclosure resources are set out below.

Australian Capital Territory

For information about the statutory disclosure obligations for sellers in relation to the sale of real property in the Australian Capital Territory, see Practice note, Disclosure obligations in conveyancing transactions (ACT).

New South Wales

For information about the statutory disclosure obligations for vendors in relation to the sale of real property in New South Wales, see Practice note, Disclosure obligations in conveyancing transactions (NSW).
For a detailed discussion of vendor disclosure obligations in relation to residential off-the-plan contracts in New South Wales, see Practice note, Disclosure obligations: off-the-plan residential conveyancing (NSW).
For the approved form of disclosure statement for off-the-plan residential contracts in New South Wales, see Standard document, Disclosure statement: off-the-plan residential conveyance (NSW).
For the approved form that a vendor must use to notify a purchaser of changes to the off-the-plan disclosure statement, pursuant to section 66ZN of the Conveyancing Act 1919 (NSW), see Standard document, Notice of change to disclosure statement: off-the-plan residential conveyance (NSW).

Queensland

For a checklist that provides a high-level overview of the seller disclosure obligations that apply to the sale of real property in Queensland, see Checklist, Seller disclosure obligations: overview (Qld).
For a form of disclosure statement to be provided by a seller to a buyer under section 213 of the Body Corporate and Community Management Act 1997 (Qld) (BCCMA 1997 (Qld)) before entry into a contract for the sale of a proposed lot under that Act, see Standard document, Disclosure statement under section 213 of the Body Corporate and Community Management Act 1997 (Qld).
For a form of further disclosure statement under section 214 of the BCCMA 1997 (Qld) (where the seller notifies the buyer of any inaccuracies in the previous disclosure statement), see Standard document, Further disclosure statement under section 214 of the Body Corporate and Community Management Act 1997 (Qld).
For a checklist of requirements to complete a disclosure statement under section 213 of the BCCMA 1997 (Qld), see Checklist, Pre-contract checklist: Compliance with Chapter 5 Body Corporate and Community Management Act 1997 (Qld).
For a form of disclosure statement to be provided by a seller to a buyer under section 10 of the Land Sales Act 1984 (Qld) (LSA 1984 (Qld)) before entry into a contract for the sale of a proposed lot under that Act, see Standard document, Disclosure statement under section 10 of the Land Sales Act 1984 (Qld).
For a form of further statement to be provided by a seller to a buyer of a proposed lot in a plan of survey under section 13 of the LSA 1984 (Qld) to notify the buyer of any inaccuracies in the disclosure plan provided as part of the disclosure statement under that Act, see Standard document, Further statement under section 13 of the Land Sales Act 1984 (Qld).

South Australia

For information about the statutory disclosure obligations for vendors in relation to the sale of real property in South Australia, see Practice note, Disclosure obligations in conveyancing transactions (SA).

Victoria

For information about the statutory disclosure obligations for vendors in relation to the sale of real property in Victoria, see Practice note, Disclosure obligations in conveyancing transactions (Vic).
For a form of disclosure statement to be provided by a vendor to a purchaser under section 32 of the Sale of Land Act 1962 (Vic) (SLA 1962 (Vic)) before entering into a contract for sale of land, see Standard document, Vendor statement under section 32 of the Sale of Land Act 1962 (Vic).
For a form of additional disclosure statement to be attached to the standard disclosure statement provided by a vendor to a purchaser under section 32 of the SLA 1962 (Vic), where land is sold subject to an undischarged mortgage or pursuant to certain terms contract arrangements (or both), see Standard document, Additional vendor statement (Vic).

Western Australia

For information about the statutory disclosure obligations for sellers in relation to the sale of real property in Western Australia, see Practice note, Disclosure obligations in conveyancing transactions (WA).

Comply with disclosure requirements under Commonwealth legislation

Vendors have additional disclosure obligations under Commonwealth legislation with respect to the following:

Foreign resident capital gains withholding tax, where purchasers of real property must withhold and remit 12.5% of the purchase price to the Australian Taxation Office (ATO) on completion of the sale unless one of the following apply:
- the market value of the property is less than $750,000; or
- before completion, the vendor provides the purchaser with a clearance certificate obtained from the ATO for each vendor, that is valid at the date of the contract and on the date it is given to the purchaser.
While not required, if the clearance certificate is available before the contract is entered into, the vendor's lawyers will usually attach the clearance certificate to the contract.
Goods and services tax residential withholding, where a vendor making a supply of residential premises, or potential residential land, must give a notice to the purchaser before completion (or, in the case of an instalment contract, before payment of the first instalment) that states whether or not the purchaser is required to make a withholding payment under section 14-250 of Schedule 1 to the Taxation Administration Act 1953 (Cth) unless certain exemptions apply.
While the notice is not required to be given on or before exchange of the contract, it is prudent to be included in the contract for sale.
Building energy efficiency, where a vendor must comply with certain disclosure obligations under the Building Energy Efficiency Disclosure Act 2010 (Cth) (BEED Act) (namely, to provide a current building energy efficiency certificate and disclose information about the building's National Australian Built Environment Rating System energy efficiency star rating for offices) if the property being sold is:
- office space with a net lettable area of 1,000 square metres or more; and
- owned by a constitutional corporation.
This information is generally required before the vendor offers for sale or invites offers to purchase the property.
For further information about the disclosure obligations imposed under the BEED Act, see Practice note, Building Energy Efficiency Disclosure (BEED) obligations.

For an overview of these general Commonwealth disclosure obligations as part of the sale of real property, see Practice note, Disclosure requirements for conveyancing transactions in Australia: General disclosure obligations under Commonwealth law.

Prepare and draft the contract for sale of land

The contract for sale of land is the key transaction document to be entered into by the vendor and purchaser to give effect to the sale and purchase of the property. The vendor's solicitors typically prepare the first draft of the contract for sale to be issued to the purchaser's solicitors for negotiation and finalisation.

The terms of the contract for sale will generally be determined by:

The agreed commercial terms between the parties as contained in the heads of agreement (also known as a letter of intent, memorandum of understanding, heads of terms or term sheet).
The outcome of the purchaser's due diligence investigations on the property and the vendor.
The negotiations between the parties.

For a discussion of the main legal issues and practical considerations arising in heads of agreement used for commercial transactions including share purchases and asset purchases, see Practice note, Heads of agreement. For a checklist that sets out the preliminary issues to consider and address when drafting, reviewing or negotiating a heads of agreement for a commercial transaction generally, see Checklist, Reviewing or drafting a heads of agreement for commercial transactions.

For a toolkit containing Practical Law's resources on carrying out due diligence for a commercial property acquisition, see Toolkit, Commercial property due diligence: acquisitions.

Standard form contract and special conditions

Typically, the terms of the contract for sale of land are heavily negotiated between the parties and their legal representatives.

Each jurisdiction has its own standard form contract for sale of land that is prepared or approved by any one or more of the local law society, real estate institute or government in that jurisdiction, either for the sale of land generally or certain property types (for example, commercial or residential property).

It is common market practice in most states and territories for:

The terms and conditions in the standard contract to be incorporated into the terms of the contract for sale of land between the parties.
The parties to delete and amend the terms of the standard contract, and include additional transaction-specific clauses, so that they are more appropriate for the transaction. These changes to the terms of the standard contract and additional clauses are usually referred to as the special conditions.

Practical Law's jurisdiction-specific standard form contract for sale and special conditions resources are set out below.

Australian Capital Territory

For the current standard form contract for sale of land in the Australian Capital Territory, see Standard document, Standard form: Contract for sale - 2021 edition (ACT).

New South Wales

For the current standard form contract for sale of land in New South Wales, see Standard document, Standard form: Contract for the sale and purchase of land 2022 edition (NSW).
For a set of special conditions for the sale of commercial property in New South Wales, see Standard document, Contract special conditions: commercial property (NSW, short form).
For a set of special conditions for the sale of residential property in New South Wales, see Standard document, Contract special conditions: residential property (NSW).
For a clause to include in a contract for sale of land in New South Wales where:
- the vendor knows or suspects that there are matters relating to the improvements on the property that could justify the making of an upgrading or demolition order, see Standard clause, Building certificate: vendor disclosure of possible orders (NSW);
- the vendor does not hold a current building information certificate for the improvements on the land, see Standard clause, Building certificate: vendor does not have current certificate (NSW); or
- a works order has been issued before the date of the contract and the parties have agreed that the purchaser will comply with the works order at its cost following completion, see Standard clause, Existing work order: purchaser to comply (NSW).

Northern Territory

For the current standard form contract for sale of land in the Northern Territory, see Standard document, Standard form: Contract of sale (NT).

Queensland

For the current standard form contract for sale of commercial land and buildings in Queensland, see Standard document, Standard form: Contract for Commercial Land and Buildings 10th edition (Qld).
For the current standard form contract for sale of commercial lots in a community titles scheme in Queensland, see Standard document, Standard form: Contract for Commercial Lots in a Community Titles Scheme 9th edition (Qld).
For the current standard form contract for sale of houses and residential land in Queensland, see Standard document, Standard form: Contract for Houses and Residential Land 18th edition (Qld).
For the current standard form contract for sale of residential lots in a community titles scheme in Queensland, see Standard document, Standard form: Contract for Residential Lots in a Community Titles Scheme 14th edition (Qld).

Tasmania

For the current standard form contract for sale of land in Tasmania, see Standard document, Standard form: Standard Form Contract for Sale of Real Estate in Tasmania (2018).

Western Australia

For the current standard form contract for sale of land in Western Australia, see Standard document, Standard form: Contract for sale of land - general conditions and contract by offer and acceptance 2022 editions (WA).

Additional contract clauses

Depending on the commercial terms agreed by the parties, the contract for sale may need to include additional clauses about the following matters:

Conditions precedent to completion of the contract for sale. For a clause which provides that completion is subject to and conditional on the purchaser obtaining approval from the Foreign Investment Review Board (FIRB) for the transaction under the contract for sale, see Standard clause, Completion of contract for sale of land subject to FIRB approval.
The consequences of a system failure where completion is to occur via an Electronic Lodgment Network (ELN). For a clause that specifies that neither party will be in default if completion fails because there is an ELN systems failure on the completion date in a notice to complete, see Standard clause, Electronic conveyancing: notice to complete and system failure.
Sunset clauses for residential off-the-plan contracts. Most residential off-the-plan contracts will include sunset clauses that give either party a right to rescind the contract if the relevant plan of subdivision (or similar) has not been registered by an agreed sunset date. However, the inclusion of a sunset clause must be treated with caution as legislation in certain jurisdictions may intervene in the vendor's ability to exercise its rights under a sunset clause. For an overview of the legislative regime applying to sunset clauses in off-the-plan contracts in the Australian Capital Territory, New South Wales, Queensland and Victoria, see Practice notes:

Consider implied warranties

In some jurisdictions, statutory warranties are implied into certain contracts for sale of land (for example, that there are no undisclosed latent or patent defects) and information regarding the accuracy of those warranties will need to be obtained from the vendor or will require investigations in addition to the usual statutory searches.

Where the disclosure documents do not include the necessary information to alert the purchaser that the vendor is not making the implied warranty or the vendor is otherwise entitled to contract out of a particular warranty, an appropriate special condition should be included in the contract for sale.

Consider whether the unfair contract terms regime applies

In certain transactions, the contract for sale of land may fall within the scope of the unfair contract terms regime under the Australian Consumer Law (ACL) if the contract is regarded as a consumer contract or a small business contract. If so, the parties need to ensure that the contract for sale does not contain terms that breach the requirements under the unfair contract terms regime in the ACL.

For more information about the application of the unfair contract terms regime under the ACL to real property transactions, including contracts for the sale of land, see Practice note, Application of the unfair contract terms regime to property transactions.

Consider purchaser cooling-off rights and obtain any necessary waivers

For the sale of certain properties in a jurisdiction, the parties should consider whether the purchaser has the benefit of a statutory cooling-off right under which the purchaser may rescind the contract for sale during the cooling-off period.

Where a cooling-off right exists, the vendor should consider whether it requires the purchaser to waive its cooling-off right (or to shorten the cooling-off period). If so, the vendor may wish to prepare and attach to the contract for sale the form of cooling-off certificate to be provided by the purchaser at or before it enters into the contract for sale.

For:

Information about the statutory cooling-off rights for purchasers in each Australian state and territory and the consequences for both vendor and purchaser if the purchaser exercises its right to rescind during the cooling-off period, see Practice note, Cooling-off rights in conveyancing transactions.
A certificate that a buyer's lawyer must give to the seller if the buyer of residential land in the Australian Capital Territory wishes to waive its statutory cooling-off rights pursuant to section 17 of the Civil Law (Sale of Residential Property) Act 2003 (ACT), see Standard document, Cooling-off waiver: section 17 certificate (ACT).
A certificate that a purchaser of "residential property" (as defined by section 66Q of the Conveyancing Act 1919 (NSW)) in New South Wales must give to the vendor to waive their right to a cooling-off period or to shorten a cooling-off period, see Standard document, Cooling-off waiver: section 66W Certificate (NSW).
For a certificate that a purchaser's lawyer must give to the vendor to waive the statutory cooling-off rights of a purchaser of land in South Australia pursuant to section 5(7)(b) of the Land and Business (Sale and Conveyancing) Act 1994 (SA), see Standard document, Cooling-off waiver: certificate of legal practitioner and purchaser's waiver (SA).

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