Beware of the "clause 9 conditions" conditions box in an Agreement for Sale and Purchase

A couple were looking to buy their first home.  They decided to take advice from friends to insert a finance condition. 

The agent ticked the finance condition on the front page, and allowed 10 working days for the condition to be fulfilled.

Their bank approved them for finance, but the additional finance they were getting through their parents fell through.  When they decided to cancel the Agreement based on the finance condition, the vendor offered to lend them the amount their parents had originally been lending them, by way of vendor loan. 

The vendors therefore argued that the finance condition needed to be confirmed, which created a lot of unnecessary stress for the couple.

When we act for purchasers, we always recommend that they avoid using what is known as “the clause 9 conditions box” in the Law Association Agreement for Sale and Purchase of Real Estate (or using any condition wording in the further terms of sale that is similar to the clause 9 conditions wording).

The clause 9 conditions are not worded favourably for a purchaser – for example:

• under clause 9.1 (finance from a bank or other lending institution) the purchaser has to give a satisfactory explanation, with supporting evidence as to why they could not confirm finance, upon request by the vendor if they cancel under that clause;
• under clause 9.4 (building report) the  purchaser would have to give a copy of the building report if they cancelled the agreement under that clause.

The clause 9 conditions are objective not subjective standards. As the purchaser has to give information and documents if they cancel under a clause 9 condition the vendor can potentially challenge the purchaser’s grounds for cancelling if they do not think a reasonable person would have cancelled in the purchaser’s position, as above.

They could then potentially try to force the sale through a court order, or seek damages including any price difference if they sell the property for less to someone else later.

If you are okay with giving personal details in the case of finance or giving a copy of a building report, then there are no technical issues with the clause 9 conditions, and you can use them.  However you need to be satisfied in the case of reports that the report writer allows you to provide that to third parties.

Instead of using any clause 9 conditions we recommend that purchasers add any conditions they want to the further terms of sale, using subjective wording and with no mention of the purchaser having to pass on copies of reports or having to give explanations if they cancel.

Your legal advisor can assist you with wording for any conditions you want to add to an Agreement for Sale and Purchase, and can check the Agreement before you sign.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.