A couple who were selling their home received an unconditional offer and the transaction was moving smoothly towards settlement when, the day prior to settlement, they received advice from the purchaser’s lawyer that the heat pump at the property was not working. 

The couple knew the heat pump was faulty, but they had worked out how to navigate the heat pump’s quirky deteriorating function and because they were still able to “operate” it they did not think to disclose this.

Negotiations followed and the result was a price reduction on the sale, for the value of a new heat pump and its installation at the property, which meant the vendors were several thousands of dollars short of what they were expecting to receive from the net sale proceeds.

This situation could have been easily avoided simply by adding the words “as is, where is” next to “Heat pump” in Schedule 2 of the Agreement of Sale and Purchase, where the chattels to be included in the sale price are listed.

It is best practice to be up front about any chattels that are not functioning properly, or not functioning at all.  This transparency regarding the status of your chattels is highly unlikely to make your property less attractive.  It means that generally the purchaser’s pre-settlement inspection goes more smoothly and there are no costly surprises or inconveniences immediately prior to settlement. 

Furthermore, not only is there the risk that your sale price will decrease, but your legal fees will also increase as negotiations are required to agree an outcome.

The chattels listed in Schedule 2 of the Agreement, and all plant, equipment, systems, or devices which provide any services or amenities to the property (e.g. security, heating, cooling, or air-conditioning) are required to be delivered to the purchaser at settlement in reasonable working order (but in the same state of repair as at the time of the agreement was signed) with the exception of fair wear and tear.

All chattels need to be unencumbered (i.e. not subject to any hire purchase charge or After-Pay payments etc) at the time of settlement.  This is important to remember, as some homes have whiteware or carpet on hire purchase agreements with retail stores, or solar panels that are purchased with Q-card, or even a leasing/rent-to-buy arrangement with solar panel suppliers.

If chattels are not functioning or are not to be included in the sale, they may be struck-through in the Agreement.  It is the responsibility of the vendor to remove any chattels that have been struck-through in the Agreement from the property prior to settlement.

If you have any doubts about what chattels to include in your Agreement or your liability regarding the status of your chattels, contact your legal advisor to clarify your obligations.