Ensuring the sale of your property is unconditional... Don't forget the title requisition clause!

A couple recently entered into an agreement for the sale of their property which included no Further Terms of Sale.  The couple understood that the offer they had received was “unconditional” and therefore decided to proceed with putting an unconditional offer on a property to purchase.  Fortunately, the couple decided to have their purchase agreement reviewed by their lawyer prior to submission.

Upon review of the purchase agreement the couple’s lawyer made them aware that they currently did not have an unconditional agreement for the sale of their home in place and that therefore putting in an unconditional offer on another property could be risky.   

This was because the title requisition clause in their agreement had not been crossed out and the applicable time period had not lapsed.  

The title requisition clause in clause 6.2 of the Agreement for Sale and Purchase of Real Estate states: 

“The purchaser is deemed to have accepted the vendor’s title except as to objections or requisitions which the purchaser is entitled to make and notice of which the purchaser serves on the vendor on or before the earlier of: 

(a) the tenth working day after the date of this agreement; or 

(b) the settlement date.” 

Unless the clause has been crossed out or amended, the clause may give a right to a purchaser to cancel the Agreement. The clause has limited scope however but can be used by a purchaser in situations where the title they receive is materially different from the title the vendor purported to sell or where it is defective in some way (for example: had errors in an easement instrument or a cross lease or unit title where the property has been built outside the footprint on the title). 

This clause is different from including a title clause in the Further Terms of Sale.  Such clauses in the Further Terms of Sale usually provide for the purchaser to be satisfied with the title, which provide a much wider scope for objections and can include things like not being happy with restrictive covenants on the title.

Under clause 6.2 above the purchaser’s lawyer will have ten working days after the date the Agreement was signed to put the vendor on notice that the title was materially different from what had been contracted for, or was defective 

Once the vendor has received notice they will have two options. The vendor could either accept the requisition and remedy the title prior to settlement, or they could choose not to comply with the requisition. 
If the vendor chooses not to comply with the requisition, the purchaser may have the right to cancel the Agreement. 

The Agreement will therefore not be considered unconditional (if no further terms are added to the Agreement) until the title requisition clause is either waived by the purchaser or the timeframe expires (i.e. ten working days from the date the Agreement was signed has passed).  

However if the clause is crossed out, the purchaser is deemed to have accepted the vendor’s title and will not have an opportunity to identify an issue with the title using this provision, and potentially cancel the Agreement. 

Accordingly, if you are selling your house and are concerned about any aspect of your title, or need a fully unconditional offer so you can on-purchase, you would need to ensure that the title requisition clause is amended to state that the purchaser has deemed to have accepted the title, and ensure that you, as the vendor, are receiving a fully unconditional offer.  Purchasers would also need to take legal advice about that removal.

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.