Be careful to ensure all Agreements align when families are selling and purchasing together

An agent received interest from a couple to purchase a family home with the man’s mother, so the extended family would be living together in the large family home that had a suitable flat for the older parent.

The agent had the couple and mother sign the Agreement to purchase and both the couple and mother had a condition each, that the Agreement to purchase was subject to the sale of their respective homes by a set date.

As it transpired one of the sale transactions required an extension to the conditions in that Agreement and the agent working with the couple granted the extension to the purchasers of the couple’s property.  However, the new due dates granted meant that the couple’s settlement date for their Agreement was pushed out, so that it was no longer concurrent with the agreement to purchase the new extended family home.

Inter-generational property transactions are becoming more common as families are wanting to take care of their parents in their later years, as well as avoid the cost of retirement villages while their parents are still able to live independently without regular medical assistance.

However these property transactions are very complex.  In this situation there are three Agreements that all need to “talk to each other” and it is important to get your customer/purchaser to contact their legal advisor as soon as you are aware that there are multiple contracts involved.

They can work well, where the vendors in the Agreement to Purchase are flexible and not constricted by plans to settle early.  Certainly in a market where properties are taking longer to sell, some vendors are willing to work closely with purchasers to achieve settlement in order to get a desired price. 

As soon as you become aware that your customer/purchaser is wanting to enter into an Agreement subject to the sale of their property (and/or their parent’s property) the following are important considerations:

• Inform the purchasers of the importance of seeking legal advice prior to signing an Agreement for Sale and Purchase;
• The purchase Agreement will be conditional on the purchasers achieving an unconditional offer for the sale of their property (or respective properties) by a certain date;
• Their sale Agreements will be conditional on achieving an unconditional Agreement to purchase by the same date;
• The settlement date needs to be the same in all three Agreements.  Instead of inserting a calendar settlement date, the settlement date should be recorded as ten or fifteen working days from the date the Agreement is unconditional.  This settlement description makes it easier to coordinate two or three Agreements (as the case may be) that need to “communicate” to each other;
• Encourage your client/vendor and customers/purchasers to seek legal advice as soon as it looks like a due date for a condition is unachievable;
• If conditions require an extension on the Sale Agreement(s), negotiations are required on the purchase Agreement, because these extensions may push out the settlement date;
• Negotiation and efficient communications with all parties are key;
• Escape clauses are useful for the vendors in all sale Agreements, in the event a better offer arises.

Other factors ensuring a smooth transaction

As with any transaction, when acting for the vendor in the scenarios above it is vital to be as transparent as possible in respect of disclosure material being provided for the sale property, to ensure a smooth and efficient transaction.  This means that potential purchasers can make the necessary disclosures to their insurance companies and mortgagees (where required) and thus mitigate against the need to seek an extension to the conditions in their purchase Agreement.

In the scenario outlined above the purchasers were fortunate to be working with a flexible vendor who was not on-purchasing, and the settlement dates for all three Agreements were able to be changed by mutual agreement with all parties involved, and, fortunately one of the sale transactions settled earlier

However this is not always the case.  It is important to encourage your clients/vendors and customers/purchasers to seek legal advice in the early stages of these complex transactions to ensure the desired outcome is achieved.