Background

A couple selling their home received an unconditional offer and everything seemed to be progressing smoothly towards settlement. However, the day before settlement, the purchaser’s lawyer notified them that the heat pump at the property was not working.

The couple knew the heat pump was faulty but had managed to navigate its quirks. Since they could still “operate” it, they didn’t think to disclose its issues.

Negotiations ensued, resulting in a price reduction to cover the cost of a new heat pump and its installation. This adjustment left the vendors several thousand dollars short of their expected net sale proceeds.

How to Avoid This Issue

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

Best Practices for Listing Chattels

– Transparency: Be upfront about any chattels that are not fully functional or not working at all. This honesty is unlikely to make your property less attractive and ensures a smoother pre-settlement inspection without costly surprises.

– Preventing Price Reductions: Disclosing the condition of chattels can prevent last-minute negotiations that might decrease your sale price and increase legal fees.

Legal Obligations and Chattels

Chattels listed in Schedule 2, along with all plant, equipment, systems, or devices providing services or amenities to the property (e.g., security, heating, cooling, or air-conditioning), must be delivered to the purchaser in reasonable working order (but in the same state of repair as at the time the agreement was signed), except for fair wear and tear.

Additionally, all chattels must be unencumbered (i.e., not subject to any hire purchase agreements or payment plans) at settlement. This is crucial as some homes have items like whiteware or solar panels under hire purchase agreements, or rent-to-buy arrangements.

Handling Non-Functioning Chattels

– Striking Through Non-Included Chattels: If certain chattels are not functioning or will not be included in the sale, they should be struck-through in the Agreement. The vendor is responsible for removing any such chattels from the property before settlement.

Seeking Legal Advice

If you have any doubts about which chattels to include in your Agreement or your liability regarding their condition, contact your legal advisor to clarify your obligations. Leading law firms offer fixed-price Initial Consultations to help clients understand their options quickly and cost-effectively.