"Subject To" Clauses: A Comprehensive guide

In property transactions, "subject to" clauses play a pivotal role in ensuring smooth settlements. These clauses, when included in contracts, make the agreement conditional upon certain events or actions. Understanding their importance can save both buyers and sellers from potential pitfalls.

What Are "Subject To" Clauses?

"Subject to" clauses are conditions set within a property contract that must be fulfilled for the contract to be enforceable. They provide a safety net, allowing parties to withdraw from the contract if specific conditions aren't met. Common examples include clauses related to finance, inspections, or the sale of another property.

Importance of "Subject To" Clauses

These clauses protect the interests of both buyers and sellers. For buyers, they ensure that they are not bound to a contract if they cannot secure financing or if the property fails an inspection. For sellers, these clauses can offer flexibility, such as requiring the buyer to sell their existing property first.

Types of "Subject To" Clauses

Subject to Finance

A "subject to finance" clause allows the buyer to cancel the contract if they fail to secure a loan by a specified date. This clause is crucial for buyers relying on mortgages.

Subject to Inspection

This clause permits buyers to conduct building or pest inspections. If the property does not meet the buyer's standards, they can opt out of the contract without penalty.

Subject to Sale

This clause is used when a buyer needs to sell their current property before purchasing a new one. It ensures the buyer is not financially overextended.

Subject to Approvals

In some cases, buyers require certain approvals, such as building permits. This clause allows the contract to be contingent on obtaining these approvals.

Key Considerations for "Subject To" Clauses

Timeframes

Each "subject to" clause should have a clear timeframe within which the condition must be met. This prevents indefinite delays and keeps the transaction moving forward.

Legal Advice

It is advisable to seek legal advice when drafting or agreeing to "subject to" clauses. A legal professional can ensure that the clauses are reasonable and enforceable.

Mutual Agreement

Both parties must agree on the conditions and timeframes of "subject to" clauses. This mutual understanding helps prevent disputes and misunderstandings.

Conclusion

"Subject to" clauses are essential tools in property contracts, offering protection and flexibility for both buyers and sellers. By understanding and effectively utilizing these clauses, parties can navigate property transactions with confidence, ensuring a smoother settlement process.

Contact us for all conveyancing! [email protected]