We have come across many clients who have made an offer on a house who have been advised (often by a real estate agent) that they can sign an agreement for sale and purchase without first obtaining legal advice because the agreement includes a ‘solicitor’s approval’ condition.
These clients often lament such a decision when they later discover that a solicitor’s approval condition only offers them a very limited ability to alter or cancel the agreement if an issue is discovered.
What are ‘Conveyancing Aspects’
A standard solicitor’s approval condition only allows a purchaser’s solicitor to cancel on the ground of the ‘conveyancing aspects’ of the transaction. ‘Conveyancing aspects’ has been interpreted by the courts to include legal impediments and their implications.
Conveyancing aspects would include reviewing the record of title (the legal document which shows who owns the property) and any instruments registered against the record of title, such as easements e.g., rights of way.
If the purchaser’s solicitor discovers any issues with the record of title, such as a missing easement, then the parties could negotiate to have the defective record of title fixed, or alternatively, the purchaser could cancel the agreement.
Some solicitor’s approval clauses are drafted to cover a wider ambit, such as the ability for the solicitor to take into consideration the commercial aspects of the agreement. However, it is unclear whether a purchaser could use a solicitor’s approval clause to cancel an agreement for reasons other than ‘conveyancing aspects’, given the courts have traditionally determined that ‘conveyancing aspects’ does not include the general wisdom, or commercial advantages or disadvantages of the transaction.
Agreements are binding
If you sign an agreement with only a solicitor’s approval condition and later discover issues with your proposed purchase, such as not being able to arrange satisfactory lending or insurance, or that the house is leaky, then it is unlikely you will have grounds to cancel the agreement under the solicitor’s approval condition.
Your are then left in a very difficult position where you have to try negotiate your way out of the agreement, which can result in costly and stressful legal proceedings and you having to pay compensation to the vendor.
The best way to avoid such a situation is to seek legal advice before signing an agreement. Your solicitor can then advise you what conditions you should include in the agreement, such as finance, insurance, due diligence, Land Information Memorandum (LIM) or building inspection report conditions, to ensure you have sufficient grounds to negotiate or cancel the agreement if an issue arises.
We strongly recommend that you seek legal advice prior to signing on the dotted line to ensure a successful and worry-free property transaction.