House purchase contract, pre sales contract

odds_on

Why, in Ireland (and the UK, I believe) when buying a property is there not a contract of intention to buy, which is a legal contract before the Sale contract is signed?

In some countries, this type of contract is used, and specifies what happens if either party pulls out of the sale. There can be clauses included, for example, if a survey finds problems then the purchase offer can be withdrawn with no penalty or if a mortgage for the property is not approved.

Or can such a contract be legally used in Ireland? This would avoid a vendor pulling out if they get a better offer, - penalty is he pays the value of the deposit to the purchaser. Or, a purchaser pulling out because he has a change of heart (penalty is loss of deposit.).

Surely it is not beyond the powers of solicitors to come up with such a contract.

Peregrinus

It’s common in Ireland for a sale contract to be conditional - I agree to buy your house for (say) €500k subject to (a) a full structural survey satisfactory to me, and (b) loan approval from my bank, both to be arranged within 14 days.

It’s a matter of negotiation between the seller and the buyer as to whether to sign such a contract, or to insist on an unconditional contract.

In a strong buyers’ market, buyers will usually succeed in getting a conditional contract. This means they do not have to incur the expense of, e.g., a survey at a time when they do not know whether their offer will be accepted, and it also prevents the seller from changing his mind if he gets another offer. On the other hand, in a strong seller’s market sellers will prefer to insist on an unconditional contract, meaning that once he has accepted an offer for the house, he can be confident that the sale will go through.

When a house is sold at auction the contract is always unconditional, for obvious reasons.

Victor

Peregrinus wrote: »

When a house is sold at auction the contract is always unconditional, for obvious reasons.

I know it is unconditional, but is it obvious to all?

Peregrinus

Victor wrote: »

I know it is unconditional, but is it obvious to all?

It is if they read the contract, or if they are familiar with market practice, or if they give the matter any thought at all.

You do hear horror stories of the successful bidder at the auction asking, after the event, for a "subject to finance" clause to be inserted into the contract before he will sign it, apparently unaware of how the world works, but I think it happens rarely.

Kosseegan

odds_on wrote: »

Why, in Ireland (and the UK, I believe) when buying a property is there not a contract of intention to buy, which is a legal contract before the Sale contract is signed?

In some countries, this type of contract is used, and specifies what happens if either party pulls out of the sale. There can be clauses included, for example, if a survey finds problems then the purchase offer can be withdrawn with no penalty or if a mortgage for the property is not approved.

.

Ireland and parts of the UK are common law jurisdictions. On the continent the legal systems are civil law based. Which of them have the system you describe? What is the point in having a contract to enter a contract? Either someone is going to contract to buy/sell or they are not.

Peregrinus

Kosseegan wrote: »

Ireland and parts of the UK are common law jurisdictions. On the continent the legal systems are civil law based. Which of them have the system you describe? What is the point in having a contract to enter a contract? Either someone is going to contract to buy/sell or they are not.

Well, there is (or used to be) a difference between the Irish and British practices.

In Ireland, the norm was the signing of a conditional contract once the price was agreed. The Vendor was then bound to sell at that price; the purchase was bound to buy if he got loan approval and if he was satisfied with a survey and if any other conditions were satsified. Some time might pass before all these conditions were satisfied, and during this time the purchaser in a comparatively strong position. The vendor could not pull out just because he got a better offer. Whereas the vendor had some scope for pulling out (or renegotiating the price) on the basis of his surveyor's report.

In Britain, by contrast, the parties woudl agree a price (and the property was then said to be "under offer") but no binding contract was signed until the purchaser had got his loan approval, his survey report, etc. During this time, the vendor could accept a better offer from someone else, in which case the purchaser was said to have been "gazumped". (I have no idea where this word comes from.)

It may be that in the dizzy, vendor-friendly heights of the Celtic Tiger the vendor-friendly British practice became more common in Ireland. In the current climate, you would expect the Irish practice to reassert itself.

Milk & Honey

Peregrinus wrote: »

Well, there is (or used to be) a difference between the Irish and British practices.

In Ireland, the norm was the signing of a conditional contract once the price was agreed. The Vendor was then bound to sell at that price; the purchase was bound to buy if he got loan approval and if he was satisfied with a survey and if any other conditions were satsified. Some time might pass before all these conditions were satisfied, and during this time the purchaser in a comparatively strong position. The vendor could not pull out just because he got a better offer. Whereas the vendor had some scope for pulling out (or renegotiating the price) on the basis of his surveyor's report.

In Britain, by contrast, the parties woudl agree a price (and the property was then said to be "under offer") but no binding contract was signed until the purchaser had got his loan approval, his survey report, etc. During this time, the vendor could accept a better offer from someone else, in which case the purchaser was said to have been "gazumped". (I have no idea where this word comes from.)

It may be that in the dizzy, vendor-friendly heights of the Celtic Tiger the vendor-friendly British practice became more common in Ireland. In the current climate, you would expect the Irish practice to reassert itself.

There are differences between different parts of the UK, particularly between Scotland and England?Wales.

In Ireland when the price was agreed a booking deposit would be demanded. Not invariably, but almost so, which would be "subject to contract". Neither side was bound. Some time (often weeks) later a draft contract would issue from the vendor. At that stage the vendor may or may not be prepared to accept conditions like subject to loan, survey. during the Celtic tiger years the vendor generally would not accept such conditions.
At the booking deposit stage, gazumping was common. The law reform Commission did not recommend any change in the law in a report on the subject.

odds_on

Kosseegan wrote: »

Ireland and parts of the UK are common law jurisdictions. On the continent the legal systems are civil law based. Which of them have the system you describe? What is the point in having a contract to enter a contract? Either someone is going to contract to buy/sell or they are not.

I have bought and sold two properties in Spain and as far as I remember this was the system though am not certain.

More recently, I bought and sold properties in Argentina. This is the system they use and it does stop things like gazumping etc. (origin:1920s (in gazump (sense 2)): from Yiddish gezumph 'overcharge'. gazump (sense 1) dates from the 1970s; Oxford Dictionaries Online).

However, in Argentina, it is usual for completion to be done in less than three weeks where as, in Ireland, it is more like 2-3 months and a lot can happen in such a long period, especially as Estate Agents keep their advet until the sale contract is signed (and they often still leave the advert on the relevant site, for a while - I know, from experience).



I did not realise that a pre sale contract was ever used in Ireland. I will be getting one when I buy soon.


Thank to all for the information.

joeirish

I've just come across this thread so maybe all concerned have moved on. But here goes anyway.

I'm buying a site. Should I have some sort of contract in place that obliges the vendor to sell the site subject to planning permission but that allows me to pull out if planning is not granted. Can I get a contract online or should I use a solicitor at this stage. I'm prepared to pay a deposit of up to 50%.

Thanks in advance for any help

blueythebear

joeirish wrote: »

I've just come across this thread so maybe all concerned have moved on. But here goes anyway.

I'm buying a site. Should I have some sort of contract in place that obliges the vendor to sell the site subject to planning permission but that allows me to pull out if planning is not granted. Can I get a contract online or should I use a solicitor at this stage. I'm prepared to pay a deposit of up to 50%.

Thanks in advance for any help

I presume that the grant of planning permission is essential to you and without it you won't buy the site. You would not be able to insert a clause allowing you to reverse the deal if planning permission is not granted or at least, no vendor in their right mind would accept such a clause. You have no guarantee of obtaining planning permission. The only way to find that out is to make a planning application. You could request that the vendor obtain the planning permission before the sale but you would have to compensate him for doing so, thereby increasing the price of the site and again that is dependent on him being willing to do so.

In short, the above is not advice in a legal sense, but rather commercial advice.

See a solicitor if you are intending to purchase any land in Ireland.

joeirish

Thanks for the quick reply.

You are right, the site would not be purchased if planning permission was not granted. But I often see sites for sale with something like 'subject to planning permission'. How does that work then? At the moment the vendor has agreed to sell me the site subject to getting planning and I've paid a small deposit to show willing. My architect is drawing up plans and I have had a percolation test done. I've spoken to the council and to a councillor and it is unlikely that planning would be refused. But my architect has advised getting an agreement as he has experience of a vendor pulling out after the purchaser had got planning. That's what led my to post on the forum.

Thanks for any further advice from anybody.

BTW I just found a website selling contracts and this is what they say about one that seems to fit the bill

" Conditional contract: standard
This is a conditional contract - the entire deal is under contract and both sides are bound - subject only to one or more conditions being met. The most usual condition is a grant of planning permission"

Jo King

joeirish wrote: »

Thanks for the quick reply.

You are right, the site would not be purchased if planning permission was not granted. But I often see sites for sale with something like 'subject to planning permission'. How does that work then? At the moment the vendor has agreed to sell me the site subject to getting planning and I've paid a small deposit to show willing. My architect is drawing up plans and I have had a percolation test done. I've spoken to the council and to a councillor and it is unlikely that planning would be refused. But my architect has advised getting an agreement as he has experience of a vendor pulling out after the purchaser had got planning. That's what led my to post on the forum.

Thanks for any further advice from anybody.

BTW I just found a website selling contracts and this is what they say about one that seems to fit the bill

" Conditional contract: standard
This is a conditional contract - the entire deal is under contract and both sides are bound - subject only to one or more conditions being met. The most usual condition is a grant of planning permission"

It is absolute lunacy to use a contract from a website when buying land in Ireland. Many of those contracts are from other jurisdictions and even if Irish may not cater for local conditions. A solicitor will have professional indemnity insurance and can be sued if they do not protect your interests properly.

valleyoftheunos

joeirish wrote: »

I've just come across this thread so maybe all concerned have moved on. But here goes anyway.

I'm buying a site. Should I have some sort of contract in place that obliges the vendor to sell the site subject to planning permission but that allows me to pull out if planning is not granted. Can I get a contract online or should I use a solicitor at this stage. I'm prepared to pay a deposit of up to 50%.

Thanks in advance for any help

See a solicitor straight away.

Jo King wrote: »

It is absolute lunacy to use a contract from a website when buying land in Ireland. Many of those contracts are from other jurisdictions and even if Irish may not cater for local conditions. A solicitor will have professional indemnity insurance and can be sued if they do not protect your interests properly.

the only way anyone should buy land in ireland is by using the Lawsociety standard contract as specifically amended by the purchaser's solicitor and agreed by the vendor to suit the specific circumstances of the property and the parties.

A contract for sale will naturally include conditions relating to the securing of a mortgage, proof of title and any number of different things where if they don't happen, the contract is off and the parties go back to their original postions.

Peregrinus

Probably worth adding that the convention in Ireland is that the vendor draws up the contract (based on the Law Society standard) and then the purchaser bargains for whatever amendments, additions, exceptions, conditions, etc he wants before signing. If, as the purchaser, you approach a vendor with your own draft contract (moreover, one not based on the Law Society standard) you will be treated with great suspicion. His solicitor will - quite reasonably - charge him for a line-by-line scrutiny and negotiation of this unfamiliar document.

Most probably you'll be told to take a hike; the vendor's position will be that if you won't use the standard contract, he can always find another purchaser who will.

joeirish

Thanks for the replies. I think I must have been unclear in my posts.

Jo King: I do not intend to use a contract bought off the internet, I was just quoting from what it said in relation to having a clause in a contract to allows a purchaser to withdraw from a sale if planning is not granted. And the website I was quoting from does sell the Irish Law Society standard contract (and other contracts for other jurisdictions).

Valley...: Of course I will use a solicitor when necessary. My OP was just to get some information about contracts. No point in paying a solicitor to be told that a contract is not needed at this stage. They charge enough anyway when they are actually needed.

Peregrinus: The vendor has been trying to sell this site for 5 years and has dropped the price by 50% so I think I am in a good position to bargain. But thanks for the advice that it is his solicitor who should draw up the contract. I will speak to him today and get him to do this. That was one of my original queries, who actually is responsible to drawing up the initial contract.

Thanks for all the answers folks.