The 2022 General Conditions: the questions buyers and sellers ask us

Most people sign a REIWA Offer and Acceptance without reading the document behind it. The Offer and Acceptance is three pages. The 2022 Joint Form of General Conditions it incorporates runs to twenty, and it is the part that decides what happens when something does not go to plan. These are the questions buyers and sellers put to us most often, with the clause numbers so you can check any of it against your own contract.

Settlement day, and what it costs when it slips

The contract sets a settlement date. If yours does not name one, clause 3.5 fills the gap with the later of 25 business days after the contract date, or 15 business days after the last condition is satisfied. Clause 3.4 requires settlement to take place in the Perth CBD, which is a leftover from the days when two settlement agents met in a room, and matters less now that almost everything runs through an electronic workspace.

What people really want to know is what happens when the money is late. Clause 4.1 allows three business days. If settlement is not completed within three business days of the settlement date, for a reason not attributable to the seller, the buyer must pay the seller interest on the balance of the purchase price and on any other money payable at settlement. Clause 4.2 runs the same way in reverse: where the delay is attributable to the seller, the buyer is allowed compensation on the same amounts, deducted from the purchase price.

The rate sits in the definitions at clause 26.1. The Prescribed Rate means 9% per annum calculated daily. On a balance of $550,000 that is a little over $135 a day.

Two details catch people out. The three business days are a trigger, not the start of the clock. Once you are past them, clause 4.3 calculates the interest from and including the settlement date, so the grace period disappears backwards. And a party who was not ready itself cannot claim. Under clause 4.4 a seller who was not ready, willing and able on the settlement date is not entitled to interest until it is ready and has given notice saying so. If that notice arrives within three business days, interest still runs from the settlement date. If it arrives later, interest runs only from the day the notice was given. Clause 4.5 does the same to a buyer claiming compensation.

Clause 4.3 also closes the subject. The interest or compensation is treated as being in full satisfaction of any claim arising from the delay, so you do not collect the interest and then claim separately for the removalist you had to rebook.

When you get the keys

Clause 6.1 entitles the buyer to possession on the earlier of the possession date named in the contract and settlement. In an ordinary sale with no special condition, that means possession at settlement, and it means vacant possession. Clause 6.1(b) also puts an obligation on the seller that gets overlooked more than any other in the document: before the possession date the seller must remove from the property all vehicles, rubbish and chattels other than the property chattels being sold. The half-empty paint tins in the shed are the seller’s to deal with.

There is one common exception. Clause 6.3 deals with a seller who is still living in the property as their principal residence at settlement. Where it applies, the buyer takes possession at 12 noon on the day immediately following settlement, and clause 6.4 makes the seller responsible for any damage caused to the property in that overnight gap, payable to the buyer on request.

Risk moves on its own schedule. Clause 8.1 passes risk to the buyer at the earliest of the purchase price being paid in full, settlement occurring, or the buyer being given possession. A buyer who takes early possession takes the risk with it, which is why insurance should start the day the keys change hands rather than the day the title does.

What keys does the seller actually have to hand over

More than most sellers expect, and less than some buyers assume. Clause 6.5 requires the seller to deliver the Access Device to the buyer on the possession date, and clause 26.1 defines Access Device as each key and security device, and written details of each code for any security system which enables access to the property.

The obligation attaches to the keys that exist, not to the locks. The seller hands over every key they hold, which means the spare set in the kitchen drawer and the one at the daughter’s house as well as the set on the ring. Every remote, fob and swipe card. Every alarm or keypad code, written down. What the clause does not do is require a seller to go and have a key cut for a lock nobody has had a key for in fifteen years.

That distinction matters at the pre-settlement inspection. A key that exists and has not been handed over is a problem to fix. A lock that has never had a key is a disclosure, and the time to raise it is during the campaign rather than on the morning of settlement.

Clause 6.5(c) is the part that involves the real estate agent. If the buyer agrees, the access device may be delivered to and held by the seller’s agent, for handover to the buyer following settlement. That is how most Perth sales are done. Clause 6.5(d) then requires the seller to get the keys to the agent in time for that to work, and treats the seller as having authorised and directed the agent to hand them over. The agent holding your keys is doing so under the contract, with the buyer’s agreement, and cannot release them until settlement is confirmed.

What a buyer can inspect, and when

Clause 5.1 gives the buyer one inspection within the five business days before the possession date, to check that the seller has complied with their obligations. If that inspection turns up items the seller has to rectify, the buyer gives notice of them and is entitled to one further inspection to check the work was done. The buyer may be accompanied by two people, which is enough for a partner and a builder. Clause 5.2 confines inspections to between 9.00am and 4.00pm and requires notice of the time and date.

It is a right to check compliance, and it is not a second opportunity to renegotiate the price. Where something genuinely is not right, the machinery for dealing with it is elsewhere in the contract, and it starts with your settlement agent.

What happens when someone is in default

Clause 22 makes time of the essence, subject to clause 23, and clause 23 is the safety catch. Neither party may terminate for the other’s default, and no seller may forfeit money paid or retake possession, unless a Default Notice has been given and the default has not been remedied in the time the notice allows. A Default Notice, as defined in clause 26.1, must allow at least 10 business days, or any longer period it specifies. Clause 23.3 removes the requirement where a party has repudiated the contract outright.

Clause 24 then sets out what follows. A seller can affirm the contract and sue for damages, seek specific performance, retake possession or terminate, and on termination may forfeit the deposit, sue for damages or resell the property. A buyer facing a seller in default has mirror rights under clause 24.14. None of it is fast or cheap, which is the practical argument for dealing with a problem in the week it appears rather than the week before settlement.

Who does what, and who to ring

The contract draws the line between the two professionals itself, and it is worth knowing where it sits.

Clause 26.1 defines a Representative as a person who is either a legal practitioner or a settlement agent, appointed to act for a party in relation to the contract or settlement. It separately defines a Seller Agent as a real estate agent appointed to act on behalf of the seller in respect to the sale of the property. Two roles, defined apart from each other, given different work.

What the general conditions actually ask a real estate agent to do is narrow. Hold the deposit as stakeholder under clause 1.2. Receive the buyer’s finance notices under condition 1 of the Offer and Acceptance. Communicate acceptance of an offer under condition 2. Hold the keys, if the buyer agrees, under clause 6.5(c). That is close to the whole list.

Everything to do with the settlement figures, the adjustments, the transfer, the duty, the workspace and the money is the Representative’s work. Clause 3.6 has payment directions coming from the seller or the seller’s representative. Clause 4.6 has disputed interest paid to, and held by, a representative. Where the two sides disagree about what the general conditions or a special condition require of them, the contract puts the settlement agents in that seat.

This matters most when a settlement starts to wobble, because the instinct is to ring the agent who sold the property. We will always take the call, and we will chase whatever can be chased. But if the disagreement is about an obligation under the general conditions or a special condition, the fastest route to an answer is your settlement agent putting it to the other side’s settlement agent, in writing, that day. Relaying it through an agent adds a day and loses the detail, and interpreting the contract is not the agent’s role to begin with.

Clause 4.6 shows how the contract expects a disagreement to run. If one party claims interest and the other disputes it, the claiming party serves an interest notice no later than two business days before settlement, setting out the basis of the claim and the amount. The disputed amount is still paid at settlement, but it is held by a representative rather than released. If the dispute has not been resolved or taken to court within 20 business days, the money goes to the party who claimed it. And clause 4.6(f) says the plainest thing in the whole document: the dispute does not affect the obligation of the parties to proceed to settlement. You settle, then you argue.

The short version

• The general conditions are the twenty pages sitting behind the three-page Offer and Acceptance, and they govern what happens when something goes wrong
• Late settlement carries interest at 9% per annum calculated daily, triggered after three business days but backdated to the settlement date
• Possession is at settlement unless the contract says otherwise, the property must be vacant, and the seller’s vehicles, rubbish and leftover chattels must be gone
• The seller must hand over every key and security device they hold, plus every security code in writing
• The buyer gets one inspection in the five business days before possession, and a second one only to check rectification work
• Nobody can terminate for default without serving a Default Notice allowing at least 10 business days
• The real estate agent holds the deposit and, if the buyer agrees, the keys. The settlement agent runs the settlement and takes any disagreement to the other side’s settlement agent

If you are selling and want to know what your contract will actually require of you, ask us before you sign it rather than after. Ask us for an appraisal and we will go through the general conditions and any special conditions with you.

This article is general information about a standard form contract used in Western Australia. It is not legal advice. Clause numbers refer to the 2022 Joint Form of General Conditions (05/22) as incorporated by the REIWA Offer and Acceptance, read together with the annexure of changes issued in August 2023. Your own contract may vary these conditions by special condition, and your settlement agent or lawyer can advise on your particular circumstances.