Contracts for Sale of Farms and Farmland
Formbys Lawyers has years of experience in the preparation of contracts for the sale of property and businesses.
Contracts for private sale, for terms sales and sales with significant deposits and the balance of the sale price secured by a mortgage back to the seller.
We advise it is better to have a contract specifically drawn up for the sale of your property, especially if it is a sale on terms or with a mortgage back to the seller.
With a terms sale, it is important the buyer’s obligation to farm the land as required by the best farming practices for the district is made a term of the contract. There must also be carefully drafted provisions dealing with the application of fertiliser, cropping and stocking.
There should also be terms dealing with the maintenance and replacement of fencing and other improvements and facilities on the farm.
One other matter to remember are the provisions of the Sale of Land Act which provides that on a terms sale once 50% of the purchase price has been paid then the buyer can require the title to the property transferred to the buyer with a mortgage back to secure the unpaid balance of the purchase price.
If property is being sold to a Proprietary Limited Company then the seller should require the buyer’s obligation under the contract, to be guaranteed by the directors of the buying company. This is particularly the case when the deposit or the initial payments under the contract, are not a substantial percentage of the sale price.
It is preferable for the interest on the purchase price to be a variable interest rate. So if the interest is paid on time there is one rate and a higher rate if not paid within a short time of the due date, usually 14 days.
The date for the payment of the instalments of the purchase price whether monthly, half yearly, or annual need to be specified exactly and also when the interest is to be paid.
It is important to specify all instalments paid are applied first in payment of the interest owing at the date of payment and only the balance is applied to the reduction of the sale price.
Often there is bundled into the same contract, leases of other portions of the farm or an option to buy other parts of the land. If this is to be done the contract needs to spell out clearly what the arrangement is.
Auction Contracts, Sale by Expression of Interest
One of the great advantages of selling a property by auction is it simplifies the sale process. It also allows the seller, within reason to ensure that all pre-sale due diligence and other enquiries to be undertaken by the buyer, are done prior to the contract being entered into. It also gives the seller greater power to dictate the contract terms.
Just because a multiple lot property is offered for sale by auction does not mean you are locked in to only selling the property as a whole.
The usual form of contract we prepare for multiple lot properties provides the property will be offered for a sale as a whole and if not sold, as a whole, then it will be offered in specified parcels. Depending on the size of the property and the number of individual lots, this might be in individual lots or separate parcels comprising one or more lots.
In such contracts we insert a clause providing if the property is sold in separate parcels then each sale is conditional on the sale of all other parcels the provision provides the seller has time, usually 48 hours to elect to proceed with sale of the individual parcels. The benefit of this is if a parcel is passed in then there is 48 hours to complete a private treaty sale following the auction of the particular parcel.
Depending on the time of year the property is offered for sale which is usually late spring or early summer, it is usual to allow the buyer access to the property for spray topping and other preparation for the following seasons cropping program.
Sometimes possession is given prior with the seller completing harvest, so access to harvest the crop and remove it from the property, is reserved to the seller.
From the sellers perspective, a great advantage of an auction is the seller can dictate and include in the contract those terms which are important to protect the seller and important for the seller on the sale of the property.
The same observations apply to a sale by expression of interest as the contract for the sale to those who are interested in buying, forms part of the document for the submission of an expression of interest.