This precedent is for use with the 2005 or 2014 edition of the Contract for Sale of Land by the Law Society of NSW and Real Estate of NSW. This special condition provides for a mortgage back to the vendor in favour of the purchaser. Vendor clients should be warned against accepting second or subsequent mortgages. They should be advised:
· that if they do accept a second or subsequent mortgage, they should obtain the consent of the prior mortgagee. This is because most standard mortgages given by banks and other financial institutions make the giving of a subsequent mortgage a breach of the first mortgage; and
· the chances of recovery of the principal of the second mortgage is at least questionable.
Clause (b) of this special condition are not needed if the purchaser is an individual.
Clause (f) of this special condition prevents the purchaser from assigning the rights of the vendor so it should not be used if the contract allows the purchaser to nominate another entity to complete the purchase. Clause 4.3 of the standard contract contemplates the purchaser exercising his or her rights under common law to nominate another as transferee. This right should be negatived if this special condition is used.
This precedent may be combined with other precedent special conditions when preparing a contract of sale in NSW.
This precedent has been authored for Lexis Nexis by Peter Kirsop, Special Counsel, MRM Lawyers and Garry Barnsley OAM.