Caveat Emptor – buyer beware –is a well-worn phrase that underscores the importance of potential buyers doing their homework before agreeing to any purchase – and living with the fallout if they don’t.
This term has something of a poor cousin, which should, by rights, also be common parlance – but, alas, is not. Caveat venditor. Seller beware.
Caveat venditor
The misconception, especially around real estate transactions, is that risk, by and large, falls with the buyer and, once the deal’s done and dusted, any nasties rest with them, period. And, where buyers haven’t done there due diligence, certainly that can be the case.
What’s not so clearly understood is that a signature on a sale and purchase agreement might mean the property has changed hands, but some liabilities can, in fact, stay firmly with the vendor … for years.
An expensive lesson for some sellers in recent years has been around leaky buildings. An earlier version of the standard sale and purchase agreement stated in the warranty fine print that the vendor must have complied with the Building Act, under which the Building Code dictates that all homes be water tight for 50 years.
Some erstwhile owners who built homes and sold under those terms – and in many cases, unwittingly – are being sprung for massive costs, after their former homes sprung some serious leaks.
Contractual comebacks
While that particular warranty has been written out of later incarnations of standard sale and purchase agreements, it serves a striking example of some of the whopping contractual comebacks vendors – often unknowingly – sign up for.
Vendors’ mindsets can be concreted around getting the best price, and getting it lickety split. For the most part, buyers are wary about buying a lemon, so tend to beat a timely path to their legal advisor’s door. Unfortunately, many vendors aren’t quite so proactive in seeking advice, largely because they’re unaware they, too, can face lemon-like consequences long after the ink’s dried. Good, timely legal input, coupled with some targeted due diligence, is the key to stopping things turning sour.
And a little “self-help” can go a long way, too. Join me again for Caveat venditor – Seller beware - Pt 2, in which I’ll share some important tips on how vendors can take steps themselves to make a safe sale.