One question we hear from clients is “I want to buy property from a family member. Do I need a contract?” Here I’ll explain the answer.
The short answer is that it’s your choice.
Many people choose not to go to the trouble of writing up an Offer and Acceptance when buying property from a family member, because the transaction is relatively simple – there is often no rates adjustment, no final inspection, and no intention to charge penalty interest if matters are delayed. Perhaps most importantly, the family members trust each other to go through with the transaction as agreed, without a written contract.
When a contract is not used, the Joint Form of General Conditions does not apply. Since there is no written contract to specify settlement date, the buyer and seller verbally advise us of the date on which they would like to settle.
Although contracts are often not used in sales between related parties, creating a contract can be a smart move. A well-written Offer and Acceptance ensures that all parties are clear on the terms of the transaction, and helps to protect the interests of both parties.
People buying from or selling to a family member may choose to create contracts for a number of reasons, but one reason may be that the family ties are not particularly close, so the buyer and seller want to be sure that they are on the same page.
Ultimately, whether or not you choose to create a written contract will depend on your unique circumstances and preferences.
Note: If you’re buying property from a family member, you may be interested in our article Your guide to stamp duty for related parties.
Image by Flazingo Photos via Flickr.