Settlement. It's one of the major milestone days in the property development process.
It can be the source of lots of funny stories about what Vendors take or leave behind, along with lengthy discussions about whether what happened was legal or not.
Why is it that a dishwasher gets left behind in one house, but not the next? They're both dishwashers, for crying out loud! And what about all the piles of junk in the garage - why are they still there? Settlement is tomorrow!
What should happen at settlement is occasionally not what actually happens in reality, so it's time to take a journey into the wonderful world of fixtures, fittings, goods and chattels.
That way when you walk into your new property and discover they've changed the chandelier for a $5 light fitting, you'll at least know whether the Vendor has done the wrong thing or not.
Being able to do something about it? Well, that might be a different story...
Let's start with the basics. The bits and pieces of a house are broken up into 2 major groups - fixtures & fittings, and goods & chattels.
Fixtures & Fittings
The easiest way to work out what items are fixtures and fittings is to look at the words themselves - shorter versions would be fixed and fitted. Both very helpful clues!
If something is fixed to the structure of the house, or has been fitted specially in a way that removing it would cause "damage" - then you can be pretty sure it fits into this category.
Another test I've heard people use is to pretend a giant came and picked up the house, and gave it a good shake. All the bits inside that stay put, even if they're a little battered, would be fixtures and fittings.
Some common examples of fixtures:
Goods & Chattels
Continuing on with the giant analogy, all those things that would fly around, making the interior of the house look like your favourite snowglobe - they're goods and chattels.
On this list we have things like:
There, that was nice and easy! Now we can all relax.
What's that? What about a dishwasher?
Well, that depends on whether it's plumbed in or freestanding and detachable.
And light fittings? What if somebody removes a chandelier and replaces it with a cheap light fitting, like you said at the start? Oh. Okay, so there's a bit more to think about.
Contract of Sale
It's becoming a lot more common nowadays for the contract of sale to include a list of items in the house, with tickboxes to confirm whether it's staying or going. So if you're offered one of these with your contract of sale, read it thoroughly, and if there's anything on there which you're not sure about, ask to walk through the house again and check.
The downside of a contents list is that it's basically a standard, generic list. So while it might stop the Vendor absconding with the dishwasher, it doesn't help if they swap out the brand new dishwasher for a derelict one on its last legs.
There are two steps you should take if retaining existing fixtures is important to you. Firstly, make sure you record any special items in the contract of sale. So you might want to add "crystal chandelier" to the list. And potentially, it may be worthwhile making a note in the contract of the brand/model number of any particularly sparkly new appliances. Photos are also good - make sure you take plenty of them.
When it comes to fittings that the Vendor has agreed to leave behind, such as a custom built couch, then these definitely need to be listed individually in the contract of sale. No verbal handshakes on those - get it in writing. And if they have a shed full of junk - from personal experience, I'd recommend putting something in the contract confirming they're going to remove all that stuff before settlement.
Pre-Settlement Inspection
The other thing you need to do is a pre-settlement inspection. Now, the rules around when exactly you're allowed to do this vary a bit from state to state, so do your homework. But popping past the property an hour or two before settlement is essentially a bad idea - a couple of days is better if you can, even up to a week.
It's something of a "how long is a piece of string" scenario. You need to do the inspection far enough out to have time to resolve issues, but if it's too far ahead of settlement, it's quite possible the Vendors won't have finished clearing everything out. Which means any last minute naughtiness on their part won't have happened yet. The optimal scenario is to do two pre-settlement inspections, but that may not be possible. So do the best you can.
The pre-settlement inspection is another time to get the camera out and take lots of photos. Chances are everything will be the way you expected and settlement can go ahead without any fuss.
But if it's not? Call your Lawyer immediately.
Now, let's take a bit of a reality check here. Sometimes the best option is just to grit your teeth and settle anyway, knowing it's just not worth the hassle of pursuing the Vendor about an issue and derailing settlement.
Sometimes, though, it may be possible for the Lawyers to come to an agreement that either fixes the problem or at least alleviates the cost of fixing it. This could take a number of forms:
Vendor agrees to….
At the end of the day, you probably won't get the Porsche at settlement (unless you sneak it into the list of contents and the Vendor doesn't notice!), but you can always hire one for a day and pretend...
And if you're going to get a giant to shake the house for you - take the Porsche out of the garage first. They don't bounce.
It can be the source of lots of funny stories about what Vendors take or leave behind, along with lengthy discussions about whether what happened was legal or not.
Why is it that a dishwasher gets left behind in one house, but not the next? They're both dishwashers, for crying out loud! And what about all the piles of junk in the garage - why are they still there? Settlement is tomorrow!
What should happen at settlement is occasionally not what actually happens in reality, so it's time to take a journey into the wonderful world of fixtures, fittings, goods and chattels.
That way when you walk into your new property and discover they've changed the chandelier for a $5 light fitting, you'll at least know whether the Vendor has done the wrong thing or not.
Being able to do something about it? Well, that might be a different story...
Let's start with the basics. The bits and pieces of a house are broken up into 2 major groups - fixtures & fittings, and goods & chattels.
Fixtures & Fittings
The easiest way to work out what items are fixtures and fittings is to look at the words themselves - shorter versions would be fixed and fitted. Both very helpful clues!
If something is fixed to the structure of the house, or has been fitted specially in a way that removing it would cause "damage" - then you can be pretty sure it fits into this category.
Another test I've heard people use is to pretend a giant came and picked up the house, and gave it a good shake. All the bits inside that stay put, even if they're a little battered, would be fixtures and fittings.
Some common examples of fixtures:
- hot water service
- garden shed cemented in place
- plants buried in the earth
- carpets
- clothes line
- solar panels
- built in bookshelves
Goods & Chattels
Continuing on with the giant analogy, all those things that would fly around, making the interior of the house look like your favourite snowglobe - they're goods and chattels.
On this list we have things like:
- pot plants
- washing machine
- mower
- televisions
- wheelie bins
- Porsches…
There, that was nice and easy! Now we can all relax.
What's that? What about a dishwasher?
Well, that depends on whether it's plumbed in or freestanding and detachable.
And light fittings? What if somebody removes a chandelier and replaces it with a cheap light fitting, like you said at the start? Oh. Okay, so there's a bit more to think about.
Contract of Sale
It's becoming a lot more common nowadays for the contract of sale to include a list of items in the house, with tickboxes to confirm whether it's staying or going. So if you're offered one of these with your contract of sale, read it thoroughly, and if there's anything on there which you're not sure about, ask to walk through the house again and check.
The downside of a contents list is that it's basically a standard, generic list. So while it might stop the Vendor absconding with the dishwasher, it doesn't help if they swap out the brand new dishwasher for a derelict one on its last legs.
There are two steps you should take if retaining existing fixtures is important to you. Firstly, make sure you record any special items in the contract of sale. So you might want to add "crystal chandelier" to the list. And potentially, it may be worthwhile making a note in the contract of the brand/model number of any particularly sparkly new appliances. Photos are also good - make sure you take plenty of them.
When it comes to fittings that the Vendor has agreed to leave behind, such as a custom built couch, then these definitely need to be listed individually in the contract of sale. No verbal handshakes on those - get it in writing. And if they have a shed full of junk - from personal experience, I'd recommend putting something in the contract confirming they're going to remove all that stuff before settlement.
Pre-Settlement InspectionThe other thing you need to do is a pre-settlement inspection. Now, the rules around when exactly you're allowed to do this vary a bit from state to state, so do your homework. But popping past the property an hour or two before settlement is essentially a bad idea - a couple of days is better if you can, even up to a week.
It's something of a "how long is a piece of string" scenario. You need to do the inspection far enough out to have time to resolve issues, but if it's too far ahead of settlement, it's quite possible the Vendors won't have finished clearing everything out. Which means any last minute naughtiness on their part won't have happened yet. The optimal scenario is to do two pre-settlement inspections, but that may not be possible. So do the best you can.
The pre-settlement inspection is another time to get the camera out and take lots of photos. Chances are everything will be the way you expected and settlement can go ahead without any fuss.
But if it's not? Call your Lawyer immediately.
Now, let's take a bit of a reality check here. Sometimes the best option is just to grit your teeth and settle anyway, knowing it's just not worth the hassle of pursuing the Vendor about an issue and derailing settlement.
Sometimes, though, it may be possible for the Lawyers to come to an agreement that either fixes the problem or at least alleviates the cost of fixing it. This could take a number of forms:
Vendor agrees to….
- remedy the situation prior to settlement (eg clear all the junk out of the garage and dispose of it)
- replace something that shouldn't have been removed - hello, chandelier!
- reduce the sale price by an amount equivalent to what it will cost to reinstate something that's been removed
- Or you agree to hold back a certain amount, say $5,000, on the understanding that those funds will be held in trust, used to resolve the issue, and any remaining balance paid to the Vendor at a set date
At the end of the day, you probably won't get the Porsche at settlement (unless you sneak it into the list of contents and the Vendor doesn't notice!), but you can always hire one for a day and pretend...
And if you're going to get a giant to shake the house for you - take the Porsche out of the garage first. They don't bounce.
