Special conditions: read them or regret them.

The details count

I don’t want to say that ‘every warehouse purchase is different’ because it sounds like AI. But it’s true. The standard contract is a square peg. It won’t exactly fit your situation.

We’ve seen clients who need to move in early. Requirements for a harder concrete floor layer. Structural changes for heavy equipment. Vendor finance terms.

Your special conditions are a roadmap for who has to do what and when. Both sides prepare them to protect themselves. Someone has to read them very carefully.

Will the contract take care of me?

Sometimes.

Maybe the price and key dates look right. There are pages of standard clauses. And a couple of pages of special conditions. Do you need to read them if ‘everything’, has already been agreed?  

Special conditions can fundamentally change how the regular REIQ contract works. They can narrow your finance protection, require you to pay 10% GST, change when you need to insure the property and try to add obligations that were never discussed.

Special conditions often decide key terms and deserve the same attention as the price.

Unexpected changes

The vendor might not say they want to limit your ability to exit on finance during negotiations. But they may try to add a special condition requiring a letter from your lender that you didn’t qualify for finance. Due diligence might be limited. Early release of deposits. Extension rights can be restricted.

Buyers often focus on headline terms like the price and key dates. It’s critical to know what the special conditions say too.

The contract you think you are signing might surprise you when things go wrong.

Common important special conditions

Of the hundreds of possible special conditions, here are six common ones:

Lease in place at settlement

To potentially qualify for the going concern GST exemption, a lease must be in place before settlement. If it isn’t, you may have to come up with 10% GST at settlement on top of the purchase price. Your special condition could require the lease to be drafted, agreed, and signed well before settlement.

Automatic expiry / Guillotine clauses

Some conditions might automatically expire so you lose the right to terminate. You’re waiting on a critical report but the condition automatically expired. Time ran out before you had good information.

Deposit released before settlement

The standard position is that your deposit is held by a stakeholder until settlement. A special condition might release it to the vendor once the contract goes unconditional. If the vendor then defaults you have to try to recover that money.

Higher Default interest

On a large purchase price, even a modest increase in the default interest rate can be expensive if settlement is delayed. Even for reasons out of your direct control (your lender, bank transfer delays etc)

Changes to finance conditions

As noted above, a finance special condition may require the buyer to provide a letter from their lender showing that finance has been declined before they can terminate the contract for finance.

‘As is’ conditions

Distressed sales, including bank and liquidator transactions, often include an ‘as is where is’ condition. You take the property in its current state. No warranties. No representations. No recourse if something turns up after settlement. What you see is what you get, and what you do not see is still your problem. These sales can offer value but will require more rigorous due diligence.

Helpful Special Conditions

Special conditions are a great tool to get you to the outcome you are after.

Due diligence: a real right to exit

A due diligence condition gives you time to investigate the property and exit if you find something you cannot accept. But the condition has to be drafted broadly enough to actually work. Too narrow and you are locked in regardless of what you find. We draft due diligence conditions that give you genuine protection and enough time to complete the investigation properly.

Leases sorted before settlement

If the property is tenanted and you want vacant possession, the lease must be terminated before settlement. If you are buying through a structure and your business will occupy the property, a new lease must be executed before settlement, or the going concern GST exemption may fail and you pay an extra ten per cent on the purchase price.

Vendor finance

If the vendor is contributing to the financing of the transaction, the terms need to be specified in the contract. Interest rate, repayment terms, security, and default consequences.

Works, fitout, and early access

If the vendor has agreed to complete works before settlement, that obligation needs to be in the contract with a clear standard, a deadline, and consequences if it is not met. If you need access to the property before settlement to prepare your business, an early access condition sets out the terms on which that happens and who carries the risk while you are there.

GST clearly defined

How GST is treated can really change the settlement amount. Avoid disputes at settlement and lock it down in the special conditions.

Read your special conditions, or regret

The buyer who reads the special conditions before signing knows exactly what they are working with and what to push back on. The buyer who reads them later is already behind.

Step 1: Find and own every amendment

Read each special condition alongside any standard clause it affects. What did the contract say before? What has changed?

Step 2: Who’s at risk?

For each amendment, ask who carries the risk and cost if something goes wrong. Then check the probability x the cost if it does happen. A low-probability risk with a catastrophic consequence deserves as much attention as one that is more likely but less expensive. Do the maths.

Step 3: Push back before you sign

Special conditions are negotiable. After the contract is accepted and signed, they control. The conversation is easier before you commit.

What we do when we review a warehouse contract

Because we’ve read a lot of them, we read them carefully. We take good notes. We talk to you about them. We ask who has the stronger hand commercially? What’s important to you and what are you trying to achieve? What can you let go and what matters? We share good ways to push back before you sign.

Sign with your eyes open, not with your fingers crossed.

Before you sign

The standard contract is the starting point. The special conditions are where your deal is written.

If you are reviewing a warehouse contract and want the special conditions properly assessed before you sign, get in touch to book a call.