Burgess Thomson Lawyers

What Is A Death Or Capacity Clause And Why Does It Matter?

Death Or Capacity Clause Property Conveyancer Newcastle NSW

No one likes to think about what would happen in the event of their loved one’s death. But what would happen if you and your partner were in the early stages of purchasing a property and one of you become incapacitated or died? Contracts bind everyone, even the dead or incapacitated, and so in the event of death parties are still required to meet their contractual obligations. This can be avoided through the inclusion of a death or capacity clause.


Death or Capacity Clauses

A death or capacity clause operates to provide both parties with the right to rescind or terminate a contract for sale in the event that either party dies or becomes incapacitated prior to the completion of the contract. These types of clauses often appear when property is being bought by two people simultaneously as joint tenants. An example of a death capacity clause is provided below.

Example Clause

  1. Death

45.1 Without affecting any other rights of the parties, if either party, or if more than one any one of them, prior to completion:

  1. i) dies; or

ii)becomes incapable because of unsoundness of mind to manage the party’s own affairs,

either party can rescind the Contract by notice in writing forwarded to the other party and thereupon this contract shall be at an end and the provisions of clause 19 hereof shall apply.

These clauses are not default provisions in contracts for sale, and therefore, they must be drafted as special conditions to the contract. The lawyers at Burgess Thomson can draft these, and other special condition clauses for you if necessary.


Relevance of death or capacity clauses for the purchaser

Death capacity clauses can be extremely beneficial for the purchaser. Particularly if finance for the purpose is contingent on both parties’ income, these clauses can ensure that parties are not locked in to contracts they can no longer maintain.  In the absence of such clause, the purchaser would either need to go through with the purchase or forfeit the deposit, causing undue financial loss.

Or, in the case of an elderly purchaser, these clauses can help protect the purchaser’s family in the event of death or incapacity. Again, in the absence of such clause the estate of the deceased, or the family members who now act or behalf of the purchaser (in the event of incapacity) would be left to either complete the contract or terminate, forfeiting the deposit.

Ultimately, the death of a loved one may completely alter the need, desire and vision accompanying your purchase. Including a death or capacity clause in the contract will ensure that in the unthinkable event of death, you have the ability to rescind the contract with no financial loss suffered.


Relevance of death or capacity clauses for the vendor

For the vendors of a sale contract, death capacity clauses pose a risk. Whilst they operate to also provide the vendors with the right to rescind in the event of death, they create uncertainty around the status of the sale. What may appear to be an unconditional sale can quickly fall through if a party to the contract dies or becomes incapacitated. Therefore, it is usually favourable for the vendor to omit these types of clauses.


How Burgess Thomson can help

The team at Burgess Thomson has a wealth of experience in conveyancing matters, acting for both purchasers and vendors in multiple transactions. We can ensure that your unique situation is taken into consideration, and that a death and capacity clause, among any other unique special conditions which may be required, is added, or omitted as necessary.

For example, there may be unique circumstances in which a vendor may wish to retain the right to rescind in the event of death or incapacity.

Whilst we never want to imagine the worst-case scenario, in the case of property purchases it is important that you are prepared for any circumstance to avoid added financial stress. The experienced team at Burgess Thomson can ensure this happens and that any foreseeable issues are taken into account and protected against.

Book a consultation with our conveyancing team to find out more.


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