Subject to Finance Clause: Western Australia Guide

Plain English Definition

"Subject to Finance" means a contractual condition in a Western Australia property contract establishing that the buyer's obligation to complete the purchase is contingent upon obtaining unconditional written approval for mortgage finance by a designated date. Under the standard REIWA Contract, this clause permits the buyer to terminate the agreement and recover their full deposit if a genuine finance application is formally declined by a lending institution. Without this condition, an executed contract binds the buyer unconditionally, exposing them to severe financial penalties if their funding falls through.

Who This Affects

• Property Buyers: Must lodge a formal loan application immediately, pursue it with reasonable diligence, and serve formal written notice of approval or rejection before the finance deadline expires.
• Property Sellers: Must keep their property off the open market while waiting for the buyer's lender to assess the file, bearing the risk of missed alternative selling opportunities if the transaction collapses.
• Mortgage Brokers and Lenders: Must coordinate property valuations, credit assessments, and formal documentation within the strict contractual timeline agreed upon in the offer.

The Danger Zone: Buyer's Risk

• Deemed breach through unhurried application: Failing to make an immediate, formal loan application breaches the "reasonable endeavours" covenant under the standard REIWA General Conditions, which can void the buyer's right to end the contract and reclaim their deposit.
• The specific lender trap: Listing a specific lender in the contract schedule (for example, "Bankwest only") and subsequently applying to or being declined by a different institution deprives the buyer of the right to terminate under the clause.
• Conflating pre-approval with formal approval: Assuming an online pre-approval or an automated approval-in-principle satisfies the clause leaves buyers vulnerable, as only an unconditional, formal written loan offer satisfies standard contractual requirements.
• Missing the 5:00 PM deadline: The standard Joint Form conditions mandate written notice of approval or non-approval before a strict cut-off time (customarily 5:00 PM on the Finance Approval Date); late notices forfeit the protection of the condition.
• Inadequate proof of refusal: Providing a generic rejection email from a mortgage broker rather than an official, written declination letter directly from the nominated lending institution invalidates the finance refusal notice.
• Approval burdened with impossible conditions: Receiving a loan approval that is conditional upon selling an existing property or clearing debts not disclosed during offer negotiations may be legally construed as an approval, trapping the buyer if those conditions cannot be met.

What to Check Before Signing

1. Calculate a realistic finance timeline: Insist on a minimum of 21 to 28 calendar days from acceptance to the Finance Date to absorb lender underwriting delays and physical valuation bottlenecks.
2. State an accurate loan amount: Write a specific loan figure (such as "$520,000") or a precise percentage of the purchase price on the REIWA Contract schedule instead of writing vague terms like "sufficient to complete" or leaving the section blank.
3. Draft the lender nomination broadly: Insert words such as "Any major Australian bank or licensed lending institution" rather than naming a single lender, giving you flexibility if your primary bank declines the application.
4. Scrutinise custom special conditions: Check whether the seller or selling agent has inserted annexures or modified Clause 1 of the Joint Form of General Conditions to shorten cure periods or impose non-refundable administrative fees.
5. Confirm non-borrowed cash reserves: Verify that you have ready access to funds required for your cash deposit, transfer duty (stamp duty), conveyancing disbursements, and settlement adjustments well before finance approval is granted.

Key Western Australia Rules

Property transactions in Western Australia operate primarily under the REIWA Contract (the Contract for Sale of Land by Offer and Acceptance) read in conjunction with the Joint Form of General Conditions for the Sale of Land, jointly produced by REIWA and the Law Society of Western Australia. Clause 1 of these General Conditions sets down rigid operational parameters for finance conditions: the buyer must apply for finance immediately to the nominated lender, use all reasonable diligence, and deliver formal written notice along with the lender's written notice of rejection if seeking termination. Unlike Victoria, Queensland, or New South Wales, Western Australia has no statutory cooling-off period for standard private treaty real estate contracts. Consequently, the Subject to Finance clause functions as the buyer's primary legal shield against insolvency or compulsory forfeiture of deposit funds.

Real-Life Western Australia Scenario

Amelia signed an Offer and Acceptance on a three-bedroom villa in Joondalup for $650,000, paying a $30,000 deposit under a standard REIWA Contract containing a 21-day Subject to Finance clause naming "Major Bank A." Instead of applying immediately, Amelia spent eleven days comparing interest rates online before submitting her application to an unlisted digital lender. Two days past the Finance Date, the digital lender declined the loan due to an unexpectedly low desktop valuation, leading Amelia to send a hasty text message to the real estate agent requesting contract cancellation and a deposit refund. The seller's settlement agent established that Amelia had failed to apply to the nominated lender, breached her reasonable endeavours duty, and missed the contractual 5:00 PM notification deadline. The seller terminated the contract for default, retained Amelia's full $30,000 deposit, and issued a formal default notice claiming further damages when the property was subsequently re-sold for a lower price. Strict adherence to nominated lender names and statutory notice deadlines is the only way to safeguard your deposit money when applying for bank finance.

Frequently Asked Questions

Can the seller cancel the contract if my finance approval is delayed?

Yes, if the agreed Finance Approval Date passes without you providing formal notice of approval or requesting and executing an agreed written extension, the seller gains the legal right under the General Conditions to serve a notice terminating the contract. Sellers often exercise this option if market demand has increased or if they hold a backup unconditional cash offer.

What happens if my mortgage approval contains conditions?

If a lender issues an approval subject to outstanding criteria—such as satisfactory property valuation or proof of cleared credit cards—it is legally considered a conditional approval, not formal finance approval. You should not notify the seller of finance approval until every bank condition has been satisfied in writing, otherwise your contract becomes completely unconditional while your funding remains at risk.

Can I withdraw from the purchase if I change my mind before the finance date?

No, you cannot use the finance clause to exit a contract simply due to a change of heart. The REIWA General Conditions require you to make a genuine, prompt, and continuous effort to obtain finance; intentionally sabotaging an application or refusing to provide required documents constitutes a contractual breach that can result in the loss of your deposit.

What constitutes valid written notice of finance rejection in WA?

Valid notice requires an official written communication delivered to the seller or their appointed settlement representative before the deadline, formally stating that finance was declined. This notification must be accompanied by the written declination letter issued directly by the financial institution named in the contract schedule to prove that reasonable endeavours were exhausted.