So what does a “solicitor’s approval clause” cover? The Court has ruled that a Solicitor is limited to reviewing the “conveyancing aspects” or “legal implications” of an Agreement. This means that your Solicitor is not able to review the “wisdom” or “appropriateness” of an Agreement or its commercial advantages/disadvantages to you. It follows that your solicitor would only be entitled to refuse approval if there is genuine legal objections or impediments to the bargain that the parties have made.
For example if the Buyer’s Solicitor discovers that the Vendor is not the registered owner of the Property being sold under the Agreement, then this would provide a valid reason for withholding their Approval. However, if the Buyer’s purchase Agreement did not have the same settlement date as the Sale of their existing property, this would not provide a valid reason for your Solicitor to withhold their approval. Neither would simply changing your mind about the transaction be a valid reason.
The Court has held that the other relevant principles that apply to Solicitor’s Approval Clauses are:
1. Does a contract exist?
2. Are there any legal implications which prevent the client from lawfully doing what they agreed to?
3. Is the action of your Solicitor under solicitor’s approval reasonable and in good faith? (Although your Solicitor must act in your best interest, they are also required to exercise honest, genuine professional judgment and not simply follow your instructions).
Please note that while your Solicitor is not required to give reasons to the other side for withholding their approval, the Court may in the absence of any reason infer that none honestly existed.
If you are entering into an Agreement to buy or sell Real Estate, it is important that you always seek legal advice prior to entering into and signing an Agreement.
