Frequent Questions

This is the day upon which the sale is made final.  That is, the process of conveyancing is completed and the buyer is able to take possession of the purchased property. It normally takes place about six weeks after contracts are exchanged.

Traditionally, settlement was a physical meeting of all the interested parties in which the final amount was transferred to the seller, and all relevant documents are checked and exchanged. This is still the case, however the buyer and seller no longer need to attend the settlement meeting as lawyers are representative of their interests.

At settlement, the buyer must ensure that the following are secured:

• That clear and good title is obtained from the seller (in the form of a certificate of title and form of transfer);
• That all requirements of the financial lender are satisfied so the funds for the settlement will be released.  Settlement cannot be made if the funds for sale are not available to be released; and
• That arrangements are made for the possession of the property.

It is advisable that in order to be sure the certificate of title is good and correct, it be compared with the copy gained by the conveyancer from the land title office.

Payable amounts

The following amounts are payable at settlement:

• Council, and water rates; and
• Land taxes (where appropriate).
• Usually other amounts, such as electricity, gas or telephone charges are not taken into account  and are settled privately between the buyer and seller.

Time and place of settlement

The time and place of the settlement is determined by the seller of the property and will be where the certificate of title is held. The timing of settlement will usually be four to eight weeks after contracts are exchanged. This is considered the minimal time in which the process can be completed.

As most property is mortgaged the site of the settlement will be a bank or building society office.  Where the seller owns the property outright settlement will take place at the office of the seller’s solicitor (or licensed conveyancer).

Often, the keys are handed over at the time of settlement so that the buyer can take possession of the property, but generally the keys will be left with the estate agent handling the property for the buyer to pick up at a later date.

A pre-purchase inspection is an exercise in ‘due diligence’, ensuring that the investment the buyer is making is a sound one.  These inspections are carried out by a qualified building inspector who prepares a report on the structural integrity of the property in question.

From 1 January 2004, only building consultants licensed under the Home Building Act 1989are permitted to carry out pre-purchase inspections of residential properties in New South Wales. Other inspections, e.g. pest inspections, do not require a licensed practitioner. However it is vital to have pest and electrical wiring inspections made prior to purchase.

What is a final inspection?

The final inspection is most often made before, or on the day of, settlement, a final inspection is used to ensure that the property is in the condition that is described in the contract and that all inclusions have been made.

What happens if problems are not found?

If the licensed consultant was negligent in doing the inspection, or did not identify problems with a property during an inspection, you may be able to take legal action against them. Seek further legal advice if you are unhappy with the results or outcome of an inspection.

When both parties have agreed with the terms of the contract for the sale of land, they both sign the contract and the buyer pays a deposit to the seller. This deposit will be a percentage of the value previously agreed.
After exchange the seller holds the property until the date of settlement. At the point of exchange, the agreement has been struck and will stand unless the contract is rescinded by either the buyer or seller.

Processes triggered by the exchange

The exchange of contracts will trigger the following processes:

• The commencement of the ‘cooling-off’ period (where it is available in your circumstances – for example, this does not apply to property purchased at auction)the cooling off period generally ranges between 3-5 business days, depending upon the laws of the state where the contract is taking place;
• The timing for the payment of the stamp duty. Stamp duty must be paid within 1-3 months of settlement (depending upon the individual laws of the State or Territory). If the duty is not paid within this period a fine may apply.
• Final period before settlement.  This will usually be four to eight weeks between the time the contracts are exchanged and the date of settlement.

The exchange of contracts presents a timetable before settlement in which final inspections, financial arrangements, and the final exchanges must be made

Exclusions and inclusions are the technical terms for those fittings and fixtures that will or will not be sold with the property. The status of fixtures and fittings in a property that is for sale are determined through negotiation between buyer and seller before the contracts are exchanged or the property settled.

Fixtures differ from fittings in that fixtures are ‘affixed’ to the land and pass to the buyer upon purchase, while fittings are chattels (personal property) that do not pass in ownership with the property. So, fixtures are ‘automatic inclusions’ and must be specifically excluded in any agreement, while fittings are automatically excluded and must be specifically included in any agreement.

Example of fixtures

Possibly the most common example of fixtures are plants in the garden (if the property has a garden). These, if the seller wishes to specifically exclude them from the purchase (and subsequently remove them prior to settlement) must be expressly excluded from the sale.

Examples of fittings

Fixtures and fittings may include the following:

• Inside living space items: light fixtures or carpets;
• Kitchen fixtures: stoves, dishwashers, dryers, etc.

It is assumed that such fittings are excluded from sale. If they are to be included they must be expressly included in any agreement.

It is greatly advisable that these inclusions and exclusions be agreed upon prior to the drafting or exchanging of contracts as it is best practice to include them (or attach an agreement to the contract) specifically in a term of the contract.

After these inclusions and exclusions are agreed upon then they must be included with the property upon settlement (or removed before settlement), unless another agreement between the parties for another timing for inclusion is made. The inclusion and exclusion of fixtures and fittings takes on greater importance in the purchase of a business.

As noted above, conveyancing is the process whereby property is transferred from a seller to a buyer. This involves both legal and administrative processes as well as processes dedicated to ensuring the property is a good investment.

The Process

The following is a brief list of activities in the conveyancing process:

• Examining, drafting (if acting for the seller) and exchanging the contract of sale.
• Liaising with the other conveyancer over the terms of the contract;
• Arranging building and pest inspections;
• Examining a strata inspection report (if the property is part of a strata scheme);
• Arranging finance (if necessary);
• Paying the deposit at exchange;
• Preparing and examining the mortgage agreement (if necessary);
• Checking if there are outstanding arrears or land tax obligations;
• Finding out if a public authority has a vested interest in the land or if any authority is planning a development that would affect the enjoyment of the property;
• Generally sourcing information about matters that may have not yet been disclosed (such as disputes over fences or building work, for example);
• Calculating the stamp duty payable or applying for an exemption or discount;
• Overseeing the transfer of title; and
• Completing final checks and attending settlement.

The Contract

This legal process is the formation of an agreement between the buyer and seller: a contract for the sale of land. This contract will include the following terms and information:

• the identity of both buyer and seller;
• the details of the property and its condition;
• the agreed priced;
• the day on which the full amount will be paid (settlement); and
• other rights and particulars such as a ‘cooling-off’ period (see ‘What is a Cooling-Off Period’) or certain contingencies regarding the availability of finance.

Conveyancing is the process of formally transferring the ownership or control of property from a seller to a buyer. It includes mortgages, charges, leases and the passing of various other interests in property.

This process, like any sale, requires the creation of an agreement. In this case, a ‘contract for the sale of land’, the preparation for which forms the basis of the conveyancing process.

The preparation for completion of the contract involves both basic administrative tasks such as the sourcing of documents, and also important acts of ‘due diligence’ in ensuring that the property investment being considered is indeed a good investment. Such acts of ‘due diligence’ includes building, and pest inspections that are geared towards ensuring that the property being purchased is not a poor investment.

Across most Australian States the following people can handle conveyances:

• A solicitor;
• A licensed conveyancer; or
• An individual.

In some States (Queensland, Tasmania and ACT) a practising lawyer may only act for a client in a conveyancing matter, but in all other States professionals such as licensed Conveyancers may also carry out conveyancing work.  Conveyancers are usually regulated by a State Government body who have strict rules for their registration and training.

Costs

The fees that are paid to a lawyer or licensed conveyancer for the completion of this process are called ‘disbursements’.  A licensed conveyancer or lawyer will also charge a general service fee for the services.  In some States this is capped at a maximum amount, though the amount will vary greatly.

Professional indemnity insurance

Both lawyers and licensed conveyancers are required to hold professional indemnity insurance.  Basically, this insurance allows a person aggrieved by the negligent work of such a professional to collect remuneration or compensation.  This fact is an important peace of mind for a buyer or seller if something should go wrong.

While It is also possible to conduct a conveyance yourself, before doing so it is important to understand the benefits of using a property law specialist covered by indemnity insurance.  For more information read the FAQ, ‘Do I Really Need a Lawyer?’

A power of attorney is a document which allows another person to make decisions on your behalf. There are lots of instances where you may want to execute a power of attorney. There may be situations where you want to give someone power to do something specific during a specific period of time. For example you may want someone to buy property on your behalf or to sign a legal document while you are on holiday.

You can also use a power of attorney to plan for the future so that someone you trust can deal with your property should you lose your capacity to deal with it yourself. You can give someone power to deal with your assets so your affairs can be properly managed and you can continue to support people who depend on you. It is not something that can be used after your death.

In NSW, the new Powers of Attorney Act 2003 which applies to any power of attorney created after 16 February 2004 has clarified the law relating to powers of attorney and gives additional protections to people wanting to appoint powers of attorney, so that they can be confident that their property will be dealt with in the way that they intend.

When creating a power of attorney, you can choose when it is to take effect from. There are a number of options:

• immediately;
• when the appointed attorney accepts it;
• between specified dates;
• when the attorney considers that you need assistance managing your affairs; or
• some other time.

You need to consider all the options that are available when creating a power of attorney.

If you want to use a power of attorney to enable someone to deal with your real estate, you must register the power of attorney. Powers of attorney are quite commonly used to deal with real estate. You can use them to do specific things such as enable someone to buy or sell property while you are away. You may want to take advantage of a particular opportunity that might arise or you may just need someone you trust to be able to handle your affairs for a period. Powers of attorney created for this purpose need to be as specific as possible.

If you want to set up a power of attorney to plan for the future, the new Act has removed a lot of the uncertainty surrounding enduring powers of attorney. An enduring power of attorney is a great way to ensure that your affairs will be properly managed should you lose your capacity through age or accident. You can include a simple statement that allows the person you appoint to give a reasonable level of gifts and benefits to cover your established social practices. If there are people who are dependent on you, the power can be used to provide for their living expenses. It can be used to give gifts to your family or close friends such as birthday and Christmas gifts. It can also be used to continue to make donations to charities which you would normally have made. Enduring powers of attorney are supervised by courts and tribunals (in NSW the Supreme Court and the Guardianship Tribunal) which can prevent an abuse of the powers.

There are number of protections in the new Act which protect the interest other people may have in your property. For example if the attorney disposes of property which is specifically given in a will, the beneficiaries retain an interest in the money or property which arises from that disposition. It also protects the rights of a spouse of someone who dies intestate (without leaving a will) if the attorney has disposed of the matrimonial home.

Valid enduring powers of attorney created in other States and Territories can be recognised in NSW. You need to be sure that the power of attorney was properly executed and bear in mind that it is will be limited to any power that could be conferred in NSW.

A power of attorney can give another person a lot of control over your property, assets and other affairs. You need to make sure it is properly set up so that the person you appoint will manage your affairs in accordance with your wishes. If you want to establish a power of attorney for a specific purpose or for long-term planning purposes, you should talk to a solicitor who can help you set up an appropriate power of attorney and explain to you the consequences of the particular power you create.

The buying or selling of a property is complex as well as risky. The good news is that having an experienced lawyer (either a solicitor or a licensed conveyancer) act on your behalf in this process is virtually a guarantee that your sale or purchase will go ahead smoothly and with a minimum of fuss. While you may think that you cannot afford the services of a lawyer, consider whether you can afford not to.

Doing conveyancing yourself with a ‘Do-It-Yourself’ kit can be fraught with unseen dangers. Remember, licensed conveyancers and lawyers are not only trained professionals but are required to have professional indemnity insurance and will be professionally liable if anything goes wrong in the process. If you carry out your own conveyance and it goes wrong you alone will be left responsible.

What can go wrong? Consider a situation where a seller of a property does not disclose the fact that their property is actually condemned and an order of demolition has been issued. If your lawyer or licensed conveyancer fails to find this out in their investigations and your new property is not in the condition it was originally sold in (that is, it is demolished) then your conveyancer will be professionally liable and you will receive remuneration for your economic losses. If you are acting for yourself no remuneration will be available and the mistake may lead to financial ruin.

Remember, the purchasing of a property will be one of the largest investments you make in your life. During this period both your lawyer or licensed conveyancer and your estate agent will become important people in your life. Whether investing for the future, or buying into the ‘Australian dream’, consulting a conveyancing professional will enable you to feel assured that your investment is in good hands.

Stamp duty is a State tax on written documents and certain transactions, such as:

• Hire purchase agreements
• Motor vehicle registration and transfer
• Leases and mortgages
• Insurance policies
• Transfers of property.

Amounts of the duty will vary between States and Territories according to the type and value of the transaction involved. The precise rules vary according to the individual State or Territory legislation. Certain exemptions and concessions may also be available.

Your lawyer will calculate this amount and ensure that the correct amount is paid at the right time prior to settlement.

Late payment

Stamp Duty must usually be paid within 3 months of exchange of contracts (however this may vary depending upon which State the exchange took place and the type document) or, if you have an incoming mortgagee, prior to or at settlement. In the event of an extended or delayed settlement you are reminded that if Stamp Duty is not paid within three (3) months of the first date of execution of the contract, the Office of State Revenue will impose a penalty interest to be calculated on a daily basis. Your lawyer or licensed conveyancer will ensure that such penalties are not incurred and that the Stamp Duty payment is made on time.

Exemptions and discounts

From time to time various State and Federal Government schemes will allow certain classes of property buyers to gain a discount or exemption from payment of the stamp duty. Public tenants are typically exempt from payment of stamp duty.

This is where an estate agency or development company offers property for sale that is yet to be completed or has not yet commenced construction. Increasingly, large residential developments are being offered for sale before completion. Buying off the plan represents unique challenges for the conveyancing process as a multitude of different considerations are required to be taken into account.

Buying off the plan can be a very risky venture and when considering buying a property of this sort you should be aware of the following risks relating to price after completion, changes to construction and management contracts:

• Is the selling price fair? You have little way of knowing what the selling price will be after the completion of the property. While some consumers find they have a completed unit that has a market price higher than that which they paid for it, often the opposite is true. Remember, market prices for real estate fluctuate greatly;
• Can they change the plans? Yes, changes to building plans often have to made during the construction process. Often the completed building will be quite different to that originally conceived. This may have an effect on the desirability of the property and the price compared with the original estimate if the building is not substantially the same as the original plan;
• Quality of construction. The purchaser has no guarantee that the property will be constructed to a certain level of quality. Indeed, the purchaser has little idea of what the standard of fixtures and fittings will be after the property has been completed. A variable quality in these fixtures and fittings may have a detrimental effect on the value of the property after completion; and
• Management contracts. Often the developers will enter into contracts for the management of the property for after completion. These contracts may not be in the best interests of the property’s value or utility and may be difficult for the owner’s corporation or body corporate to overturn or change.

Generally, buying off the plan is very risky as the final product may not be as it was originally imaged. Financially, while buying off the plan may lead to the securing of a property for less than its worth when completed. However, the reverse may often be true and a buyer may buy an unfinished home or unit that turns out to be worth less than the original asking price.