BUYING
Find the answers to all your buying related conveyancing questions.
A contract of sale is a legally binding agreement between a buyer and a seller. It details the terms and conditions in which a seller agrees to transfer ownership of a property to a buyer.
The real estate agent provides the contract to any prospective buyers of the property. The contract notes legal details about the property and includes a range of disclosure documents such as, copy of the title information, plans for the land, any dealings related to the land, a zoning certificate and sewer water location information.
There are only a very small number of scenarios where a buyer can pull out of the purchase once contracts have been entered into so it’s important that the buyer have this document reviewed by their conveyancer prior to signing.
Generally, finance approval will be given in 2 stages:
- Pre-approval is provided when there are still outstanding items or ‘subject to’. You will almost always be given a pre-approval (as opposed to a ‘final’ approval) when you have not yet found a property to purchase as the finance will be conditional upon the bank/finance provider accepting the property as security for the loan.
- Final, Unconditional or Formal Approval is provided once all the ‘subject to’ terms are satisfied by the bank. It is the last step before loan documents are provided by the bank for signing then certified for settlement.
Usually, the first step in the conveyancing process is for your conveyancer to review the contract for the property you wish to purchase. This is normally done around the time you want to make an offer, or several days before going along to an auction. YMC offer this as a complimentary service and there is no conveyancing fee if you are unsuccessful with the purchase.
As your conveyancer we suggest and request any contract amendments on your behalf and, if required, mark up the contract for signing. We liaise with any other stakeholders (e.g. your broker, buyer’s agent, or real estate agent) on any special requirements and ensure the contract you are entering into is on the terms negotiated.
‘Exchange of contracts’ is the legal term used to describe that a contract has been entered into.
It is the physical act of the contract being signed by all parties then ‘exchanged’ to one another. It is this act which creates a legal relationship between the buyer and seller.
Prior to an exchange of contracts, both the buyer and the seller can change their mind and not proceed with the deal, despite any verbal agreements.
Buyers should be aware that any expenses occurred prior to exchange of contracts may be lost if the seller decides not to proceed with their offer. Likewise, the seller is not able to establish any legal relationship with the buyer until an exchange of contracts has taken place. Further, sellers should be aware of any cooling-off period that may exist for the benefit of the buyer.
The sooner the better! It’s far better to know what your borrowing power is and anticipated repayment structure for budgeting before ‘going shopping’. Having the security of finance approval also means you will be considered a genuine buyer when it comes time to the seller choosing to accept your offer or someone else who isn’t as advanced in their finance application.
Generally, finance approvals will last three months, and most banks/brokers won’t charge a fee to renew the approval if it expires. However, the bank may require additional credit checks for multiple applications so it’s best to know what that will be prior to undertaking multiple applications.
This is the time in which a legal relationship is formed between yourself and the seller. Contracts will either be exchanged with a cooling-off period for the benefit of the buyer, or unconditionally. The deposit is also payable at this time.
All contracts for residential property in NSW come with a 5-business day cooling-off period for the benefit of the buyer. It allows the buyer to obtain their unconditional approval from their bank, any pre-purchase reports that may be required as well as final checks of the contract terms before committing to the purchase.
If the buyer chooses not to proceed with the purchase, the buyer will forfeit their 0.25% (of the purchase price) deposit paid to the real estate agent.
Note there are several scenarios where a cooling-off period may not apply:
- At auction. There is automatically no cooling-off period where the property is sold at auction, or where the property is passed in at auction but sells the same day.
- Non-residential property. Where the property is used wholly for non-residential purposes or there are more than two places of residence.
- Where the property is over 2.5 hectares.
- Where a section 66W certificate is provided by the buyer’s conveyancer.
After contracts are exchanged unconditionally or once the cooling-off period expires, your conveyancer will undertake a number of other enquiries on the property to ensure the seller has fulfilled their obligations under the conveyancing act such as whether there are any outstanding building notices issued by council and rates/tax checks so that those payments are taken into consideration as part of the settlement. If you are obtaining finance, this is the time where you would sign loan documents and your bank will certify the loan for settlement.
Roughly 1-2 weeks before settlement, your conveyancer will confirm a break-down of what is due for settlement (i.e. balance due to the seller, stamp duty and any other fees to settle the purchase). You should also ensure satisfactory insurance is undertaken around this time. Whilst the seller carries the insurable risk of the property up until settlement (or possession, whichever occurs first), we normally recommend you investigate coverage in the lead up to settlement. Your bank will likely require this too. You are also allowed to view the property to undertake a final inspection within the 3 days leading up to settlement. This is to ensure the property is in the same state of repair as what it was in at the time contracts were entered into.
A section 66W certificate is a document prepared and signed by the buyer’s conveyancer noting that they have explained to the buyer that the cooling-off period has been waived by the buyer.
This is a common document requested by the seller as it provides certainty that when contracts are entered into, the buyer is committed to going ahead with the deal. It’s important that the buyer has completed all due diligence on the property and is comfortable committing to the purchase before this document is provided.
All settlements take place electronically via PEXA (currently the only electronic settlement platform available in NSW). Your conveyancer will take care of all the formalities to ensure the settlement runs smoothly and you are not required to be physically present on the day of settlement, however, you may be needed via phone/email to provide any last-minute instructions.
Prior to a buyer committing to purchase any property, it is important that all pre-purchase inspections and due diligence is completed. This relates back to the established caveat emptor/buyer beware legal adage which translates to the responsibility of being aware of what the buyer is purchasing, is on the buyer to investigate. There are, of course, exceptions to this rule where a seller knowingly misleads a buyer, but generally the state of repair of the property or strata related concerns, is the buyer’s responsibility to investigate.
A buyer should undertake a pest and building report to ensure there are no obvious building defects or infestation problems with the property.
A strata report details important information on the running of the owner’s corporation such as, the financial position, if any special levies have been struck or will be struck by the owner’s corporation, and to determine whether there are any issues that have been flagged by the owner’s corporation in respect of the property.
The strata inspector will usually review minutes of recent meetings of the owner’s corporation and provide a summary of any important items that have been raised at those meetings.
A buyer should do this investigation before an unconditional exchange of contracts or during the cooling off period.
Once settlement takes place, you are officially the owner of the property. You are entitled to keys and therefore possession of the property.
Change of name/addresses are issued at the time of settlement and you’ll start to receive notices for council and water (and strata if purchasing a strata titled property). If you are gaining possession of the property at settlement, we’d normally recommend changing the locks as it’s not possible to determine how many sets have been created over time.
Buying Off the Plan means you’re purchasing a property that is not yet built. It usually means you are committing to purchasing the property based on design plans. You can read further information on OTP here.
We recommend speaking to the local council for the area you are purchasing in. Most local government authorities have an online database of advertised development approval’s (DA’s).
You can also subscribe to the following website which assists in gathering this type of information:
https://www.planningalerts.org.au/
The seller promises that there are no encroachments on or by the subject property being transacted. However, it is up to the buyer to ‘test’ this promise. Obtaining a survey can be beneficial, particularly for large or unusual blocks that may have easements or right of ways involved, especially if you are intending on carrying out future works to the property.
An alternative is title insurance; this is a type of insurance that assists with a wide range of risks that may arise with property ownership, including dealing with encroachments.
You can read more about title insurance via:
https://www.stewartau.com or
https://www.firsttitle.com.au
Gazumping refers to a situation where a buyer has verbally agreed to buy a property, but then the seller signs a contract with a second buyer before the agreement is finalised.
If you are gazumped, neither the real estate agent nor the seller is obliged to compensate you for any money you may have spent on legal advice, inspection reports, finance application costs or inquiries. However, your “expression of interest” payment (if you have paid one) must be refunded to you in full.
If you are the successful bidder at auction when the hammer falls and the reserve has been met, you are committed to the purchase!
Normally, the successful bidder will be required to sign the contract upon the auction finalising and pay the deposit. An exchange of contracts then takes place. Any agreed amendments to the contract (note these need to be agreed to in writing by the seller prior to the auction commencing) will be made by the auctioneer before signing. The auctioneer is authorised to sign on any party’s behalf and there is no cooling-off period.
Where property is owned jointly in NSW, you can own the property as joint tenants or tenants in common (in equal or unequal shares).
Most married or de facto couples choose to purchase the property as joint tenants which means that if one party passes away during the co-ownership, the surviving party automatically inherits the deceased’s share.
In a tenants in common structure, you get to choose the ownership percentage as well as how you want your share to be dealt with on your passing. This is a common structure for investments. However, there may be other reasons why a tenants in common structure is beneficial for you.
Prior to deciding on the structure, we recommend you obtain advice from an accountant or solicitor who specialises in estate planning who can best guide you what the benefits of either structure is.
There are two main options:
- Where you are obtaining finance to assist with the purchase, most banks have an option to debit the additional contribution from your nominated account. There is normally an authority document for this to occur as part of your loan documentation.
- You can also choose to transfer the funds to our Trust Account to be held pending settlement.
Generally, a deposit is due at the time contracts are entered into. This is a standard ‘essential’ term of all contracts in NSW. The default deposit amount is 10% of the purchase price, however, it is common for this to be reduced to 5% or, for a deposit bond to be used in lieu of a cash deposit, with the seller’s consent.
At auction, the successful buyer should be prepared to pay the deposit immediately after the auction is held.
The deposit is normally held in the real estate agents trust account until settlement occurs, unless negotiated otherwise.
For more information about deposit bonds click this link: https://depositpower.com.au/
There are several schemes available to first home buyers in NSW. To check your eligibility for any one of these schemes, we recommend you view availability and criteria via the Revenue NSW website which you can access here: https://www.revenue.nsw.gov.au/grants-schemes/first-home-buyer
This is a tough question! Whilst it may seem commercially beneficial to try and line up your rental expiry with the settlement of your new purchase, it can be fraught. Sometimes a settlement may be delayed and where you have a tight cross over period, this could cause issues in having to find short term accommodation for that delay. We recommend having a buffer of about 2 weeks to deal with any delays but also to give you some breathing space with the move.
The sooner the better! Removalists, especially reputable ones, book out early, so getting them lined up ‘asap’ is worthwhile. It will also give them time to come over to provide property quotation and recommendations on how to handle the move.
In short, no! Whilst it is common practice for a seller to have the property cleaned prior to settlement, it is not a requirement. As long as the property is passed to the property in the same state of repair as what it was in at the time contracts were entered into (fair wear and tear excepted), the seller has fulfilled their contractual obligations.
If one party is not ready to settle on the due date, the other party can issue a notice to complete. The notice to complete provides the defaulting party 14 days from the issue of the notice to settle the transaction. The party who is not in default can then terminate the contract and the deposit will be paid to that party. This sometimes means that the buyer will forfeit the deposit if they are unable to complete the settlement by the end of this Notice period.
Note that the seller is often in a unique position where they can also charge interest for any delay caused by the buyer so the consequences for a delay caused by the buyer are significant.
Your conveyancer will call you immediately after the settlement takes place. Written notices via email are then provided to yourself and the real estate agent which authorises the deposit to be released and keys to be provided to the purchaser.
When your transfer has been lodged for registration after settlement, council, water, and the Valuer General are automatically notified of the new purchase.
Strata managers will be advised by way of a s22 notice which is submitted by your conveyancer.
SELLING
Find the answers to all your selling related conveyancing questions.
The seller holds the insurable risk of the property until settlement or until the buyer obtains possession of the property, whichever occurs first. It is recommended that the seller ensure that adequate insurance is in place up until that time.
We also recommend that that buyer consider obtaining their own insurance for the property commencing during the settlement period. Most insurance providers will provide complimentary coverage for the settlement period, and this will assist in the unlikely event that a risk eventuate where the seller does not have adequate coverage and there is still a desire for settlement to take place.
In NSW, it is a legal requirement that a draft contract is prepared prior to the property being advertised for sale. This is usually the first step in the conveyancing process. Your conveyancer will prepare the contract on your behalf which will include prescribed documents such as a copy of the title for the property, the plan of the land, any notations recorded on the title (such as easements and covenants) as well as a planning certificate from the local council and a copy of the sewer mains diagram.
If the property includes a pool, it is also a requirement that the contract include a pool compliance or non-compliance certificate which is issued by an independent certifier. The contract will also include some detail about what’s included or excluded in the sale, any conditions you may have as well as your preferred settlement timeframe.
Once you have accepted an offer to sell the property, your conveyancer will then update the draft contract to a ‘final’ version noting the agreed terms.
It is then set up for signing (usually electronically) and an exchange of contracts takes place which forms the legal relationship between yourself and the buyer.
Contracts will either be exchanged unconditionally or with a cooling-off period for the benefit of the buyer. The buyer will usually pay the deposit to the real estate agent where the funds are held until settlement takes place, unless negotiated otherwise with the buyer.
The buyer is entitled to a set of keys as part of the settlement process. This is normally coordinated via the real estate agent. The seller is not required to hand over all keys to all locks in the property so long as access to the property can be obtained. Generally, we recommend the buyer change the locks after settlement occurs.
After contracts have been entered into (exchange of contracts), if you have a mortgage over the title, your conveyancer will engage the mortgagee to arrange a ‘discharge of mortgage’. They will be invited to the PEXA Workspace (the electronic settlement platform) and advise of any requirements they may have for settlement to take place.
If you haven’t already done so, where the sale of the property is over $750k, you will also be required to obtain a Foreign Capital Gains Withholding Clearance Certificate via the ATO. This Certificate notes that no withholding is required to be delt with as part of the sale proceeds. All sellers in Australia are required to obtain this certificate. Where you are a resident for tax purposes, the clearance certificate is usually issued within 28 days of application.
If you are unsure of your residency or tax status, we recommend engaging an Accountant who will help you navigate these requirements.
Approximately 1 week prior to settlement, your conveyancer will confirm a draft break-down of any payments that are required to come out of the sale proceeds (e.g. rates payments and loan payout) and an estimate of the net sale proceeds. Where there are any loans to payout as part of the sale proceeds, these amounts are normally finalised by your bank on the morning of settlement.
Note that the seller carries the insurable risk of the property up until the time of settlement (or the buyer taking possession of the property, whichever occurs first) and we therefore recommend adequate insurance is in place until settlement has occurred.
Where you have committed to provide vacant possession on settlement, you will be required to establish this prior to settlement taking place. You are entitled to remain in occupation of the property up until the time of settlement, however, practically this means that you’d need to have physically moved all your possessions out of the property before a settlement can occur.
While there’s no requirement to hand over remotes and warranty documents, it is common practice for the sellers to leave behind a folder of these documents at the property. If you are purchasing a brand-new property where warranties may still be in place, it is valuable to ensure that warranties are provided as part of the settlement process. This would normally be included as an additional condition in the contract.
Your conveyancer will contact you on the morning of settlement to confirm final settlement figures and to verify account details for the payment of the net sale proceeds. All the formalities for settlement are taken care of by your conveyancer and you don’t need to be physically present for settlement, however, you may need to be available on phone or email to provide any last-minute instructions.
The sooner the better! Removalists, especially reputable ones, book out early, so getting them lined up ASAP is worthwhile. It will also give them time to come over to provide property quotation and recommendations on how to handle the move.
Once settlement takes place, your conveyancer will contact you to confirm. Written notification is also provided to the real estate agent authorising any funds they are holding as the deposit to be paid to you and for keys to be provided to the purchaser.
Where the settlement takes place electronically via PEXA, any net sale proceeds will be paid into your nominated account and are generally cleared the same day.
The purchasers are responsible for ensuring appropriate notices are provided to relevant rating authorities.
If one party is not ready to settle on the due date, the other party can issue a Notice to Complete. The Notice to Complete provides the defaulting party 14 days from the issue of the Notice to settle the transaction. The party who is not in default can then terminate the contract and the deposit will be paid to that party. This sometimes means that the buyer will forfeit the deposit if they are unable to complete the settlement by the end of this notice period. Note that the seller is often in a unique position where they can also charge interest for any delay caused by the buyer so the consequences for a delay caused by the buyer are significant.
Where rates have a due date prior to the settlement date, we recommend paying these to avoid incurring any interest or delayed settlement fees.
Where you make payment in advance of the settlement date and the payment covers a period after your settlement date, there will be an adjustment made in the seller’s favour to pro rata the amount for the time between settlement and the end of the payment period for the rates.
GENERAL QUESTIONS
Find the answers to all your general conveyancing questions.
A standard conveyance transaction is generally 42 days (6 weeks) and starts from the date of exchange of contracts. It is common for this to be negotiated to as short as 3 weeks to as long as 3+ months.
Where you have offer and acceptance on a property YMC can provide 2-hour contract review turnaround.
When you get in touch, or provide us with a contract to review, please let us know whether you have had your offer accepted and we will expedite the service for you.
For all other reviews, you can expect to receive your summary within 24 hours.
We can usually prepare a draft contract of sale within 2-3 business days. Delays can occur where a seller is not able to provide required information to complete the contract, there are outstanding compliance certificates (e.g. pool), or there is a delay from your local council in preparing the zoning certificate.
Where your deal is coming together outside of business hours or on the weekend, email team@ymc.com.au or phone our office (1300 857 335) and leave a message with your details. The out of hours office line is always monitored and you will receive a response as soon as possible.
All buyers and sellers in NSW are required to verify their identity when completing any conveyancing related transaction. These identification requirements are outlined in the Model Participation Rules, a document written by ARNECC (the Federal Government body which is responsible for the mandating of the Model Participation Rules). You can view the requirements here.
PEXA Key is an app built by PEXA (the electronic settlement platform) that features a moving checklist with a top line guide on what happens during settlement, such as a countdown to when settlement is due to take place and any changes to this along the way. It also allows users to safely share their account details using multi-factor authentication. YMC encourages our clients to use the PEXA Key App for this purpose, but it is in no way mandatory, nor does it replace any function of a conveyancer’s role within the transaction.
Vacant possession means that the property is not occupied and free from possessions (except fixed inclusions remaining as part of the sale).
Generally, the buyer is entitled to expect there to be no substantial impediment to the use and enjoyment of the property, however, consideration will be made as to the condition the property was in at the time contracts were entered into. Therefore, it is important that if a buyer is expecting a dilapidated property to be passed to them ‘ready to move in’ that a condition allowing for this be included in the contract.
There are limited scenarios where a transfer will not incur a stamp duty liability, so this is usually the first consideration. Revenue NSW require the stamp duty to be assessed on the higher of the consideration paid by the person acquiring the interest, or the value of the share being transferred which is determined by an independent valuer.
Most family transfers occur on ‘friendly’ terms so whilst you may have a contract for the purposes of agreement on the most important items, you may not necessarily be concerned about the smaller items such as the pro rata of rates/taxes.
Where you are transferring ownership shares by adding or taking someone off a title, another consideration will be your bank and their approval of the new ownership structure.
There is an exemption of stamp duty where the transfer occurs to add your spouse onto the title of your primary place of residence for an exact 50% share of ownership.
For buyers, this includes the post exchange of contracts enquiries for searches and certificates for example outstanding rates over the property, verification of identity, processing of stamp duty and they electronic notice of sale lodgement to Land Registry Services.
For sellers, it includes the costs for the searches and certificates required to be included in the contract, the government required clearance certificate and verification of identity.
