Buying a home or investment property is probably one of the largest financial transactions you will enter. It makes sense therefore to do your research and to obtain sound legal advice from an experienced professional so you can make informed decisions along the way.
Before signing a contract to buy property, you should obtain legal advice.
The contract for sale of land
The contract for sale of land includes the legal description of the property and sets out the rights and obligations of each party. The contract should show all encumbrances (mortgages, easements, covenants) registered over the property and include disclosures by the seller about matters such as compliance with swimming pool, electrical safety and smoke alarm regulations, whether the property is subject to an environmental protection order, and details of renovations, building work and relevant insurances.
In most cases building and pest inspection reports from a qualified inspector should be ordered. These reports comment on the condition of any structures on the property, identify significant defects, highlight issues to factor into your plans, and may be used to negotiate a reduction in purchase price.
Contracts should be taken to your lawyer or conveyancer who will review all terms and conditions, explain any encumbrances, recommend further searches and if relevant, negotiate additional terms before the contract is signed.
When contracts are signed, the deposit (up to a maximum of 10% of the purchase price) is paid to the agent or seller’s legal representative and held in trust. It is prudent at this stage to arrange insurance cover for the property.
Purchasers of residential property usually have statutory cooling-off rights allowing them to rescind within five business days of receiving the signed exchanged contract. Buyers who rescind under these rights avoid their obligations under the contract but forfeit 0.25% of the purchase price from the deposit paid. Cooling-off rights do not apply when buying property at auction, or they may be waived or shortened by agreement.
Getting ready for settlement
After contracts are signed, your lawyer or conveyancer will carry out tasks to ensure you receive clear title to the property on settlement, that your rights under the contract are protected, and that completion of your purchase proceeds as smoothly as possible. Some of these tasks include:
- recommending and ordering searches and enquiries with government authorities to ensure they do not have an interest in the property;
- arranging for payment of transfer duty and ensuring the appropriate transfer duty concession forms are completed;
- providing information to the lender to ensure funds are available on settlement;
- liaising with the agent and the seller’s lawyer;
- obtaining rates, water and body corporate searches and calculating settlement figures to submit to the seller’s lawyer;
- preparing documents required to transfer title and ownership of the property;
- preparing for online settlement through PEXA.
Prior to settlement, buyers should arrange a pre-settlement inspection of the property through the agent to ensure that it is neat and tidy, all excluded chattels have been removed, the sellers have removed all of their personal belongings, and is in the same condition as when you signed the Contract, fair wear and tear accepted.
Most settlements are now conducted through Property Exchange Australia (PEXA), Australia’s online property exchange network. Electronic conveyancing enables lawyers, conveyancers and financial institutions to complete settlements online with greater convenience and less risk for all parties. Where an electronic settlement is not possible, your lawyer will arrange for a physical settlement to take place. A physical settlement requires all parties to attend a settlement location and bank cheques to be drawn on the day of settlement. An electronic settlement is the preferred method of settlement as there is a higher likelihood of the settlement completing on the contracted date.
After settlement your lawyer provides formal notification to the agent who is authorised to release the keys to the property.