Frequently Asked Questions – Conveyancing
What is Conveyancing?
Conveyancing is the transfer of the legal title of a property from one person to another. This is contained in a contractual document and the property transfer is occurred in a timely manner agreed between a vendor and a purchaser with instructions to the Registrar of Titles to effect the relevant change in the Register.
What is a Vendor’s Statement?
Section 32 of the Sale of Land Act 1962 provides for the pre-contract disclosure of the sale property to be made by a vendor. The information contained in a Vendor’s Statement is different depending on the type of property being purchased but generally contains documents relating to:
- vendor’s ownership of the land;
- evidence of the vendor’s right to sell;
- relevant plans relating to the property;
- details of any registered or unregistered easement, covenant or similar restriction affecting the land and any existing failure to comply with their terms;
- details of the relevant planning instruments affecting the property;
- details of outgoings and statutory charges such as rates and taxes affecting the property;
- details of whether or not the utility services are connected;
- owners corporation information if the property is affected by it and Section 151 of the Owners Corporation Act 2006 specifies that the owners corporation certificate must include copies of the owners corporation rules, the prescribed information statement and copies of resolutions made at the last annual general meeting;
- particulars of any building permits obtained in the preceding seven years;
- particulars of any current insurance policy issued to an owner-builder under Section 137B of the Building Act 1993 within the preceding six years; and
- tenancy agreements.
Acting for Vendor
The Vendor’s Statement should be prepared by a conveyancing practitioner as Section 32 requires strict compliance with a vendor supplying some of the disclosure information and the balance obtained from relevant authorities. It must be noted that the information given in the vendor statement must be current as at the day of sale and not the date upon which the vendor actually signs the statement.
Acting for Purchaser
Caveat emptor – let the buyer beware, which is often advised to potential purchaser to take care when considering the purchase of a property. Where the vendor fails to provide correct or complete vendor statement, the purchaser may terminate the contract prior to settlement.
There are, however, restrictions on the purchaser’s ability to terminate. It is therefore advisable that the purchaser engages a conveyancing practitioner for a pre-contractual consultation to have the contents of the vendor statement verified and obtain advice on rights and remedies in relation to the contract.
What is a cooling off period and how does it affect me?
Section 31(6) of the Sale of Land Act 1962 gives a purchaser a statutory right, in certain circumstances, to end the contract within 3 clear business days after signing the contract. A purchaser who exercises this right is entitled to a refund of the deposit less the greater of $100 or 0.2% of the purchase price. A vendor is entitled to this penalty and more than unlikely the agent’s commission is payable.
A cooling off period is not available in the following situations if:
- the property is primarily used for industrial or commercial purposes;
- independent legal advice from a legal practitioner has been obtained prior to signing the contract;
- both parties have previously entered into similar contract for the property;
- the purchaser is an estate agent or a corporate body; and
- the contract is signed either 3 clear business days before or after a publicly advertised auction.
Before considering whether or not to cool off, it is important to ascertain whether or not the vendor has signed the contract. If not, the purchaser can simply withdraw the offer without the need to pay any fee for cooling off.
What is a caveat?
A caveat is a caution and a caveat on title serves the purpose of giving notice to anyone dealing with the property that there is another party with interest in the property other than the registered proprietor. It does not confer ownership but merely serves as a protection for the caveator with its interest noted on title.
It is advisable that a purchaser should register its interest in the property as soon as a contract of sale has been signed by both the vendor and purchaser. Some contracts of sale prohibit the lodging of a caveat. As such, a purchaser should always obtain legal advice before lodging a caveat over a vendor’s property.
There are some other situations whereby a person may have a right to lodge a caveat over the title such as a claim for the benefit of an easement, a person entitled to a mortgage or charge, a claim under a constructive trust and etc. It is important to obtain legal advice to ensure that you have a caveatable interest before lodging a caveat, as the caveat can be removed if presented that no caveatable interest exists, and penalties may apply.
Payment of deposit
A deposit is paid upon a purchaser signing a contract of sale. The deposit, usually 10% of the purchase price, is paid when an offer to purchase is accepted by a vendor. The deposit must be paid to the vendor’s estate agent, or to the vendor’s conveyancer or legal practitioner and retained until settlement. Sometimes, a vendor may request for an early release of the deposit, frequently required for a purchase of another property by the vendor.
In this instance, an early release of the deposit can be achieved under section 27 of the Sale of Land Act 1962 if the following requirements are met:
- the contract is not subject to any condition enuring for the benefit of the purchaser;
- the purchaser has accepted title or is deemed to have accepted title;
- the vendor has given the purchaser notice in writing setting out particulars of any mortgage over the land and particulars of any caveats lodged against the land;
- the purchaser is satisfied with the particulars provided in the notice from the vendor indicating that the vendor has sufficient equity in the property to discharge the existing mortgage if the deposit is released; and
- the purchaser gives the vendor a signed notice stating that they are satisfied.
If there is a default in payment of the deposit or any part of it, a vendor is entitled to charge penalty interest on the deposit that is overdue.
As a general rule, if the purchaser withdraws from the contract of sale the deposit with be forfeited and the vendor keeps it. The vendor may seek an action in court to recover from the purchaser any damages and losses such as agent’s sales commission and the difference in sale price if the property is sold later at a lower price. If a vendor fails to complete the sale, the deposit will be refunded to the purchaser.
If you are buying off-the-plan land or property, the deposit paid must not exceed 10% of the purchase price of the lot. In this type of transaction, there is usually a lengthy period between payment of the deposit and final settlement. It must be noted that deposits cannot be released in off-the-plan sales and the parties may agree on payment of the deposits by way of:
- deposit bond;
- bank guarantee; and
- cash deposit into vendor’s legal practitioner’s trust account and establishing a special interest-bearing account in joint names of the vendor and purchaser.
The property I am buying is affected by Owners Corporation
Owners Corporation exists where the land or property you are buying contains common property for “above and below ground” such as driveways, garden, basement, stairs, lifts, lobbies, underground services etc. It is governed by the Owners Corporation Act 2006 and prior to that an Owners Corporation was known as a Body Corporate.
An Owners Corporation is usually a legal entity set up or engaged to perform functions such as, but not limited to:
- manage and administer common property;
- repair and maintain common property, fixtures and fittings and services related to the common property;
- maintain and pay insurance premiums;
- maintain an owners corporation register; and
- provide an owners corporation certificate upon request.
An owners corporation may set annual fees to cover general administration costs, maintenance and repairs, insurance and other recurrent obligations. From time to time, an owners corporation may levy special fees and charges to cover extraordinary items of expenditure. Information regarding owners corporation applicable fees and levies, paid or unpaid, are detailed in the owners corporation certificate. Special care should be taken to understand the owners corporation fees and levies and what you will be liable to pay as a purchaser.
Under the Owners Corporation Act 2006, all properties affected by owners corporations must have public liability insurance for the common property for a minimum amount and reinstatement and replacement insurance for all buildings on the common property. Some owners corporations are inoperative, such as 2 lots in a subdivision or the common properties are underground. The lot owners may resolve among themselves to arrange their own insurance instead. It must be noted that a vendor cannot sell a property that is affected by an owners corporation without a current public liability insurance. Failure to have a current insurance policy before the property is sold gives the purchaser a right to avoid the contract under Section 11 of the Sale of Land Act 1962.
What are rates adjustments and why must it be adjusted at settlement?
Periodic outgoings are expenses incurred in respect of the ownership of a property, usually payable by monthly, quarterly or annually. They include council rates, land tax, sewer, drainage, water and parks service charges and owners corporation fees. These charges are imposed on the land and are therefore not removed on change of ownership. A new owner inherits these charges and is responsible for payment these outgoings from settlement onwards.
There are also outgoings which cannot apportion at settlement as these are usually one off charges. These could be owners corporation special levies, street construction charges and connection for gas, water and other utilities. If these charges are struck after the date of the contract, payment of these charges becomes the purchaser’s responsibility.
It is usually the purchaser’s legal representative who prepares the statement of adjustments forwarded in advance to the vendor’s legal representative for approval prior to settlement. The statement will calculate the purchase price, deposit paid and the outgoings and income apportioned accordingly.
What happens at settlement?
Settlement is the end of the conveyancing transaction. At settlement, the vendor will hand over a set of documents to enable the purchaser to become the registered owner of the property in exchange for the balance of the funds in accordance with the contract. It is the responsibility of each party’s legal representative to arrange settlement, ensuring that anyone they require is present at settlement. However, both vendor and purchaser are not required to attend settlement.
Each party’s representative will then hand over the necessary documents and bank cheques to complete the transaction. After settlement, the vendor’s legal representative will authorise the release of the keys to be handed over, which is usually at the real estate agent’s office.
It is important to note that in the contract of sale the purchaser is allowed to undertake a final inspection at any reasonable time during the seven day period preceding and including the settlement date. It is quite common for the purchaser to inspect the property nearer to the settlement date to ensure that the property and goods are in a reasonable condition.
What is the difference between a lawyer and a conveyancer?
A lawyer is a qualified legal practitioner who can give advice on all elements of the conveyancing transaction. A conveyancer handles the processes and procedures in conveyancing transactions and is limited in the nature of the advice that can be given. In the event of any legal issues arising out of a transaction, a conveyancer may need to refer you to a lawyer. The benefit of using JJ Legal is that you will deal with our property lawyer in the entire conveyancing transaction, who has extensive experience in property matters.
Why should I use a property lawyer?
Buying and selling your home is one of the biggest financial decisions you will make. It is vital that you seek legal advice from a property lawyer as the transaction can be costly, stressful and time consuming.
A property lawyer can protect your interest in the transaction and endeavour to conduct the process as smoothly and timely as possible. Leaving the conveyancing transaction with JJ Legal will ensure that you can focus on other things during the process.
Advice from a conveyancer is not “advice from a legal practitioner”