Buying a Property

Conveyancing is the legal process of transferring real estate from one party to another, whether it be residential, rural, or commercial property, a house, vacant land, or a strata unit.

Buying a property is often one of the largest financial transactions a person will make, yet the process typically moves very quickly providing no room for error.

Signing a contract to buy property creates binding legal obligations – the penalties for breaching the contract can be significant, so it is important to be guided by experienced professionals.

The process of purchasing a property

A conveyancing transaction in New South Wales can generally be viewed as three phases. Your purchase will typically proceed as follows:

1. Purchase – pre-exchange

Once your offer has been accepted by the vendor, the real estate agent will send a sales advice to our office and the vendor’s conveyancer. We will contact you shortly after to confirm your details and obtain instructions. We will review the contract and advise the next steps.

Before entering a binding contract, it is important to carry out some due diligence on the property. The contract does not cover the quality of the buildings on the property, so the situation is ‘buyer beware’. After contracts are exchanged there is no recourse if the buildings are defective. Depending on the type of property you are purchasing, some of the reports we may recommend are:

• A building report to investigate and report on the structural integrity of any dwellings. You should expect that any building that is not brand new will have some minor defects. A building report will usually indicate this, but more importantly, flag any structural problems that may not be obvious to the untrained eye.
• A pest report to investigate and report on any structural pests that may be present, or to advise on past or present pest activity affecting the property. The report is for the activity of structural pests – it will not normally advise on infestations of cockroaches, mice, etc.
• A strata report if you are purchasing a unit, townhouse, or villa. In such cases you will likely be entering into a strata scheme, so it is important to obtain an inspection of the books and records of the owners’ corporation. A strata report details matters such as insurance policies in place, the quarterly levies, the financial position of the scheme, whether there are any ongoing maintenance problems, if there are any special levies for capital works, or if there are any issues between owners.
• A septic tank inspection – if the property is not connected to town sewer, it is most likely on a septic system. Any defects in the system found after exchange of contracts do not have to be rectified by a vendor and can be costly. After settlement, the new owner must apply to council for approval to use the septic system, so it is important to ensure that the system is in working order and up to council’s standards. An inspection of the septic system is usually carried out by a council officer or plumber experienced in this area.

Finance approval must be in place before contracts are exchanged, even if there is a long settlement period, to avoid the risk of defaulting and losing the deposit and possibly being sued for damages.

2. Exchange of contracts

Once you are satisfied with any searches and enquiries and have finance formally approved, we will obtain your approval to exchange contracts. Contracts are provided in duplicate with each copy signed respectively by the purchaser and vendor. They are checked to ensure that they are identical; dated and swapped so that each party holds a copy signed by the other.

Exchange of contracts triggers the countdown to the completion date, which may typically be 4–6 weeks thereafter, but can differ from case to case.

A deposit of 10% of the purchase price, unless otherwise negotiated with the vendor, must be paid on exchange of contracts. The deposit is usually paid to the agent as stakeholder and held in a trust account, pending settlement.

Contracts for most residential purchases in New South Wales have a statutory cooling-off period allowing a purchaser to rescind (cancel) the contract within five business days of exchange. If a purchaser ‘cools off’ they must pay a penalty of 0.25% of the purchase price to the vendor. It is common practice for the cooling-off period to be waived so that the contract is immediately binding on exchange. Most vendors will require that the purchaser’s conveyancer sign a section 66W certificate which waives the purchaser’s cooling-off rights.

There is no cooling off period if the property is sold at auction.

Stamp duty is payable on the contract within three months of exchange or on settlement, whichever comes first. Stamp duty is calculated on the purchase price. We will advise the applicable stamp duty or if you are eligible for any government first home-owner grants or duty concessions.

After exchange of contracts, we carry out various searches and enquiries such as council rates, water rates, strata levies, land tax, roads and traffic authority and council outstanding notices. We will advise you on the outcome of these searches and whether there are any adverse implications.

3. Settling your purchase

The settlement statement adjusts council rates, water/sewer access rates, water usage, strata levies and anything relevant to the property so that each party only pays for rates and levies for when they own the property. The statement takes into account the deposit paid and calculates the balance required from the purchaser to complete the purchase. The settlement statement is checked and approved by the vendor before settlement.

A purchaser is entitled to a final inspection of the property prior to settlement. We recommend conducting the final inspection on the morning of settlement to ensure that all inclusions are in the property and that no damage has been done. The property should be left in a similar condition to as it was on exchange of contracts. After settlement, you will have no recourse on the vendor should you find something wrong.

Property settlements used to require the physical meeting of lawyers and bankers to check and swap documents and bank cheques, and the lodgement of various documents with government authorities to transfer ownership of the property.

E-conveyancing has revolutionised this process through an electronic platform enabling lawyers, conveyancers, and financial institutions to transact online. E-conveyancing improves efficiency and streamlines the old manual processes.

Online settlements remove the location and time barriers of physical settlements, visually track the progress of each stage of the transaction and facilitate online lodgement of documents with land registries and other authorities.

The online property exchange known as PEXA operates nationally to provide a standardised platform for the completion of online property transactions.

Property ownership interests and rights

The way in which legal interests in property are held between co-owners is an important consideration when purchasing property, as there can be different implications in the event of a dispute, a relationship or partnership breakdown, financial stress, or the death of a co-owner.

Property held as joint tenants is held as a whole – the interests cannot be apportioned into specific shares and the joint tenancy is subject to survivorship provisions. When one co-owner dies, his or her share automatically passes to the remaining owner/s. The share cannot be left to anybody else, even if the deceased owner’s Will provides otherwise.

Property held as tenants in common can specify the individual shares held by each owner which need not be equal and may be transferred, sold, or left to a beneficiary in a Will.

Joint tenancies are common between spouses or domestic partners however may not always be the best solution for your particular circumstances. We can answer any questions you may have regarding your ownership interests.

Loans and Mortgages

When buying a home, most people will need to get a loan to finance the purchase. When lending money for a property purchase, the bank or building society will require that you grant a mortgage over the property as security for the loan. A mortgage is like a ‘charge’ over the property and gives the lender certain rights if the borrower breaches the loan agreement, for example, failing to meet loan repayments or to insure the property for the duration of the loan.

It is important to read your loan documentation carefully so that you understand the effect of granting a mortgage and your rights and obligations.

It’s not ‘just’ conveyancing

Conveyancing involves a sound knowledge of property and contract law and a complete understanding of the processes required to transfer title from one party to another.

Conveyancing is our core focus, and our experienced team has helped numerous individuals, families, investors and businesses with a range of conveyancing and property matters.

If you need any assistance, contact [email protected] or call (02) 6621 8005 for expert conveyancing advice and guidance.