Conveyancing is the buying and selling of property - commercial buildings, houses, farms, vacant land.
For most people, buying and selling a house is a major decision and often an emotional one. Understanding the legal processes necessary for you to sell your existing property (if you have one) and purchase a new property (including dealings with a Bank, Building Society or other lender, as Mortgagee) helps matters proceed smoothly.
A number of things can cause delays and difficulties in settling the sale or purchase of a property on time. There are also matters that should be considered when buying and selling a property.
Things to consider in buying and selling a property include:
1. Title Search
Obtaining an up to date Title search (including a plan of the land and copies of all relevant easements and covenants). A Title search must be included in the Section 32 Statement ('Vendor's Statement') attached to the Contract of Sale. The search shows who owns the property and all current dealings affecting the Title to the property.
Possible dealings that may affect a property include existing Mortgages, Easements, Land Tax Charges, Caveats, adverse possession claims etc.
1.1 The Title particulars are correct.
1.2 The measurements of the land accord with those shown on the plan attached to the Title search to ensure that the boundary fences are on the Title boundaries.
1.3 The location of the property is in accordance with the Title by checking the distance to the nearest connecting street is correct.
1.4 There has been no failure to comply with the terms of any easements and/or covenants affecting the land.
1.5 The Mortgages, Caveats and other encumbrances registered against the Title to the property are (if necessary) discharged, withdrawn or otherwise removed at or prior to settlement.
1.6 If Covenants affect the Title, then you should check what the Covenants require and that you can abide by them. A Covenant may restrict what sort of house can be built on the property and/or what the property is used for.
1.7 Easements - nothing is built on or over them in case the area has to be dug up to clear drains etc.
2. Vendor's Statement
You should check that:
2.1 Inaccuracies in a Vendor's Statement may allow you as Purchaser to avoid the sale and recover all monies paid to the Vendor.
2.2 All relevant searches and certificates should be included in the Vendor's Statement. The information contained in these searches and certificates must be checked carefully.
2.3 Details of all notices, orders or requirements affecting the property should also be included in the Vendor's Statement (This could be a fencing notice by a neighbour requiring contribution towards the cost of a new fence, a demolition order on the house, etc).
3. Contract of Sale
Ensure that the Contract of Sale specifies:
3.1 The Vendor
3.2 The Purchaser
3.3 The Property Details
3.4 The Price
3.5 The Settlement Date
3.6 Special Conditions - anything which affects your decision to buy the property (e.g., subject to finance, subject to the sale of your property, subject to obtaining a building permit, etc)
3.7 Any items which you expect to acquire with the property. Some examples are:
- rotary clothes line, television, antenna
- potted plants, barbecue
- garden shed, pool equipment
- window furnishings (drapes, blinds, curtains, awnings and fly wire screens).
If you are a Vendor, it is also prudent to specifically detail in the Contract any items which you intend to take with you when you leave.
Confusion in this area arises where the parties are unclear as to what items are chattels (which should be set out in the Contract) and fixtures (which automatically pass with the sale of the property and technically do not need to be detailed in the Contract).
Settlements can be threatened by an argument over a minor matter like potted plants or missing doorknobs or changed curtains. This can happen when the Vendor and the Purchaser have not considered and agreed on what happens to these items at settlement.
The property should be adequately insured at all times up to settlement and, in the case of a purchase, thereafter. It is the Vendor's responsibility to insure the property until settlement. It is prudent for a Purchaser to take out insurance once the Contract is signed - so you know the property is adequately insured.
Strata or Stratum Title Units - the body corporate or service company must ensure a strata or stratum titled building is properly insured. This should be for its full replacement value.
5. Cooling Off
In the case of a house purchase, you should contact your solicitor before or immediately after you sign the Contract because you may be able to exercise the right to 'cool off' if you change your mind about the purchase or if there is a problem with the property. A Purchaser does not have the right to cool off if they have bought the house property at or within 3 clear business days of an auction, received legal advice before signing the Contract of Sale or the purchase price exceeds $250,000.00. The cooling off period is 3 clear business days after signing the Contract of Sale.
Other than the cooling off period, there are other time limits that run from the date you sign the Contract of Sale.
6. Requisitions on Title
These are enquiries of the Vendor about the property. They must be sent within 21 days of the day of sale (the date of signing the Contract).
If settlement is to take place within 60 days (or less) there is not a lot of time to properly organise everything (legally, financially, notifying relevant authorities, moving household effects, etc) so that settlement takes place on time. A 30-day settlement is possible but very difficult to achieve, especially if there is a financier involved.
8. Statutory Certificates
These are obtained from the relevant authorities (e.g. Council, Water Board, Land Tax, Planning) and provide important information about the property.
Some of this information (location of sewerage and water easements; building permits, etc) is not recorded on the Title search.
If it is a strata or stratum titled unit, a certificate should also be obtained from the body corporate or service company detailing levies, fees, insurance, etc.
Lenders usually require copies of the Contract, Statutory Certificates and Transfer of Land. They may have other requirements depending on the property. Prior to settlement, they also require the Notice of Acquisition, a copy of the Statement of Adjustments, payout figures and details of settlement. Give your Lender plenty of time to prepare documentation, get it to you to execute, have your solicitor consider and advise you on it (if you want to do this and/or the Lender requires it).
A Mortgage may be for a set amount (e.g., $100,000.00) principal or 'all monies' (for all monies owed by you to the Lender from time to time). It gives the Lender the right to sell the property if you default under the mortgage. A mortgage is also a guarantee so, if the value of the property is not enough to pay out the mortgage, the Lender can sue you for the balance. Some lenders may want mortgage guarantee insurance. This is to ensure that they receive all principal interest and other monies owed to them under the mortgage in the event of your default. This is usually required where the value of the property is less than Lender's usual Loan to Value Ratio (LVR). This is generally 75% for house properties. With mortgage guarantee insurance, the mortgage guarantee insurer can pursue you for any monies which it pays out to the Lender under that insurance policy and which it does not recover if it sells the property.
10. Statement of Adjustments
Adjustment of rates, land tax, body corporate fees, rent and other outgoings must be worked out prior to settlement and are adjusted between the Vendor and the Purchaser at settlement.
11. Final Inspection
Purchasers are entitled to inspect the property prior to settlement. It is wise to do so one or two days before settlement. At that time you can discuss with the Vendor any practical details concerning moving, telephone, electricity, gas, rates, etc. You will also see if the property looks to be in the same state as when you bought it.
12. Notice of Acquisition or Disposition
These notices are sent to relevant statutory authorities (Council, Water Board, etc.) to advise of the sale and purchase of the property.
13. Body Corporate / Service Company
When you buy a flat or unit which is part of a building, there will be a body corporate or service company whose members are the owners of all the units at the whole property and which looks after the building and the common areas of the property. The cost of this is shared by all the owners in accordance with their liability (unit entitlement) under the strata plan.
14. Stamp Duty and Registration Fees
The Government charges stamp duty and registration fees on transfers of land and mortgages. Do not forget to factor these costs in to your purchase figures.
GST may apply to your purchase. You should check this before signing a Contract.
The above is only a brief summary of some matters involved in a conveyance for the purchase or sale of a Property.
Solicitors can assist you with the items mentioned above and by:
You should check that:
(a) liaising with your Bank with respect to:
(i) if you are purchasing - the preparation and execution of the Bank's security documentation. If necessary, or it is required by the Bank, the solicitor can peruse the Bank's Mortgage documents to ensure everything is in order and advise you about them;
(ii) if you are selling - arrangements for the discharge of the Mortgage(s) registered against the Title to your property; and
(iii) if the Vendor is a Company - checking if it has any charge over its assets and getting a release of it in respect to the property it is selling.
(b) release of deposit monies - where you are selling a property, assisting you and your Selling Agent in attempting to obtain an early release of the deposit monies so that these funds may be utilised by you prior to settlement or put towards the purchase of another property.
There are many other matters which must be carefully considered if you are contemplating buying or selling a property or are actually doing so.
We are happy to work with you, your lender and other professional advisers (accountant and financial planner) to have the transaction proceed as smoothly as possible.
This article is general in nature and for information only. It should not be acted upon without obtaining specific legal advice.
Content provided by Anne Hodgson & Co Lawyers
About Anne Hodgson & Co Lawyers
Anne Hodgson & Co Lawyers provides quality, timely and cost effective legal services for businesses and individuals.
Anne Hodgson has worked and been a Partner in two sizeable Melbourne CBD legal practices before establishing this firm. She has significant experience in commercial and business legal matters and in assisting clients with their personal legal matters. This firm offers clients quality legal services at a convenient location and at significantly lower rates than those charged by CBD firms. They also ensure that you receive prompt 'hands on' attention from Anne and staff.
This firm operates from purpose built premises at 81 Miller St, Carnegie in Victoria. Office hours are 9am to 5pm Monday to Friday. Appointments can also be arranged outside work hours at their office or at client's premises.