Conveyancing is the process of legally transferring the legal title for real property from the vendor to the purchaser.
Where the land is already registered (ie not an off the plan contract), these are the essential steps that are involved in a standard contract for sale of land
- Obtaining finance
It is essential that a purchaser has adequate finance to cover the cost of the purchase, stamp duty and any other applicable fees and charges before they proceed with a conveyance.
- Contract prepared
The vendor's property solicitor will prepare the contract for sale.
A property cannot be advertised for sale until such time as a contract is available.
Interested purchasers are able to make an offer once a property is listed for sale. An offer can be subject to requirements a purchasers may have, including a specific settlement date, lengthy cooling off period or "subject to finance."
Upon an offer being accepted by the vendor, the purchaser needs to act quickly to secure the property. This is because, until contracts are exchanged, the vendor may still be able to sell the property to another purchaser.
- Exchange of contracts
At exchange, the following takes place:
- The vendor signs and dates their copy of the contract.
- The purchaser signs and dates their copy of the contract.
- The purchaser pays the required deposit. This is usually 0.25% of the purchase price.
- The contracts are exchanged with the vendor receiving the purchaser's signed copy and the purchaser receiving the vendor's signed copy. It is upon the exchange of the contracts that a binding legal agreement is made.
- Cooling off period
After contracts are exchanged, the purchaser is allowed a cooling off period within which they can change their mind to not proceed with the purchase. Usually, a cooling off period will be five days. But this can be extended if the vendor agrees.
During the cooling off period, the purchaser's conveyancing lawyer does the following, in consultation with the purchaser:
- Reviews the contract of sale to ensure the required documents are included and advise on the terms of the sale, including any special conditions
- Negotiates changes to the contract of sale with the vendor's conveyancer.
- Arranges for pest, building and/or strata reports.
The purchaser's property conveyancing lawyer should be advising them by, or before, this stage of:
- How much stamp duty they will have to pay.
- Whether they are eligible for a first home owner grant or other grants or concessions.
By this stage the purchaser should also have written confirmation from their bank that their loan is fully and unconditionally approved.
If the purchaser decides to pull out of the contract within the cooling off period, then they will lose 0.25% of the deposit
A purchaser will not be entitled to a cooling off period in certain circumstances. These include:
- If a property is to be purchased at auction.
- If a property is purchased on the day of the auction.
- If a certificate under section 66W of the Conveyancing Act is signed by a solicitor or conveyancer waiving the purchaser's cooling off rights.
- The contract becomes unconditional
The purchaser is required to pay the balance of the deposit on or before 5pm on the day the cooling off period expires. 10% of the purchase price is the usual deposit. But other percentages can be negotiated through the property lawyers acting for the parties.
Upon the purchaser paying the balance of the deposit, the contract becomes unconditional.
If a party defaults under the contract following it becoming unconditional, there can be consequences including:
- If the purchaser defaults, then they will forfeit the full deposit they paid and the vendor can sue for damages.
- If the vendor defaults, then the purchaser can seek specific performance of the contract or sue the vendor for damages.
- Pre-settlement actions
After the contract becomes unconditional and before settlement, the following takes place:
- Executes loan documents
- Execute stamp duty documents through their property conveyancing lawyer.
- Their conveyancer orders council, water and strata (if applicable) rates certificates and prepare adjustments to determine the total amount owing to the vendor at settlement.
- Conducts a pre-settlement final inspection of the property.
- Arranges for the discharge of any mortgage on the property.
- Provides the purchaser's solicitor with a Foreign Resident Capital Gains Withholding Certificate – if the contract price exceeds $750,000.
- Stamp duty
Stamp Duty is payable in NSW on any purchase or transfer of land. Stamp Duty liability falls at the earlier of settlement or within three months of exchange of contracts.
A purchaser's incoming mortgagee (if applicable) will require stamp duty to have been paid by settlement and NSW Land Registry Services will not register the certificate of title until stamp duty has been paid in full on a purchase.
Settlement generally occurs 42 days after exchange of contracts. However, different periods can be negotiated through the parties' property lawyers.
If settlement does not occur by the settlement date because the purchaser is not in a position to settle, then most contracts have a provision where there will be penalty interest and costs.
In NSW, most transactions are settled electronically which means that neither party is required to attend settlement.
Once settlement has taken place, the purchaser can move into the property.
NSW Land Registry Services will notify council and Sydney Water of the new ownership details.
If property is subject to strata, then the relevant change of ownership notice will need to be provide to the Owners Corporation.
At Opal Legal we have offices conveniently located at Liverpool and Parramatta for all your conveyance services.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.