CONVEYANCING FOR BUYERS
CONVEYANCING FOR BUYERS
CONTACT YOUR LAWYER FIRST
The first thing you should do is appoint your conveyancing solicitors or lawyers to act on your behalf and to advise you on how the process of buying a house unfolds. JRA legal and conveyancing Newcastle provides conveyancing services for both residential and commercial property purchases. JRA legal and conveyancing Newcastle is a boutique law firm that understands and specialises in these legal transactions. As professionals in this area of law, we strongly advise that you speak to your conveyancing solicitors, lawyers or conveyancers before signing the sales contract. Jacqui Angelos is a certified practising lawyer in Newcastle. Jacqui has two degrees under her belt and is an experienced specialist in property law, wills and estates, and probate law. She launched her small boutique law firm in 2017, and this allows her to spend more time with clients to explain any matters. JRA carries professional indemnity insurance to protect you against any errors or omissions.
THE CONTRACT OF SALE
The law provides that the real estate agent must have available at all times a complete copy of the contract for the sale for any residential property so that the purchaser may obtain legal advice before signing. The contract will contain all the details of the land and should have attached, a zoning certificate (shows the local council's approved use zoning for the property),
a full title search (shows all recorded interests in the land eg easements, restrictions on the use of the property, mortgages, caveats, etc), and a sewer diagram (showing the location of the regulatory authority's sewer(s) about the land). Not all things that affect the sale will be written into the contract. There are several matters enshrined in legislation that is not noted in the written contract, and it is essential your conveyancer explains the effect of the contract to you before you sign and commit yourself to it.
The contract will specify a period of 28-42 days for settlement to take place calculated from the date of the contract; however, the number of days can be negotiated, or a specific date can be nominated. This is particularly important where the settlement date must coincide with the settlement of another transaction. This completion date and the penalties of a late settlement should be discussed with your conveyancer before the contract is signed.
The contract will also contain a list of all the items included with the property. These things should be confirmed or negotiated through your conveyancer before the contract is signed. It is usually best to confirm with the vendor what items, including fixtures, the vendor intends to remove to avoid disappointment and arguments later.
WHY CALL YOUR CONVEYANCING SOLICITORS
Your conveyancer or conveyancing solicitor/lawyer will guide you through the conveyancing process and the procedure involved in buying a property. Your conveyancing solicitor will show you what steps you should take before you commit to a particular property and what you should and should not do when dealing with an estate agent. We will also make sure that you are aware of all the additional costs that may be involved. Once your solicitor has outlined the costs, you can work out a budget and know what you can afford when negotiating the purchase price with the agent. Your conveyancing solicitor will also clarify any matters that you may not be completely aware of relating to the purchase of a property.
BUILDING AND PEST INSPECTIONS
Under the legislation, the vendor is only required to disclose any matters affecting the title to the property. The vendor is not required to provide information about the quality of any building structure on the land. Before you commit yourself to the purchase of a property, you should discuss with your conveyancer what inspections (if any) you should obtain. When buying a house, we recommend that you obtain both pest and building reports. They will give you peace of mind and, compared to the investment you are about to make, the cost of these reports is minimal. Some defects may be evident to the untrained eye; however, a building inspection will report minor maintenance and cosmetic issues, as well as advise on any structural or building problems that may not be obvious, including drainage or damp problems. Remember: even a new building can have defects. A pest inspection will report on any visible old or current structural pest activity that may be present. Pest inspections will only report on structural wood-boring pests and will not normally advise on the presence of cockroaches, mice, rats, etc.
When choosing your inspectors to ensure that they have the appropriate qualifications and experience and carry professional indemnity insurance so that if they miss something detrimental, you have some chance of being compensated for any error or oversight. Try and use someone who has been recommended to you so that you know of their work and competence.
If you are buying a unit, townhouse or villa, you are buying into a strata scheme. While a pest and building inspection will advise you if your particular lot is clear of any structural or pest problems, it cannot advise on the other lots in the scheme.
You should, therefore, obtain a report of the books and records of the owners' corporation, commonly called a strata inspection report. The inspector will not physically inspect the building; only the written records kept by the owners' corporation. Usually, a managing agent is appointed by the owners' corporation to keep these records, so the inspection is done at the office of the managing agent.
The inspection will cover things such as the insurances the strata plan has in place, what the current quarterly levies for your lot are and if they are paid. It will identify if there is any proposal to increase the levies soon, the current financial position of the strata scheme, including the current budget and details of any ongoing maintenance problems. If there are any special levies struck or proposed to cover any work or any other matters that are in the records or minutes of meetings.
If a lot has any structural or maintenance problems, it is usually a common property issue, and the owner will generally report it to the managing agent for rectification. These notifications should be recorded in the strata records; however, this cannot be relied on.
You must have written unconditional finance approval available before the contract is binding. Your lender may provide you with a pre-approval before you start looking for your property; however, it will usually be subject to and conditional upon the bank obtaining a satisfactory valuation. Should the bank's valuation be lower than the amount required, the loan approval may fall through. It is, therefore, essential that the bank confirms that the loan offer is unconditional before the contract becomes binding. There are many places you can apply for a loan, such as banks, credit unions, mortgage lenders, or a finance broker. There are many different types of loans, and you must be aware of the differences between them before you decide which is right for you and your circumstances.
Once you have decided on which type of loan you require, you can apply directly to the finance provider you have chosen. If you are unsure, then it may be a good idea to consult a finance broker. Finance brokers have access to many lending institutions and can find the loan that best suits your needs. Usually, there is no extra cost for using a broker because the lender pays the broker's fee for referring the loan to them. We recommend that you do some homework to have an idea of what rates are available, and what fees may apply. Although the lender pays the mortgage broker's fee, be aware that different institutions pay different rates of commission.
Be aware that where a lender approves a loan for an amount higher than 80% of the lender's valuation of the property, there will also be a mortgage insurance premium to pay, which will increase the size of the loan. Mortgage insurance protects the lender in the event of default, but only to the extent of any loan monies outstanding, and the borrower sued for the remainder. The premium will depend on the loan/valuation ratio and will increase as the loan amount draws closer to the purchase price. The mortgage insurance premium is an expense that you may not have allowed for and can amount to several thousand dollars depending on the amount of the loan.
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EXCHANGE OF CONTRACTS
Once the vendor and buyer have agreed on the price and any other special terms of the sale, the Contract for Sale is finalised in duplicate. The vendor signs one copy, and the buyer can sign the additional copy. The two copies are then compared to ensure that they are identical, and if so, they are dated and swapped or "exchanged" so that each party holds the copy signed by the other party. Generally, at this point, the full deposit must be paid to the stakeholder nominated in the contract unless the contract provides an alternative arrangement for payment explicitly.
There are two ways to bring about an exchange of contracts.
Exchange of contracts can happen by the estate agent: Here, the contracts are usually signed and exchanged in the agent's office shortly after the sale price and other terms have been agreed to. The agent then sends the appropriate copy of the contract to each party's conveyancer. If the property is residential, the buyer will have the statutory five business day cooling-off period (see 6. below for details) in which to get any reports, unconditional finance approval, etc. The seller does not have the benefit of a cooling-off period and cannot withdraw. The danger for the purchaser with this method, however, is that once contracts are exchanged, the vendor may not agree to any further amendment to the contract even though the buyer has not had the opportunity to obtain legal advice.
Exchange of contracts can happen by the conveyancers: Here, the agent advises both conveyancers of the agreed terms of the sale; the vendor's conveyancer issues the finalised contract to the purchaser's conveyancer for checking and possibly negotiation while the purchaser arranges his reports and unconditional finance approval. If everything is in order, contracts are exchanged, this method it is usual practice for the buyer to waive their right to the cooling-off so that the contract is binding on both parties from the moment of exchange.
COOLING OFF PERIOD
Under NSW legislation, all contracts for the sale of residential property (having an area of fewer than 2.5 hectares) have a cooling-off period of five business days ending at 5.00 pm on the fifth business day. From the date of exchange, the purchaser has five business days in which to make inquiries, carry out inspections, and obtain unconditional finance approval before the contract becomes binding on him. If the purchaser decides not to proceed, he can rescind the contract within the cooling-off period. If he does choose to rescind, he must forfeit to the vendor 0.25% of the sale price. The contract is then at an end, and neither party has any further claim against the other. The seller is locked into the contract from the exchange and cannot withdraw from the sale.
The cooling-off period does not affect the completion period in any way. Completion periods expressed in terms of days runs from the date of exchange regardless if there is a cooling-off period. The purchaser can waive the cooling-off period by having the contract explained by a conveyancer or solicitor and a certificate signed by that conveyancer or solicitor and the certificate handed to the seller's conveyancer on exchange. This certificate is commonly called a "Section 66W Certificate" it is issued in accordance with s66W of the Conveyancing Act 1919. The cooling-off period can be reduced by the use of the s66W certificate, where the purchaser has agreed to shorten the period to whatever number of days has been negotiated.
The vendor can also agree to extend the cooling-off period. If the agreement is made at the time of exchange, it must be included in the contract by adding a special condition. The pre-printed pages must NOT be altered. Alternatively, if the request is agreed to after exchange, it can be evidenced by an exchange of correspondence.
The cooling-off period only applies to residential properties having an area of fewer than 2.5 hectares. However, there is no cooling-off period if the property is sold at public auction or if the contracts are exchanged on the same day as the property is listed for auction sale.
PAYMENT OF DEPOSIT
It is a standard and essential term of the contract that the deposit is paid on or before the date of the contract (i.e., on exchange) or in strict accordance with any other payment terms detailed in the contract. The deposit paid is usually 10% of the sale price but can vary. The deposit is generally paid to the estate agent, who holds it in trust pending completion as a stakeholder.
If a holding deposit is paid before the contracts are exchanged, it will become part of the 10% deposit, and the amount paid on exchange of contracts should be adjusted accordingly. If the purchaser fails to pay the deposit under the terms of the contract or the deposit cheque is not honoured, the seller is entitled to terminate the contract at any time up until the deposit is received.
The agent holds the deposit in trust for both the seller and purchaser and cannot release it or deal with it without consent from both parties. It is standard practice for the purchaser's permission to release to be handed to the vendor's representative at completion so that the agent can account to the seller immediately after settlement. The agent will deduct his commission from the deposit before accounting to the vendor for the balance.
Where a purchaser does not have sufficient funds to cover the 10% deposit, the vendor may agree to accept a deposit bond, which is a guarantee issued by an underwriter to secure the deposit between exchange and completion in the event the purchaser is in default. Where a deposit bond is provided to secure the deposit, the purchaser must then pay the full price (plus any other sums of money due under the contract) to the vendor at completion.
The risk of damage to the property stays with the vendor up until the earlier of completion or the purchaser taking possession of the property. The vendor is required to take care of the property up until completion, and the property should be handed over at completion in the same condition, subject to fair wear and tear, as it was at the date of exchange.
If the property has been substantially damaged before completion, the purchaser has a right to rescind and have the deposit refunded, provided they do so with 28 days of becoming aware of the damage. If the damage is not substantial but more than minor, then the purchaser may choose to proceed with the purchase subject to an adjustment of the sale price to account for the cost of repairing the damage done.
Stamp duty is payable on the Contract for Sale by the purchaser and may also be payable on some mortgages where the property is purchased for investment properties.
Stamp duty is calculated on the sale price: the higher the price, the higher the duty. It is the purchaser's responsibility to pay the stamp duty. The Office of State Revenue allows up to 3 months for the duty to be paid before fines become payable; however, the duty must be paid on or before completion for the associated Transfer document to be registrable at the Department of Lands.
RATES AND LEVIES
Council rates are levied on a financial year basis. The standard terms of the contract provide that rates be adjusted between the vendor and purchaser as at the settlement date so that each party pays the rates for the period that they own the property. The adjustment is calculated on the basis rates are paid in full regardless of whether they are paid or not. Any outstanding rates are paid from the sale proceeds (being the vendor's money).
Council rates are a charge on the land, and any outstanding rates become the liability of the purchaser, so they must be paid in full at settlement. One of the property inquiry certificates the purchaser's conveyancer will obtain is from the council and sets out the amount of the annual rates, what payments have been made, and what is outstanding, including any penalties for late payment.
In some country areas, the water rates are paid to the council and may be incorporated within the council rates. In other areas, a separate water authority supplies the water and sewer service, and an adjustment of these rates must also be made at settlement. Unlike Council rates, water rates are assessed quarterly, and the adjustment will be made on the amount for the quarter current at the time of settlement. The same principals apply to water rates as they do for council rates.
In addition to quarterly rates, there may be an additional water usage charge to be paid by the vendor for the water used by the vendor from the time of the last meter reading up to the day of settlement. This is usually estimated based on the vendor's average daily usage at the time of the last meter reading multiplied by the number of days to settlement. This amount is deducted from the amount due by the purchaser on completion. The purchaser is then wholly liable for the next water usage bill when it issues.
CONVEYANCING HUNTER VALLEY
If you are purchasing a lot in a strata scheme, the quarterly strata levy will be included in the settlement adjustments. The levy is usually issued quarterly and adjusted in the same manner as water rates. However, unlike water rates, the quarters for strata levies are not necessarily the usual quarters of the calendar year.
There may also be special levies to take into consideration. A special levy is struck when and if there are not enough funds held by the owners' corporation to cover either the regular running expenses or special work to be carried out on the building.
Usually, a special levy struck before the date of the contract has to be paid in full by the seller. Some times the special levy may be paid by installments. If this is the case, all installments must be paid by the seller. Hopefully, any strata inspection would show if it is intended to raise a special levy that may be struck after the date of the contract, but this cannot be relied upon.
PRE SETTLEMENT INSPECTION
As a purchaser, you are entitled to and should take advantage of a pre-settlement or final inspection of the property before you make the final payment and take the occupation of the property.
Once settlement takes place, it is too late to be finding that some of the inclusions are missing or that something has been damaged. It is challenging to be able to have repairs done, or inclusions returned after the seller has left and settlement completed. The ideal time to do the pre-settlement inspection is immediately before the settlement. However, this is usually not very practical. It is generally done the day before the settlement. This way, if there is a problem, there is some time to sort out the problem before settlement. If there is some concern that something may go missing or damage be done between the inspection and settlement, then you have no alternative than to re-inspect just before settlement takes place.
Before the settlement date, you should make a list of all those places you need to advise your change of address and do this immediately when settlement takes place. Do not do it before settlement just in case there is a delay in the settlement.
As settlement may take place at a venue not necessarily close to your conveyancers' office, any final sums of money that need to be paid by you will need to be drawn and given to your conveyancer the day before settlement. You should be advised by your conveyancer whom to make this payment in favour of a couple of days before it is due. However, you should be aware that because of the procedures followed by some financial institutions, the final cheque details may not be known until the day before settlement. You should be prepared to receive the details and be able to provide your conveyancer with the final cheques on short notice. While this is not convenient, it is, in most cases, unavoidable.
The day of settlement is determined firstly by the date of exchange of contracts and is normally 28-42 days after that date. A settlement can take place on an earlier or a later date if both parties agree. Contracts usually have a condition that if a settlement is delayed through no fault of the vendor, then the purchaser will pay interest to the vendor in compensation for the delay in settlement.
When signing the contract, if the settlement date is not convenient for you, it should be discussed with your conveyancer at that time. It is too late to realise the settlement date is not suitable after the contract is exchanged unless, by chance, the vendor agrees.
The settlement time, on the day of settlement, is determined by the availability of all parties to the transaction.
Your conveyancing solicitor or your conveyancer's agent will attend the settlement on your behalf. There is no need, nor is it standard practice for you to participate in the settlement. There will generally be four parties attending a simple purchase settlement. More if one or more of the parties are simultaneously selling and buying. The time of settlement is according to when all parties can attend a particular venue at the same time. While you may prefer a morning settlement, it may not be possible. The settlement venue is determined by the person or institution that holds the deeds to the property, usually a discharging mortgagee. The parties normally attending a settlement will be the conveyancer for the buyer, the buyer's lender, the conveyancer for the seller and the sellers discharging lender.
It is at the settlement that the deeds to the property are handed over for payment of the sale price. Your lender will hold the title deeds and any related documents until the loan is repaid.
It is your lender who attends to the registration of your ownership of the property and the Land Titles Office, and they should do this shortly after the settlement date.
CONVEYANCING LAKE MACQUARIE
It is normal practice that the occupation of the property is not granted until after the settlement has been completed unless some other arrangement is made. You should not assume that the seller will allow you to move in before settlement, even if the property is vacant.
BUYING A PROPERTY WITH A TENANT
If a tenant occupies the property and they have a current lease, then you take over the vendors' role as landlord immediately settlement has been effected.
There is no need to enter into a new lease as the current lease remains in force, and as the new landlord, you are bound by the terms of that lease. If you want to have the tenant vacate the property, then you will need to serve on the tenant a notice of termination, which must allow the required period depending on when it is issued.
When the fixed term period is due to run out, either party can give 14 days' notice to end the tenancy, and it can be served at any time up to the last day of the fixed term. When the fixed term has expired, if the tenant wants to give the notice to terminate, then at least 21 days' notice must be provided. The landlord, on the other hand, must provide at least 60 days' notice. If the property is sold and the fixed term has expired, then the landlord must give at least 30 days notice of termination, after the date of the contract. When the tenant remains in the property, the rents need to be adjusted. If the rent is paid in advance, then the seller will give you a credit in the settlement figures for that portion of the rent already paid to the seller that applies from the day after settlement. If the rent is in arrears, then no adjustment is made as the purchaser is not expected to take over a debt that is owed to the prior owner.
The managing agent will make the adjustment of rent as they often collect rents weekly but account monthly to the landlord so they could be holding rents in their trust account. Your conveyancer will determine what and how adjustments are made.
Immediately following settlement, the estate agent will be advised so that he has the authority to release any keys so that the buyer can have access to the premises. It is normal practice for the buyers' conveyancer to give to the sellers conveyancer at settlement, a written direction to the agent authorising the release of deposit and keys. This direction or "order on agent" is usually faxed to the agent, so they have written authority to release the keys to the buyer. When confirmation of the settlement is given to you by your conveyancer, you can then collect the keys from the agent and move in.
Your conveyancer will send to you, usually during the week after settlement, final letters of confirmation of your purchase together with final statements and any other documents they hold. You will not receive a Certificate of Title (Title Deed) if you have borrowed any money to assist with the purchase because all title documents are retained by your lender. It is the lender who will register the transfer into your name at the Land Titles Office.
When your lender attends the Land titles Office they will also lodge with the title documents a "Notice of Sale." It is this document that is used by the Land Titles Office to notify Council, Water authority, and Valuer General of the change in ownership so that all future rate notices issue in your name. Sometimes there may be a delay in your lender lodging these documents for registration, and consequently, there is a delay in advising the rating authorities of your details. If the settlement occurs just before the Council or Water authority issue, their rate notices they may issue in the wrong name. Be aware of this so that if you move into the property and receive correspondence from Council or Water authority in the previous owner's name, the enclosed assessment is probably for your payment and not the previous owner. You should now notify all those places that you have determined need to know of your change of address.
CONVEYANCING FOR BUYERS NEWCASTLE
CONVEYANCING FOR BUYERS SUMMARY
In summary, the process of buying a property can be simplified into the following steps:
1. Find your property
2. Contact JRA Legal & Conveyancing receive advice about the Contract and pre-purchase inspection reports. We negotiate the terms of the Contract with the Vendor’s Solicitor or Conveyancer;
3. You sign the contract, pay the deposit, and we exchange Contracts;
4. We order pre-settlement enquiries, prepare the Transfer, stamp the Contract, liaise with your bank and meet their requirements, prepare settlement adjustments and settlement booking;
5. Settlement: pay for the property and receive title; and
6. Post settlement – collect keys; notify authorities.
JRA congratulate YOU, our clients, on your purchase.