Conveyancing – Buying and Selling a Property
Published February 2011
Buying or selling a property can be an emotional, complex and even risky venture. Laying claim to your slice of the ‘Australian Dream’ is not always easy nor problem free. Your best defence to stopping the dream becoming a nightmare is to arm yourself with knowledge and good legal advice. To be sure that your purchase or sale runs smoothly you need to be aware of the process, your rights and those of others involved. This article is a short selection of commonly asked questions regarding the complex process of buying and selling a property. All property sales will be different and this set of basic answers to common questions is intended only as a guide and is not a substitute for quality legal advice.
What is Conveyancing?
Conveyancing is the process of formally transferring the ownership of real property from a seller to a buyer. This process, like the sale of any property, requires the creation of a sale agreement. In this case, a contract for the sale of land.
What is contained in a contract for the sale of land?
A contract for the sale of land is an agreement between a buyer and a seller that details:
- the identity of both the buyer and seller;
- the details of the property being transferred (as well as any other items that will come with the property) and its condition;
- the price as agreed;
- the settlement date (the day on which the transaction will be completed). This is usually about 5 or 6 weeks; and
- other rights and particulars such as a ‘cooling off’ period or sale contingent on the buyer gaining finance or selling their own property.
What is the process of drawing up and exchanging contracts?
The process of drawing up and exchanging contracts will proceed in a manner similar to this:
- Seller lists their property with an estate agent, and their lawyer creates a draft contract. After having completed property searches the seller’s lawyer will list the details of the property, and the identity of the seller;
- Estate agent finds a buyer for the property, the buyer and seller will then begin to negotiate over terms of the contract (not all clauses will be negotiable). The draft contract prepared by the seller’s lawyer will then be amended with the buyer’s details, any other particulars, as well as the sale amount agreed to;
- Buyer’s lawyer will scrutinise the contract and carry out or recommend various searches to confirm that the property described in the contract is the one actually being sold. These inquiries will also substantiate that the property is owned by the seller and that it is in good repair;
- Buyers would be prudent to obtain pest and building inspections of the property to reveal any defects before becomming legally committed.
- There may also be further negotiation about “cooling off” rights. The buyer’s lawyer may also attend to matters such as ensuring the availability of finance for the purchase; and
- Deposit is paid by the buyer and then contracts are exchanged. After the exchange of contracts the seller will sign the transfer of the property title which will be held by the seller’s lawyer until settlement.
Will GST be payable?
GST is generally not paid on sale and purchase of residential property, but may be payable on non-residential property.
What is a “Cooling Off” Period?
Contracts for the sale of land may include a “cooling off” clause. This clause gives the buyer a period (often five days) in which to decide not to proceed with the contract. If you are the seller, and have already purchased another property based on the sale, the rescinding of the contract will be greatly problematic. If the buyer rescinds the contract during this period then other potential buyers for your property may have already moved on. Many sellers will therefore insist that the buyer waive their right to a “cooling off” period. A “cooling off” period can be shortened or lengthened depending on negotiations between the parties.
How will the purchase of a strata property differ?
A strata property purchase will be mainly the same (as most strata schemes are under the Torrens system), however, it should be remembered that when gaining strata property you will automatically become involved with an Owner’s Corporation. This will mean different property management arrangements as well as dispute resolution. It will also mean the payment of strata levies by the owner.
How will the sale and purchase of a business property differ?
When selling or buying a non-residential property the contract for the sale of land will not be drawn up until a buyer is found. Also, there will be differences in the kind of investigations you will wish to have carried out on the property itself. You will need to consider whether the property to be purchased will suit the business and whether purchasing the property will be more financially viable than leasing it.
Do I really need a Lawyer?
The buying or selling of a property is complex as well as risky. The good news is that having a lawyer act on your behalf in this process helps your sale or purchase go ahead smoothly and with a minimum of fuss. While you may think that you cannot afford to retain a solicitor, consider whether you can afford not to. The purchasing of a property will be one of the largest investments you make in your life. During this period both your lawyer and your estate agent will become important people in your life. Whether investing for the future, or buying into the ‘Australian dream’, consulting a lawyer will enable you to feel assured that your investment is in good hands. If you’re buying or selling a property, contact Penmans. For specific advice on buying & selling a property contact Penmans Solicitors.