Conveyancing
Buying and Selling Real Estate
On this page:
Buying or selling your home, apartment, an investment, hobby farm or rural property, vacant or sub-divided land, or an off the plan purchase?
Upsizing, downsizing, transferring, re-financing, changing the ownership mix, or selling property following a Family Law property settlement, or as part of estate administration?
Fast response, meticulous and accurate, attention to detail and strict adherence to time limits.
Tailored to your individual needs at competitive rates. Advising and keeping you fully informed at every stage, acting swiftly and decisively to nip any potential issues in the bud.
What is Verification of Identity?
Verification of Identity (VOI) is a process used to confirm a person’s identity. Your lawyer must take reasonable steps to verify the identity your identity or of anyone who says they are authorised to enter into property transactions on your behalf .
The Conveyancing Rules deal with the verification and identity of parties to conveyancing transactions.
The VOI process is used for documents that must be registered with NSW Land Registry Services and for documents that need not be registered.
The Registrar-General’s Guidelines set out the acceptable categories and combinations of documents.
How does VOI work?
To confirm your identity and authority to enter into the transaction you can:
- meet personally with your lawyer or other agency to give them your original VOI documents (ideally including a photo ID); or
- use another approved method; or
- if you have insufficient identification documents, another person may identify you using an Identifier Declaration.
You need not undertake VOI for property transactions within two years after the initial VOI.
What if I can’t see my lawyer in person?
If you can’t attend an interview with your lawyer in person, you can use an Identity Agent , who completes the VOI process and provides an Identity Agent Certification.
How about companies and attorneys?
If a party is a corporate entity, the person authorised to sign on the company’s behalf completes the VOI process.
Attorneys entering transactions on behalf of their principal must provide the document authorising them to do so before they can complete the VOI process.
Buying and selling properties at the same time
Buying and selling property at the same time is known as a simultaneous settlement.
Why settle simultaneously?
Many people are not in a financial position to buy a new property without first selling an existing property: they rely on the funds from their sale to complete their purchase.
Simultaneous settlements are ideal when you sell your home and buy an alternate home.
What happens at a simultaneous settlement?
The sale of your existing property is completed at the same time as the purchase of your new property. These transactions are interdependent so they must meticulously coordinated and planned–delays or problems with one transaction will affect the other.
If the buyer of your existing property and the seller of your new property are in a similar position, their issues also become yours and a domino effect occurs.
If a refinance is involved, on completion, funds from the sale are applied towards your purchase. Your lender discharges the mortgage over your existing property and you take out a mortgage on the new property.
What are the legal considerations?
Once contracts have been exchanged, the parties are legally committed to the transaction and may suffer significant repercussions for breaching the terms. You should not commit to buying a property before you are certain that the sale of an existing property is a ‘done deal’.
Generally, to protect your interests, a simultaneous settlement requires a simultaneous exchange of contracts for sale and purchase with the same completion date.
Alternatively, your lawyer may be able to negotiate the inclusion of a ‘subject to sale’ clause in a purchase contract if you haven’t yet sold your property. However, a vendor is unlikely to accept this, particularly in a competitive market where other buyers are ready willing and able to enter into an unconditional contract.
What are the options?
Selling first and buying later is a safer option. The downside is that you will need to arrange accommodation while looking for your new home. The upside is that the funds from your sale can pay out your mortgage with the balance being applied towards your purchase. Having pre-approved finance from your lender may also give you an advantage in a competitive market.
If your buyer is in no hurry to move into your existing home, you may be able to lease the property you sold until you find a suitable home.
Buying first and selling later can be very risky. Unless you are a cash buyer or own your existing property outright, you will need to finance both properties. You will have to make repayments on two mortgages or obtain a bridging loan.
If you can afford this option, it may enable you to snap up the property you want when it is available then reduce your financial commitments once your existing property is sold. You can also take advantage of market fluctuations.
If you find servicing two loans unmanageable, you may need to sell quickly and may have to accept a lower offer than you would like.
Take aways
You should consider the market and your personal circumstances when choosing the option that is right for you.
Your financial circumstances will determine your options. The current market and property demand also affects how quickly you can sell and find an alternate suitable property.
Selling one property and buying another at the same time can be very stressful. A simultaneous settlement requires careful planning, good communication and negotiation skills and, a contingency plan.
What's a Settlement Adjustment?
What are settlement figures?
The standard contract provides for the making of adjustments. Settlement figures are the calculation of the exact amount of money to be handed over at settlement.
Usually, the seller pays for expenses and is entitled to rental income before settlement and the buyer likewise after settlement. Settlement adjustments allow the parties to compensate each other for expenses paid in advance or in arrears, or for rent received by the seller after settlement.
How are council rates and water rates and usage charges and strata levies adjusted?
Usually, rates and levies are considered as paid either to the end of the next quarter or the end of the financial year, even if they have not actually been paid.
Rates and levies are usually adjusted as follows:
- Council rates are levied for the financial year. They are adjusted so that the seller pays the rates up until the day of settlement and the buyer is liable from then until the end of the rating period (30 June). They are adjusted as if the rates are paid in full regardless of whether they are paid or not;
- Water rates and strata levies are adjusted to the end of the current quarter.
In rural areas, council and water rates may be combined and are adjusted using the same method as council rates in metropolitan areas.
How is land tax adjusted?
Land tax is calculated on a calendar year basis. If the seller is liable for land tax on the property for the year, their liability must be cleared at settlement. Land tax on real estate purchased from a developer is usually adjusted in the same way as rates but on a calendar year basis.
How is water usage adjusted?
The method used to adjust water usage depends on the property’s location. In areas where the local council supplies water, water usage and charges may be included in the rates notice. In other areas, water is supplied by a third party.
The seller pays for all water usage calculated up to settlement. The buyer requests a figure from the water authority from which they calculate the average daily water usage. The seller makes an allowance in the buyer’s favour for estimated water usage in the quarter up to the settlement date.
How about electricity?
Electricity is not adjusted between the parties.
What's an Easement?
Rights of way and easements are registered on the title and usually remain part of the land after the title is transferred.
An express easement is granted and recorded in a legal document.
Easement means the right to cross or use in some way a portion of land belonging to someone else for a specific purpose.
An easement gives someone who is not the landowner a legal right to use a piece of land.
A positive easement allows another party to enter the owner’s property without trespassing.
A negative easement stops a person from doing something they would usually do on their property.
An easement can be removed with both parties agreement, or if there is no agreement, by commencing court proceedings.
In an easement contract, the landowner grants a party to the contract the right to use the land for a specific purpose.
If your property has an easement you cannot block or impact its use.
Easements should be disclosed in the contract for sale of land. Before buying a property, check if there are any easements.
Section 88K of the Conveyancing Act 1919 (NSW) allows the court to grant an easement over your property if:
- it is reasonably necessary for the land to be effectively developed;
- it will benefit the public;
- the owner can be adequately compensated; and
- the developer has made every reasonable attempt to acquire an easement, but has been unsuccessful.
If you are asked to provide some of your property for an easement, to avoid costs orders potentially being made against you, think carefully before refusing a reasonable request.
You may be entitled to compensation (sec 88K Conveyancing Act 1919). If you are asked to agree to an easement over your property, you should have the easement valued before negotiating compensation.
In some situations you may be paid for a right of way.
You can be forced to remove an unauthorised construction and pay damages if you build over an easement.
To check if there is an easement on your property, contact New South Wales Land Registry Services or order a title search.
What's a Covenant?
A covenant is a provision or a guarantee. It can give a landowner some say over what can occur on a neighbouring property. A covenant over land affecting or limiting its use is called its burden.
In the context of property, a covenant describes restrictions to the way property owners can utilise their land.
Covenants can be positive or restrictive.
A positive covenant refers to an action you need to take.
A restrictive covenant limits the way an owner can use the land. It can be removed but does not expire and applies to all owners over time.
Removing or varying a covenant by applying to the Supreme Court of NSW can be very complex and expensive with an uncertain outcome.
You may apply to your local council to amend a covenant. However, the process is generally complex and requires all owners affected by the covenant to consent.
Co-Ownership disputes and Sec. 66G of the Conveyancing Act
People caught up in the excitement of purchasing a new property seldom consider what might happen if the relationship between co-owners deteriorates in the future.
What if only one co-owner wants to sell the Property?
Where there is no written agreement and the owners cannot agree on the terms of sale of a property, one co-owner can apply to the Supreme Court of NSW under section 66G of the Conveyancing Act 1919 (NSW) (the Act).
What are the implications of a section 66G application?
The Court may appoint a trustee to oversee the sale. Unless the appointment would be inequitable, an order under section 66G of the Act is considered almost ‘as of right’: it is very hard to defend the application and the Court will likely force the sale of the Property.
What would the Court consider inequitable?
It is very difficult to establish inequitable grounds and there are very few successfully defended section 66G applications.
What happens when a property is sold under section 66G?
Once the property is sold, the sale proceeds are placed in a trust and distributed amongst the co-owners. Their respective proportions will be based on the contribution each co-owner made.
The legal costs of the section 66G applicant are generally deducted from the sale proceeds.
What if one co-owner has made greater contributions or improvements to the property?
When determining a division of sale proceeds, the Court takes into account any enhancement in a property’s value as a consequence of one co-owner’s expenditure on improvements.
However, the reimbursement will be valued at the lower of what the co-owner has spent on the property and of the property’s increase in value.
Contributions to the property include:
- Renovations;
- Council and water Rates;
- Home insurance payments;
- Mortgage repayments; and
- Rent (if a co-owner lives in the property at the exclusion of the other co-owner/s).
Fixtures and Fittings - What's the Difference?
The contract for sale normally specifies what moveable items (fittings or chattels) will remain with the property and if any fixed items (fixtures) will be removed from the property before settlement.
If an item is:-
- affixed to the land to any great extent, it is a fixture (which stays with the property on sale, unless the contract says otherwise); or
- a freestanding movable item resting on its own weight, it is presumed to be a fitting (which is removed from the property on sale unless the contract says it is an inclusion).
Fittings remaining with the property are noted in the contract and fixtures the vendor proposes to remove are listed as exclusions.
Fixtures
Fixtures are a permanent part of the property which need not be listed in the contract. A fixture is usually an item:
- which is an integral part of the structure, or
- the removal of which would damage the structure.
Fittings
Fittings are not permanently attached to, or part of, the structures on the property, and might easily be removed without damaging the structure.
Grey areas
Some items may be considered as either a fixture or a fitting.
To avoid disputes regarding fixtures and fittings, the vendor should list on the contract items that:
- could be deemed an inclusion; and
- are excluded from the sale.
To avoid any misunderstanding, the vendor should remove items to be excluded from the sale before putting the property on the market.
What is indefeasability of title?
Indefeasibility of title is an essential element of the property system in New South Wales. It is a system for determining who has priority or ownership of real property (i.e. land and buildings) when competing interests exist.
The Torrens Title System
There are two central property systems in New South Wales:
- the Torrens Title system; and
- the Old Title system.
The Old Title system was the central system before the introduction of the Torrens Title system.
Under the Old Title system, no one title proves ownership. To establish ownership you must examine an unbroken series of deeds following a paper trail.
Now, all property must be registered using the Torrens Title system. On settlement of the sale, the dealing between the parties must be registered with NSW Land Registry Services.
The Torrens Title system simplifies dealing with land, as it relies on the indefeasibility of the title concept, where a registered interest has priority over all other interests. This system allows property buyers to rely solely on title registration to determine ownership or interest in the real property. They need not investigate whether the prior transfer was valid, which provides them with a higher level of security.
Indefeasibility of title
Indefeasibility of title means that you have a registered title over real property and unregistered third parties can claim the property belongs to them only in exceptional circumstances.
Even with indefeasibility of title, some interests which will impact what you can do with your property can be registered over your property. These include:
1. easements;
2. leases;
3. mortgages; and
4. caveats.
These interests are registered over the title and given priority in the order of their registration.
Exceptions to Indefeasibility
Generally, you cannot challenge the indefeasibility of a title. However, there are exceptions where a court may consider overruling indefeasibility and reversing the registration, including:-
- forgery;
- fraud;
- misdescriptions;
- prior certificates of title; and
- prior registered interests.
Despite the above, a purchaser who purchases a property in good faith for fair value without knowledge of competing or adverse claims for that property will still take indefeasible title to the property.
Why should I care?
Indefeasibility of title grants you greater security in your property ownership. It is crucial to conducting appropriate due diligence when purchasing or leasing a property.
In addition to land ownership, indefeasibility of title may also affect your:
1. commercial lease;
2. mortgage; and
3. other property encumbrances.
The order of registration of such instruments will affect your rights, as priority is accorded by the date of registration, and encumbrances registered earlier than yours may take priority.
Reviewing the title of a property is an essential part of any property transaction.
Buying
Facilitating verification of identity and client authorisation, exchanging contracts promptly with meticulous attention to detail and adherence to time limits.
Advising you about a cooling off period, a pest and building inspection, certificates and reports, a survey, and a building certificate. Negotiating special conditions, issuing requisitions and the reviewing the vendor’s responses. Processing transfer duty liability and advising you as to the availability of exemptions or reductions under NSW Government schemes.
Agreeing on an exchange and settlement date, ordering certificates and calculating rate adjustments. Monitoring the timeliness and sufficiency of funds paid into trust and the PEXA workspace.
Liaising with the incoming mortgagee and with your mortgage broker, NSW Land Registry Services and strata managers to ensure a smooth and stress-free purchase.
What is a cooling off period?
What is an exchange of contracts?
Before contracts are exchanged and the deposit (normally 10% of the purchase price) is paid, the agreement is not legally binding and either party can change their mind about entering a contract. Exchange is when the purchaser and the vendor each sign two identical contracts which are then dated. A contractual relationship comes into effect when the purchaser retains the contract signed by the vendor and vice-versa.What is a cooling off period?
Purchasers of residential property in NSW are entitled to a 5 business day cooling off period. If the parties agree to the purchaser giving the vendor a section 66W certificate on exchange, the purchaser waives their entitlement to rescind the contract without forfeiting the deposit during the cooling off period. The purchaser has no cooling off rights if a property was purchased at (or immediately after) an auction. The purchaser may reduce or extend the cooling-off period by written agreement with the vendor. However, the purchaser must receive the vendor’s written reply by 5 pm on the fifth business day after exchange or the cooling off period will be deemed to have expired and the contract will bind the purchaser. A purchaser who decides not to proceed with the purchase must tell the vendor in writing during the cooling off period.Why should a purchaser request a cooling off period?
It is in the purchaser’s interests to have a cooling off period at exchange of contracts because:- on exchange, the property comes off the market. The vendor cannot accept a better offer;
- the purchaser has time to consider any pest, building or strata inspection reports they order. If they decide to rescind the contract, they forfeit only 0.25% of the purchase price;
- a purchaser risks only 0.25% of the purchase price to secure the property;
- a purchaser has time to secure unconditional loan approval. If they do not receive unconditional loan approval during the cooling off period, the vendor may (or may not) agree to a request to extend the cooling off period. However, if the vendor refuses such a request, the purchaser must decide whether to go ahead without unconditional loan approval. Ideally, a purchaser should obtain pre-approval from their prospective mortgagee before starting to inspect properties.
Special Conditions in Property Sale Contracts
What are special conditions in a contract of sale?
‘Special conditions’ are additional conditions attached to a standard contract of sale, which are commonly included in contracts relating to the sale of a property. If you are a seller, your solicitor can inform you on what conditions can be included in a property sales contract. If you are considering buying a property, your solicitor can explain the special conditions in the contract. Whether you are a buyer or a seller, a solicitor’s advice can help protect your interest.What if the special conditions of sale are not met?
Provided the contract allows for it, if the special conditions are not met, the buyer can cancel the contract or ask for an extension of time to sell their property or to obtain finance. If the contract is cancelled due to this, the seller must return the deposit.Here to help
Whether you need assistance navigating the process of selling a house or drafting special conditions of sale, we ‘re here for you. Contact us to book an initial consultation.Subject to finance clauses and cooling-off periods in NSW
The high hurdle to purchasing a property is an unconditional loan approval. What if the real estate agent is threatening that unless you sign straight away, they will sell the property to someone else? Do you take the risk and sign the contract, without an unconditional loan approval?
Property contracts in NSW do not contain subject to finance clauses
NSW property purchase contracts do not contain a ‘subject to finance’ clause which allows the buyer to change their mind and walk away if they don’t obtain finance approval to buy the property.
Why not?
In NSW, conveyancing practice has always been that a property contract should be unconditionally binding the moment it is exchanged. Solicitors and conveyancers acting for sellers in NSW simply refuse to agree to finance clauses: there is no ‘escape clause’ if loan approval is not received.
In Victoria, Queensland and Western Australia, there is a loan finance clause in the standard purchase contract which can be activated to give the buyer time to obtain unconditional finance approval for the purchase. If the buyer does not obtain unconditional finance approval within that period, they can terminate the contract and the deposit is refunded.
Finance clauses are often necessary in Queensland and Western Australia because financiers will not approve finance unless and until they are given a signed purchase contract. Financiers in NSW do not need a signed contract.
With no subject to finance clause in the NSW contract, a buyer can safely sign a purchase contract immediately to avoid missing out on buying the property whilst retaining the ability to walk away if they don’t get unconditional loan approval by using the cooling off period to tie up a property while waiting for finance approval.
Cooling off is legal protection for buyers under the NSW conveyancing law against what is known as ‘gazumping’. During the cooling off period, a buyer can walk away from a legally binding contract within 5 business days without having to give a reason. If the buyer rescinds, they lose their cooling off deposit (0.25% of the price). But during the cooling off period, the seller cannot sell the property to anyone else.
Although cooling off protection exists in most other states, it is not used to cover loan approvals because the contracts contain loan finance clauses.
Cooling off periods are removed when:
- a solicitor, having explained the contract to the buyer, signs a section 66W certificate which removes the cooling off period; or
- the property is sold at auction or on the day of the auction.
The standard 5 business days cooling off period in NSW can be extended by agreement to 10 days.
What about off-the-plan buyers?
Off-the-plan buyers are exposed to finance risk. They cannot obtain unconditional loan approval before they sign because the building is under construction and cannot be valued until it is finished; and in any case, a loan approval is valid for only 90 days.
Off-the-plan buyers should obtain pre-approval at least three months before the estimated settlement date, then hope that the property values up and they can obtain finance approval by the completion date.
Joint Tenancy vs Tenancy-in-common
Joint tenancy
If a joint tenant of a property dies, ownership of the property automatically passes to the survivor(s). The deceased’s interest in the property is not part of their estate and cannot be left to anyone in their will.Tenancy in common
If the property owners are tenants in common, they each own a share in whatever proportion the owners have agreed. If an owner dies, their share is dealt with under their will or (if there is no will) under the intestacy rules in the Succession Act 2006 (NSW).Why choose joint tenants?
Married and de-facto couples often purchase as joint tenants. Transferring the interest of a joint tenant in a property to the surviving joint tenant is less expensive and faster than transferring their interest in the property under a will. If a joint tenant dies, a grant of probate is not required. A Notice of Death registered with NSW Land Registry Services transfers the deceased’s share of the property to the survivor.Why choose tenants in common?
Purchasing as tenants in common may be appropriate where an owner:- wants to gift their interest in the property in a particular way if they pass away; or
- does not want their interest in the property passing to the other owners if they pass away; or
- wants the property ownership to be in different proportions.
When to decide
Transfers changing the ownership proportions attract stamp duty. To avoid possible stamp duty implications, you should decide which type of ownership you want before exchanging contracts.Can I change the type of ownership after completion?
The type of ownership between tenants in common in equal shares and joint tenants is possible after exchange of contracts, by registering on title either:- a Transfer Severing Joint Tenancy, to change ownership from joint tenants to tenants in common in equal shares; or
- a Transfer Altering Tenancy, to change from either tenants in common in equal shares to joint tenants or vice-versa.
Stamp Duty in NSW
Stamp duty (now known as transfer duty) is a tax administered by Revenue NSW on the value of property being bought.
The Duties Act 1997 (NSW) regulates stamp duty. Revenue NSW Revenue Rulings provide some guidance on how stamp duty is imposed and how concessions and exemptions are applied.
Which transactions attract stamp duty?
Stamp duty is imposed on ‘dutiable transactions’ (defined by the Duties Act 1997) which include a transfer of, or an agreement to sell or transfer, dutiable property (including land).
Who pays stamp duty?
Stamp duty is generally paid by the purchaser of the dutiable property.
What is the time limit?
For a land transfer, the duty must be paid within three months of exchange of contracts. Failure to comply with these strict deadlines attracts penalties or interest.
How much stamp duty is payable?
The amount and rate of duty payable depends on the dutiable value of the transaction and the kind of property being transferred. The dutiable value is usually the greater of:
- the amount paid for the property; and
- its value free from any encumbrances.
Rates reduce as the dutiable value of the property decreases.
Concessions and exemptions
A transfer made as part of the division of property of a separated de-facto or married couple is exempt from payment of stamp duty if done pursuant to court orders (by consent or following litigation) or a financial agreement (FA).
The First Home Buyer Assistance Scheme
The First Home Buyer Assistance Scheme exempts first home buyers (both of whom have not owned or co-owned residential property in Australia before) from paying stamp duty on a house purchased for under $800,000. Houses purchased for $800,000 to $1,000,000 attract a concessional rate.
If you are buying vacant land on which you intend to build a home, you may receive an exemption for land valued up to $350,000 and a concessional rate for land valued between $350,000 and $450,000.
NSW Revenue Grant
The First Home Owner Grant
A $10,000 First Home Owner (New Homes) Grant is available from Revenue NSW to first home buyers of:
- newly built or substantially renovated homes purchased for up to $600,000; or
- vacant land and on which you have a new home built where the total value of the vacant land, the home building contract, and any building variations is under $750,000.
Deposit Bonds
What is a deposit bond?
A deposit bond is a legal substitute for a cash deposit. It is like an insurance policy that acts as a guarantee to the vendor that the purchaser will pay the deposit at settlement.
“Deposit” refers to the required payment on exchange of contracts and “Bond” refers to an obligation to pay the sum.
How does it work?
No money actually changes hands until settlement, when the whole purchase price is paid to the vendor and the deposit bond lapses.
The purchaser applies for the bond, pays a one-off fee and must be able to prove that he or she will have sufficient funds available at settlement to complete the purchase.
What are the advantages?
A purchaser may:
- have their funds tied up in term investment or in other properties; or
- have sold their property and not have the funds available until settlement of that sale; or
- be borrowing the full purchase price, in which case the funds won’t be available until settlement.
What will the bond issuer need from me?
The bond issuer will need to sight:
- a copy of the contract;
- evidence of the savings or funds in the term investment/bank accounts; and
- a copy of the unconditional loan approval or evidence of the sale of the property.
How much does a deposit bond cost?
Provided the deposit bond is required to be valid for up to 6 months, the purchaser pays a one-off fee (usually about 1.3% of the deposit required) including the issue fee. The fee varies slightly between different Issuers.
Applications by purchasers who require a longer validity period are generally assessed on a case-to-case basis, depending on the purchaser’s needs.
Is a bond refunded if I don’t purchase the property?
If you return the bond to the issuer within 30 days from the issue date, you may be eligible for a refund of your fee, less an administration and processing fee.
How does the vendor access the deposit if I don’t complete settlement?
If the purchaser defaults under the terms and conditions of the contract and the vendor becomes entitled to the deposit, the underwriter/bond provider is legally obligated to pay the vendor the deposit. They are then entitled to recover from the purchaser the deposit they paid the vendor .
What is an auction bond?
An auction bond may be issued to a purchaser who is attending an auction and is unsure whether they will be the successful bidder and if they are what the purchase price will be. An auction bond is similar to a blank cheque. If the purchaser is successful at the auction, they insert the vendor’s name, property address and the final purchase price.
If the purchaser is not the successful bidder, the bond may be used at another auction. Or they may return the bond and obtain the refund less a processing and administration fee.
Do all sellers accept a deposit or auction bond?
Your legal representative must seek the vendor’s instructions as to whether they will accept this method of deposit.
Requisitions on Title in NSW
Requisitions on title are questions related to the sale of property. The purchaser’s legal representative puts enquiries to the vendor about the property.
What kind of enquiries are in requisitions on title?
Requisitions can include either: –
- questions that are not directly included in the contract; or
- matters that are not found during an inspection of property.
Are requisitions on title important?
The primary purpose of requisitions is for the purchaser to obtain information which may not have been disclosed in the contract.
The vendor’s duty of disclosure requires them to disclose all information. If, however, some information is not included in their disclosure, requisitions on title become essential.
What are the consequences of a dishonest or inaccurate response?
A vendor can be sued for damages if the purchaser has relied on false information provided by the vendor, and has consequently suffered losses.
If a vendor deliberately conceals information, or provides false information to make the purchaser settle, the vendor may face criminal and civil charges: sec 183 Conveyancing Act 1919 (NSW).
Incorrect statements by the vendor may be found to be in breach of consumer protection legislation such as the Australian Consumer Law.
A vendor providing honest but incorrect information may also be liable for negligent misstatement.
When the vendor is unable or unwilling to disclose information requested by the purchaser, the vendor may rescind the contract, if: –
- the purchaser has made a proper requisition; and
- the vendor is acting on reasonable grounds.
In that event, the vendor must allow the purchaser a reasonable period to waive the requisition: sec 56 Conveyancing Act 1919 (NSW)
What's a Residential Withholding Payment?
- a new residential premises; or
- potential residential land
How is the residential withholding payment calculated?
The amount to be withheld depends on GST law but is generally:-- 1/11th of the contract price; or
- 7% of the contract price (i.e. the margin scheme); or
- 10% of the GST exclusive market value of the property (for sales between associated entities for below the market value).
- any payment; plus
- the market value of the non-monetary consideration.
Margin scheme
The margin scheme provides GST relief for people who sell property as part of their business which they owned before the introduction of GST in 2000. It aims to eliminate the increase in the value of land between its acquisition date and 2000. The amount of GST payable is based on the difference between and the property’s value when the seller registered for GST and the amount paid for the property (i.e. the margin). Both parties must agree in writing before settlement that the scheme is to apply. The administrative penalty if a buyer fails to withhold or pay a required amount is the amount they were required to pay.How is the residential withholding payment made?
The seller gives the buyer written notice that a residential withholding payment must be made. A fine of 100 penalty units (currently $31,300) applies if this is not done. The buyer completes two GST property settlement forms online on the ATO website to make the residential withholding payment:- Form 1: withholding notification; then
- (on the day of settlement or upon the first instalment of an instalment contract) Form 2: date confirmation.
Can I move in before settlement?
Early access to the property is rarely permitted except under a Licence Agreement.
A buyer may seek early possession because they require sufficient time to move their possessions or somewhere to live until the settlement has been completed.
The seller is not obliged to allow early possession unless the contract includes a special condition to that effect.
Early possession: disadvantages for the seller
- Legal title does not pass to the buyer until the completion of formal settlement;
- The seller will not receive settlement monies until the formal settlement;
- The sale may be delayed or not occur; and
- If settlement does not occur, or if a dispute arises with the buyer, removing the buyer from the property may be difficult and costly, possibly requiring legal action.
Early possession: disadvantages for the buyer
- If it becomes part of the agreement, the buyer may be responsible for rates from the date of possession;
- A grant does not entitle the buyer to alter the property;
- The buyer must maintain the property in the condition it was in at possession;
- If the property is damaged, the buyer must nonetheless proceed with the settlement; and
- The seller may charge the buyer for the time they spend on the property before settlement.
Considerations for early possession
- specific details of the agreement;
- parties should understand their obligations before agreeing;
- seller should maintain their insurance; and
- costs to each party;
- buyer should maintain the property in an ‘as is’ condition;
- Utilities should be moved into the buyer’s name.
What is a caveat?
A caveat is a legal notice you place on the property’s title to alert other parties that you have an interest in the property (although you don’t actually own it yet) [also known as an unregistered interest].
The person lodging the caveat (the caveator) provides details of their claim and ways they can be formally contacted in connection with the caveat. NSW Land Registry Services notifies anyone with an interest in the property who is affected by the caveat.
A caveat is a warning to anyone who checks the certificate of title of the property that the person who lodged the caveat has an interest in it.
Lodging a caveat over a property is a way of telling anyone who wants to deal with the property that someone else’s interest already has priority. LRS must notify the caveator before they can deal with the property.
On signing a contract to buy real estate, a purchaser acquires a caveatable interest. That is, they are entitled to register a caveat to protect their interest.
Only a person with a caveatable interest is entitled to lodge a caveat.
Whilst a number of people may have the right to lodge a caveat on a property, many do not. A caveat is merely a notice of claim which may or may not be valid: at some stage the validity of the claim must be determined.
The two main procedures to remove a caveat are:
1. Removal by Application to the Registrar General; and
2. Removal by Order of the Supreme Court of NSW.
In either procedure, to prove you have a caveatable interest, you must commence or defend court proceedings. A caveat without any merit can entitle the registered owner to compensation if they suffer any losses. If you are unable to prove a caveatable interest, costs will be claimed from you.
- Engage a solicitor to prepare a caveat for electronic lodgment through an Electronic Lodgement Network Operator (ELNO);
- Lodge the caveat and lodgement rules exception form via the ELNO;
- The caveat is recorded against the title and the applicant and registered proprietor are notified.
A caveat prevents the registered owner from selling the property for 21 days from the date of service of a notice that a caveat has been lodged against the land. A caveator can within that period extend the period the caveat lasts by obtaining an Order from the Supreme Court of NSW and lodging it with NSW Land Registry Services.
A caveat remains in effect until it is withdrawn, removed, or otherwise extinguished. NSW Land Registry Services cannot register any transactions involving land while a caveat is still in force. A caveator can withdraw a caveat at any time.
A caveat can be withdrawn in several ways. The property owner can issue a Lapsing Notice which is served on the caveator. The caveator has 21 days from the date of service to seek an Order from the Supreme Court of NSW extending the operation of the caveat which must be lodged with NSW Land Registry Services within a specified period. If the caveator takes no steps, the caveat will lapse (i.e. it will fall off the title).
What is a priority notice?
- A priority notice is a form of land dealing which, once registered on title:
- acts as a notice to the public that someone intends to lodge a dealing on a title (e.g. a transfer, lease or mortgage); and
- temporarily (i.e. for the period of the priority notice) prevents the registration of other dealings to preserve the priority-on-title of the dealing covered by the priority notice.
Lodgement and duration
Priority notices can only be lodged online by a subscriber to an ELNO. A priority notice’s initial priority period of 60 days from the date of registration can be withdrawn before the end of the priority period or can be extended once for 30 days.Pros and cons
Pros:- cheaper to register than a caveat;
- quick and easy to lodge;
- the only requirement is that you are a party to a land dealing (a caveatable interest is not required);
- can remain on title for 60 to 90 days; and
- sequential priority notices can be lodged without limit re the same land dealing.
- time limited – lapses;
- do not prevent registration of all subsequent dealings (e.g. a caveat, and there can be competing priority notices).
Priority notices vs caveats
One disadvantage of priority notices is automatic lapsing. After registration of a priority notice, subsequent dealings lodged for registration on title are ‘unregistered dealings’ until:- the priority notice dealing is registered; or
- the priority notice lapses or is withdrawn.
- the priority notice preserves the priority of a dealing to be lodged for registration later;
- the caveat acts as a form of security and a warning to third parties that the caveator claims an equitable or legal interest in the land.
Moving into a Retirement Village?
Types of Retirement Village Contracts
A retirement village contract sets out a resident’s obligations and their entitlement to reside in a retirement village.
Some retirement village contracts create an equitable interest in the village and some create a registered interest over the village land. All retirement village contracts are regulated under the Retirement Villages Act 1999 (NSW) (the ‘Act’).
A retirement village contract may be in the form of one or more of the following arrangements:
Loan and licence arrangements
This type of contract requires the resident to pay an Ingoing Contribution in the form of an interest free loan. Often, a non-refundable deposit is payable and is deemed part of the loan.
The contract includes an entitlement for the resident to reside at the village and the termination provisions connected to that residency entitlement.
Where the loan agreement is in combination with another type of retirement village contract, the loan agreement should refer to that other document confirming the entitlement to reside.
The village operator must maintain the capital items in the premises that do not belong to the resident.
Recurrent charges are payable on a fortnightly or monthly basis.
On termination of the agreement, the village operator must give the resident a refund in accordance with the loan agreement and the Act. A departure fee may be deducted from the refund.
Leasehold arrangements
If a Village Operator owns the residential premises in the Village, it may require a resident to enter into a lease.
The lease is registered on the title of the Village property. The Act provides that the resident is a registered interest holder if the retirement village contract is ‘in the form of a registered long-term lease that includes a provision that entitles the person to at least 50% of any capital gain’. On the sale of the leasehold interest, depending on the terms of the lease, the resident may be entitled to/liable for the whole of (or a share in) the capital gain/loss.
It is usually a condition that the resident pay recurrent charges monthly or quarterly. The village operator must maintain the capital items in the premises that do not belong to the resident.
On permanent vacation of the premises, departure fees and outstanding recurrent charges and sale costs permissible under the Act are payable.
On termination, the village operator may require the resident to surrender the lease as a pre-condition of paying the resident monies payable under the lease and the Act.
Strata and community schemes
Usually, a resident would purchase the premises by entering into a Contract for Sale of Land with the existing registered proprietor which may be the village operator (if the premises have not been lived in before) or an outgoing resident/executor.
The Act does not consider the purchase price under the contract an ‘ingoing contribution’. However, an ingoing contribution may be defined in a service contract as the price payable under the contract.
On settlement of the contract, the resident becomes the registered proprietor of the lot within the strata or community scheme for the premises. The resident will be deemed a member of the owners’ corporation or community association and liable to pay strata/community levies for the scheme.
The main differences between a strata retirement village and a non-strata village are:
- in a strata retirement village, the owners corporation (as opposed to the village operator) is responsible for maintenance of common property; and
- individual residents are responsible for the capital items they own in their unit.
Residents’ rights and obligations are set out in the Strata Schemes Management Act 1996 (NSW) or the Community Land Management Act 1989 (NSW) in conjunction with the Retirement Villages Act 1999 (NSW).
The resident and the village operator are often required to enter into a service contract. The service contract may define the ingoing contribution, require the resident to pay departure fees, and set out whether capital gain/loss is to be shared with the operator.
The village operator and the owners’ corporation or community association may already have an agreement requiring the village operator to assist the owners’ corporation or community association with the administration and management of the common property.
Rental arrangements
This type of arrangement often involves a residential tenancy agreement where the resident pays rent in the same way as they would under a standard tenancy arrangement.
There are no Ingoing Contributions or Departure Fees. However, the resident may have to pay a bond or other costs associated with the tenancy.
If the agreement excludes the applicability of the retirement village laws, the agreement will be regulated by the Residential Tenancies Act 2010 (NSW).
Company title schemes
Company Title Schemes generally require a resident to purchase shares in a company which is the registered proprietor of the village property.
In accordance with the constitution of the company, the shares give a resident the right to occupy a specific premises allocated to the share numbers purchased by the resident. A resident must usually seek approval from the company’s board of directors to buy the shares and comply with the company’s constitution.
The Act does not consider the purchase price payable for the shares an ingoing contribution. However, a service contract may define the price of the shares as an ingoing contribution.
The company may require the resident to:
- enter into a services contract in which departure fees may be payable; and
- pay the company a bond which is refundable on the sale of the shares.
What's buying "off the plan"?
- During periods of rising prices, a purchaser can buy a property at today’s prices which may not be completed for some time.
- A developer may be prepared to sell more cheaply where the “final product” can’t be shown to the purchaser.
- Purchasers are committed at an agreed price, reducing the developer’s commercial risk and re-assuring their financiers.
The off-the-plan contract
As there is no standard contract for purchasing off the plan, it is important to carefully review a contract for an off the plan purchase.What are you buying?
When you buy an existing property, there is no doubt what you are buying. An off the plan contract rarely describes the property in detail. Make sure you are satisfied with the level of detail in the contract. There is often just the draft strata plan or preliminary plans submitted to council and brief descriptions of the finishes to be used in the building. The developer usually retains the right to alter the plans. Inclusions are usually described briefly but the developer usually retains the right to substitute the inclusions.Variations to the contract
Off the plan contracts invariably give the developer flexibility in completing the development. They usually allow a purchaser to rescind if a variation significantly affects the property to their detriment.Time to complete
The contract usually gives the developer some flexibility in the time frame to complete the project. It usually provides that the developer must use reasonable or best endeavours to complete the development by the ‘sunset’ date. If the developer cannot complete by the sunset date (including any extensions allowed by the contract) then either party may have the right to rescind with the deposit being refunded.Developer’s entitlements of over common property
Contracts often give the developer entitlements over the common property for a reasonable time after completion. The Strata Schemes Management Act 2015 (NSW) prohibits the developer from voting on matters at meetings of the Owners Corporation as your proxy or attorney regardless of whether a contract (or any ancillary document) asserts such a right.Defects
Ensure that the contract includes a defects liability clause where the developer agrees to remedy defects which appear after completion.Finance
There is always a delay between signing the contract and completion. Not all lenders will be prepared to give you a formal finance approval with an open ended time frame. In addition, your financial circumstances may change between the contract date and completion. You must be satisfied that you will be able to obtain any required finance before completion.Transfer Duty
Normally, transfer duty (i.e. stamp duty) must be paid within three months of the date of the contract. However, the First Home Buyers Assistance scheme is a transfer duty exemption or concession scheme applying to first home buyers of off-the-plan purchases if the property will be your principal place of residence. Transfer duty can usually be paid 15 months after the contract date. If you are purchasing the property as an investment, transfer duty must be paid with three months of the contract date.Selling
Preparing and exchanging contracts promptly.
Advising you in relation to agency agreement. Negotiating with the purchaser’s solicitor or conveyancer regarding special conditions. Advising you about any easements, covenants, caveats, charges, priority notices, a cooling off period, and building works insurance.
Searching for documents to be annexed to the contract including title search, deposited plan, sewerage diagrams, swimming pool, strata inspection report, planning, and land tax certificate. Applying for a FRCGW clearance certificate, pest and building certificate. Checking water, council and strata rates adjustments. Annexing optional documents incl. plan, survey, building work insurance.
Responding to requisitions and liaising with agent re deposit, mortgagee on title re discharge, purchaser’s solicitor or conveyancer, NSW Land Registry Services and strata managers to facilitate the smoothest possible sale.
Foreign Resident Capital Gains Witholding (FRCGW)
What is FRCGW and who does it effect?
The foreign resident capital gains withholding (FRCGW) tax requires a purchaser of a property with a sale price over the threshold to withhold a 12.5% capital gains withholding tax unless the vendor obtains and provides to the purchaser at or before settlement a clearance certificate proving that they are not a foreign resident.
ALL vendors must apply for the clearance certificate if the sale of the property is for $750,000 or more, regardless of whether they are an Australian citizen or a foreign resident.
The online clearance certificate application from the Australian Taxation Office (ATO) must be initiated sufficiently early that it does not cause a delay in settlement.
To avoid unanticipated delays, and to ensure the certificate is valid when it is given to the purchaser, vendors seeking a clearance certificate should apply as early as practical in the sale process.
How does this affect me?
Failure to provide the purchaser with a clearance certificate will result in the purchaser having to withhold and pay to the ATO 12.5% of the contract price.
What do I need to do?
The ATO says they could take up to 28 days to produce a certificate, so you should apply for the clearance certificate before or as soon as possible after exchange. The certificate is valid for up to 12 months and can be used for any sale during that period.
Applications including a tax file number get processed faster having the certificate sent to an email address is the quickest way to receive it.
Subdividing land for sale
Subdividing (subdivision) means the partition of a parcel of land into smaller portions. A ‘title’ is then created for each new portion which can be separately sold and transferred.
If you’re thinking of purchasing land for development, you should carry out due diligence to ensure that:
- the land is suitable for the intended purpose; and
- your proposed use is permitted.
The role of council
Local councils administer the subdivision approval and certification processes, and consider objections to a proposed subdivision.
During the approval process, the local council may refer plans for assessment to government authorities which may have an interest in the proposal.
Regulations and processes
Most subdivisions require approval from the local council. Each council has its own requirements. In New South Wales, the subdivision process is generally:
- the council contemplates the proposed subdivision;
- the landowner retains a surveyor to prepare a plan of subdivision;
- the landowner lodges a Development Application with the local council;
- the council issues a Construction Certificate which is the approval for works necessary to create the subdivision;
- when the subdivision works are completed and the conditions in the Development Application approval have been met, the council issues a Subdivision Certificate, authorising registration of the plan;
- the plan of subdivision is lodged with NSW Land Registry Services for registration.
Can my land be subdivided?
The land’s zoning is set out in the local planning scheme. Ascertain what type of development is permitted on the land. A title search, plan of the land, and zoning certificate provides preliminary information.
