The big contract has been signed, and the settlement date set. So what happens in between? This guide gives you an idea of what to expect.
At Kai Legal, we guide our clients expertly through this whole process, ensuring a smooth and stress-free settlement.
The major tasks to be done after the contract of sale is signed commonly include:
Some sale contracts are conditional on one or more of the following:
Many contracts are also contain cooling-off rights for the purchaser.
Once all the conditions are satisfied, and the cooling-off period passes, the contract has ‘gone unconditional’. It becomes very difficult for a purchaser to withdraw from the sale without forfeiting the deposit and possibly being liable for other damages suffered by the vendor from the withdrawal.
At this point, purchasers should, if they have not done so already:
It is fairly routine for vendors to request an early release of the security deposit (otherwise known as a section 27 release). These requests are accompanied by a statement of any monies owed by the vendor to a mortgagee over the property, to assure the purchaser that the owner does not owe the mortgagee more than the sale price of the property.
The purchaser’s solicitor or conveyancer will organise both parties to sign a draft Transfer of Land form, which will be lodged at the Land Titles Office on settlement day, instructing the Registrar to officially record the purchaser as the new owner of the property.
Parties who are unable to personally sign the transfer (usually due to being overseas) should prepare a power of attorney ahead of time to allow someone else to sign on their behalf.
The vendor has an obligation to deliver the property with clear title on settlement day, subject only to the encumbrances disclosed prior to sale.
For most vendors, this means organising a discharge of a mortgage over the property.
It may also involve removing any caveats lodged by third parties (for example, people to whom the vendor owes money).
The purchaser’s solicitor or conveyancer usually also undertake further checks on the legal title over the property, to make sure that there are no encumbrances on the title that were not disclosed prior to sale. For example, there may be easements over the property that restrict where buildings can be built. Anything not disclosed may give the purchaser a right to withdraw from the contract.
Purchasers generally have a right to nominate substitute or additional purchaser. They should consider the best person to purchase the property, for example, whether in their own name, whether with their parents, partners or children, in a family trust, as a company, etc. If that is different to the person signing the sale contract, then the nomination right needs to be exercised.
Some rates, charges and income ‘run with the land’, so it is only fair for the parties to adjust for those fees on settlement day so that the vendor pays for the outgoings and gets the benefit of income before settlement, and the purchaser does so after settlement.
These amounts to be adjusted include:
An adjustment statement is generally prepared by the purchaser’s solicitor or conveyancer, and forwarded to the vendor’s side for checking and approval.
The vendor issues instructions on where the balance of purchase moneys should go. Typically:
The purchaser’s solicitor or conveyancer makes sure that funding (generally in the form of bank cheques) will be ready to match these requests on settlement day.
The purchaser is entitled to a final inspection of the property in the week before settlement, to check that the property is still in a similar state as on the purchase date, and that the vendor is able to give over vacant possession of the property. This is generally done as close to settlement date as possible.
This is also the time for the purchaser to organise its own connections of utilities, and to arrange for the collection of the property keys from the vendor’s agent on the day of settlement.
On settlement day, the parties’ legal representatives and their mortgagees meet to exchange title documents and bank cheques, and generally ensure that the sale can be completed.
The purchaser’s mortgagee or legal representative then lodges the transfer of land form, to officially register the purchaser as the new owner. Typically that same person also ensures that stamp duty for the purchase is also paid.
Most importantly, the purchaser then collects the keys from the estate agent.
After settlement, the parties’ solicitors and conveyancers send notices to the local council, the State Revenue Office and other authorities notifying them of the change in owner, to ensure that it is the purchaser who is liable for future fees in respect of the property.
Growing up in a family of property developers, real estate is in Lucy’s blood. It’s that experience and her time at her previous commercial and property law practice that allows Lucy to cut to the chase, identify the real issues, give you practical advice alongside the legal, and help you with anything from the smallest purchase to your next major development project.
Lucy can also draw from her years of experience at the Australian Tax Office and Victorian State Revenue Office to help you structure your property transactions in the most tax-effective way.
Call us on +61 3 9041 7733 if you would like to find out more.
The Fitzroy Legal Centre’s law handbook is a good reference for the legal aspects of a purchasing transaction.
There are many helpful resources on the web to help property buyers. Always check when they were written, as the law and industry practices change frequently, and many articles are outdated.
You can see our related services for property purchases on our services page.
You can also read or download a PDF copy of this publication.
Kai Legal publications provide general information, and are not legal advice. These are not complete summaries of the law, and only touch on select points and scenarios that may be relevant to our readers.
This fact sheet is current as of 18 February 2015.
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