rules of buying and selling are largely set out in the standard form
contract as well as convention. The clauses in the contract govern
what each party can require of the other in making their preparations
to completion, including the time to be allowed. Many of the clauses
operate to prevent trouble or to give protection if something
unexpected occurs. A typical sale process is as follows:
1: AGREEMENT & DEPOSIT
a period of marketing and through the seller's agent, the buyer and
the seller reach agreement on the price of the house. Typically, the
deposit is 10% of the sale price and is paid to the agent to hold as
pending completion. The deposit can be more or less than 10% of the
sale price if the parties agree.
it is reduced by the agreement if the sale is going to take a long
time. If there is no agent (a private
the deposit is generally paid to the seller's solicitor. Upon receipt
of the deposit the agent or solicitor will lodge the money into a
There are risks in
paying it to the seller personally. Sometimes the parties agree to
the deposit being invested until completion. In that case, agreement
is also reached on who is to have the interest on it or in what way
interest is to be shared.
also be provided by at least one insurance company. The buyer pays a
premium to the insurance company and a deposit
is provided to take the place of cash. Generally speaking, the
deposit bond guarantees that if the buyer defaults (see later), the
insurance company will pay the amount of the deposit to the seller.
Of course, the insurance company would then move to recover from the
buyer the deposit it has paid. The real estate agent sends details of
this to the solicitors acting for both parties on a form known as a
2: TITLE SEARCH AND EXCHANGE
solicitors to give effect to the agreement on settlement
(completion). The seller arranges for existing mortgages to be
discharged and the execution of the transfer. The buyer makes all
necessary searches, enquiries about the title, pays stamp duty and
arranges for any future mortgage. Exchange then takes place.
title search can be made at the LTO or electronically by your
solicitor/conveyancer. A title search reveals the precise details of
the property, the names of the owners, the use to which the property
may be put and whether there are any encumbrances, restrictive
covenants or caveats on the title.
search should show whether any recorded easements such for the supply
of electricity, right of way, water or sewerage are registered. An
easement is the right of one landowner to use of the land of another
for a certain purpose. To avoid any interference with such easements
there are restrictions on building on the site of an easement.
shows where the house is in relation to the boundaries of the
land. Sometimes a survey report is required by a lender. At an early
stage of construction by a private builder, a survey must be lodged
with the controlling authority to show that the building will be on
the correct block and within the required distance of the boundary.
Fences, garages, carports, retaining walls and the like are
generally not built at this stage. If you wish to be completely
satisfied that there are no improvements which encroach from your
neighbour's land onto yours or vice versa, you should ask your
solicitor to have a survey made before completion.
NSW local councils control building construction in various
ways. The ACT is the only place in Australia where the control goes
as far as the actual title to own the land. It is a term of the Crown
Lease that there be no unapproved buildings on the land.
buyers have the house inspected by a building inspector to report on
the quality of its construction and a pest exterminator to report on
any evidence of pests such as white ants. If the agreement provides
that the seller will build or complete the building of a new house,
apart from any maintenance provisions, there is implied in the
agreement a warranty by the seller that he/she has used proper
materials and good workmanship. The effect of this warranty is that
even after the time specified in any maintenance clause, you can
still sue the seller for a breach of warranty if a defect can be
shown due to bad materials or workmanship. You would need expert
evidence to prove this.
you are buying an established house, you buy it in its actual state
of repair at the time agreements are exchanged. If the seller or his
agent make any promises as to the quality of the improvements, you
should ensure these are written into the agreement. You cannot later
complain if you have failed to notice defects or if you thought the
condition of the house or the goods (if any) to be better than they
are. Prior to completion, you should satisfy yourself that the
condition of the house has not deteriorated since you agreed to buy.
The standard agreement gives you this right of inspection.
you find defects of quality, others can be held responsible only if
they wrongfully caused it or if they misrepresented the truth of the
matter, even if innocently. If you believe you have such a claim, you
should see your solicitor first.
legal costs are cheaper in borrowing from a bank because banks
prepare their own mortgages and in many cases, building societies do
so as well. Most other lenders use solicitors and those solicitors'
costs must be paid before the loan is made available.
there is no agent in the sale, the deposit is generally paid to the
seller's solicitor. Also, often there is a clause included in the
agreement to protect the seller from a claim by an agent for
commission. If the seller did engage an agent but that agent did not
introduce you as buyer to the sale then it is important to the seller
that a statement to this effect is included in the agreement. The
typical clause provides that the buyer confirms he did not see any
agent in connection with the sale so that if it proves to be false,
the buyer pays the commission.
exchange the contract is certain. There is a need for parties to bind
each other to sell and to buy so that they may act with certainty in
making their preparations to complete the sale. The standard
agreement contains a number of clauses to govern the situation
between exchange and completion. The length of time for each stage
will vary according to the complexity of the contract.
is the same as completion.
– standard contract
contract for the sale of land
for rates and taxes
3: SETTLEMENT (COMPLETION)
agreement provides a date for completion. If a date is stated and for
some reason completion does not take place exactly on that date, the
seller cannot immediately terminate the agreement and claim a forfeit
of the deposit and claim damages. However, if the agreement states
that the date is "of the essence" then it can probably be
enforced. It is seldom in the interests of a buyer to sign an
agreement which makes the date for completion "of the essence". If
completion does not take place on the (non essential) day
originally agreed, you have two choices:
- to adhere to the agreement and force the seller
to perform his obligation to sell (and if the delay causes damage, you
have the right to sue for that damage); or
- to make time an essential element by serving a
notice to complete and, if it is not met, terminate the agreement,
recover your deposit and sue for any damages. The phrase used is “time
is the essence”.
there is a fixed date for completion, the standard agreement fixes
the period to run in a notice to complete. Where there is no fixed
period for a notice to complete it must be for a reasonable time.
What is a reasonable time is depends on the circumstances of each
typical conveyancing practice is for completion to take place at the
Land Titles Office. Some few mortgagees insist it take place at their
own office. On settlement, the title travels one way and the money
the reverse way. The lenders pass their money to the borrower.
borrower puts that with any other money (and an authority to the
agent to pay out the deposit) and gives it to the seller. In turn,
the seller pays out the existing mortgagees (keeping the
difference). The title deeds and mortgages then come from the
seller's mortgagees who hand each mortgage with a discharge to the
seller who, in turn, gives the buyer the Certificate of Title and all
the discharged mortgages together with the transfer. (The transfer is
the authority to the Registrar of Titles to register the buyer as the
new owner). In turn, the buyer passes his title deeds to the new
mortgagee to register and to keep as security.
the money is paid by way of a bank cheque. If a bank is lending, it
mostly pays over the whole of the balance of the purchase money on
completion including the loan money. In other cases, the buyer's
solicitor will have obtained the balance of purchase money from the
buyer a day or so before completion.
a separate debt from the seller to you is to be paid on completion,
it is clearer if you pay the whole of the agreed purchase price and
then receive back a cheque for the debt, rather than taking the
shortcut of paying only the difference. Keys to the house are handed
over on completion unless the buyer has made other arrangements to
obtain them from the seller or the seller's agent.
the seller gives you as buyer a notice to complete and you fail on to
meet that notice, the seller may keep your deposit (up to 10% of the
purchase price) and either:
- sue you for
breach of contract or
- re sell the
property and recover any loss from you.
4 : PROCEDURE AFTER SETTLEMENT
solicitor will usually phone you to state that completion has taken
place. That is followed by a letter setting out full details
including the money paid over on completion and how it was
calculated. Notices of the sale are then sent to the government. In
the case of a unit, the buyer's solicitors notify the Body
because of the Trade Practices Act (Cth) 1974, there is no fixed
scale of charges for solicitors in a conveyancing matter. In
practice, costs do vary from one solicitor to another. You should ask
your solicitor about his fees before you engage him/her. As a buyer
you should remember that under most, lending terms, you will be
liable for the legal costs of your mortgagee's solicitors. You should
ask about this. Those costs and your own solicitor's costs are
generally expected to be paid before completion.
ELECTRICITY AND GAS
buyer's solicitor's job is to ensure the buyer gets a good title to
the land in accordance with the agreement. It is up to the buyer
(and not the buyer's solicitor) to attend to all other matters
incidental to buying a house including transfer of the telephone
service, connection of electricity and gas, redirecting mail from the
post office, complying with the Electoral Act, etc.
power authority is responsible for bringing the supply up to the
connection with the house. You should engage an electrician if you
wish to check the condition of the wiring, the location of the meter
box, loading capacity, etc. To connect the electricity you will need
to sign a supply agreement.
KEEPING OF TITLE DEEDS
title deeds are entitled to be kept by the first mortgagee. If there
is no mortgage some buyers put the deeds in a safe custody packet at
their bank and others leave them in safe custody in their solicitor's
strongroom. Most solicitors make no charge for doing this. All banks
have a scale of charges in relation to keeping documents in safe
custody and opening the safe custody packet. The amount of the charges
in different circumstances differs from bank to bank so you should
enquire from your own bank what it charges to keep your title deeds in
safe custody for you.
IMPROVEMENT AND ADDITIONS
bought a house, you may wish to improve it. Any improvement or
alteration needs the prior approval of the controlling authority such
as the local council. Generally, mortgagees re quire their approval
to be given as well. After any work is completed, it is a good idea
to send the certificate of completion and fitness for occupancy to
your first mortgagee and ask it to attach the certificate to the
Crown Lease. That way, it will be where it is needed when you come to
Tax Assessment Act 1963 Part IIIA relates to capital gains generally.
The broad effect of s160ZZQ is that a tax payer's sole or principal
residence is exempt.
time when you change your property holding is generally a convenient
one to review your will to ensure it properly covers your new