It can be years in the planning, you’ve found a home or block of land that is perfect. The next step is to make it yours. As you’d expect, the legal aspect of the purchasing process is very involved, with many stages and important documents to be aware of.
Although there are experts to help guide you through this stage of the purchasing process, being clear yourself will help give you the confidence to make the final step in owning your dream property.
We recently sat down with Michael Johnston, Director of Queensland’s Emmett Grace Lawyers to discuss the contracts and settlement process of buying property in Australia.
1. What is the difference between Torrens Title and Strata Title?
Torren’s Title is the underlying system of land ownership in Australia.
Michael explains, "In Australia, land is owned by registration. The system of land registration and land ownership is referred to as Torrens Title. To purchase a property, you have to legally register ownership with the land registry."
Torrens Title means you are the sole owner of the property. You may occasionally also hear it referred to as ‘Green Title’ or ‘Freehold’.
Strata Title means that there are multiple owners of properties on one piece of land – units, apartments and townhouses are usually purchased under Strata Title because they share some common areas including; roofs, lifts, gardens or driveways. It is the responsibility of all the owners to maintain the common areas and costs are shared through the Body Corporate or Owners Corporation.
2. What is a Conveyancer?
Once you’ve found your perfect property, it’s time to engage a Conveyancer to undertake the legal work required to put the property into your name.
Conveyancers, sometimes referred to as Settlement Agents are specialist legal professionals who guide you through the purchasing process.
Do your research before selecting a Conveyancer – making sure they have the right background, experience and qualifications will ensure you’re in good hands. Check out our blog with a list of 10 questions to ask a potential Conveyancer.
3. What does a Conveyancer do?
A professional Conveyancer’s job is to ensure that the conveyancing process – the exchange of contracts and settlement, meets all of the requirements of the law.
On your behalf, a Conveyancer will:
- Prepare necessary legal documents
- Help you understand legal documents prepared by the seller’s Conveyancer
- Undertake property research, including planning and title searches
- Ensure each step in the process is completed by the due date or request extensions on your behalf (missing deadlines through the conveyancing process can mean you incur penalty fees)
- Hold your deposit in a trust account and make payments on your behalf
- Calculate tax adjustments and rates
- Reply to the seller on your behalf during any negotiation process
- Let you know when the property is settled
- Advise your lender on when payments will be made
4. What is a contract of sale?
As you’ve been out and about hunting for your perfect property, you may have heard the term contract of sale. But what exactly is it?
A contract of sale is at the centre of every house or land purchase process in Australia. Its purpose is to ensure a sale of property meets all current legal requirements. The contract of sale outlines the terms and conditions of your property purchase including the price you are offering.
Whoever is selling the property (the vendor) must have a contract of sale drawn up. In some states a real estate agent can draw up a basic contract, which is then refined later by a Conveyancer. In other states, the vendor’s Conveyancer or lawyer is required to draw up the contract from the start.
Your Conveyancer will review the draft contract of sale to make sure everything is in order, and also check that it suits you – the buyer.
Michael comments, “Buyers all have different needs; contracts can be tailored to meet your needs. From the timing of finances, to changing settlement dates to suit your unique circumstances – you want to make sure that the document that you’re signing works for you”.
Most offers on a contract of sale are either:
- Unconditional – usually when you have the cash available immediately, or
- Conditional - nominating specific conditions on which the sale relies, such as securing finance
Once both the buyer and the seller are happy with the purchase price and any conditions on the contract, it can be signed. This is called an exchange of contracts.
It’s at this stage that your deposit has to be paid.
5. What is a settlement period?
If you’re purchasing an existing house, the settlement period is the period of time between when both parties sign the contract, and the day of settlement – typically between 30-90 days.
When you’re purchasing land, a settlement period is the period of time between when the land is titled and when you become the owner, on settlement day. The length of time can vary depending on the development.
Once the settlement period begins, you can start the process of confirming finance and ensuring any of the conditions on the contract of sale have been met. If you’re building your dream home, this is also the time you can begin some of the fun things like choosing your home design and builder and finalising your building plans.
6. Do I need to do anything before settlement day?
As property settlement is largely a legal process, your Conveyancer is responsible for much of what needs to happen. However, as the buyer there are a number of things that you’re responsible for, to ensure that everything runs seamlessly on settlement day.
- If you’re purchasing an apartment or townhouse, you may need to organise home and contents insurance
- If your contract of sale had conditions included, you’ll need to resolve them now so you can go unconditional before settlement day.
- Make contact with your lender to make sure your property finance is ready to go.
- If you’re purchasing land to build on, your plans should be confirmed and your building contract signed to ensure your loan is approved and your land purchase can settle by the due date.
- Even if you’re buying a brand-new home, it’s important to conduct an inspection to ensure that everything is as you expect it to be before you settle.
- Go through the settlement statement with your Conveyancer.
- A majority of settlements in Australia today are now being completed online and while this has made the process far more convenient, there’s still loan documents and mortgage instructions to check and sign so you’ll want to clear your diary around settlement time.
7. What happens on settlement day?Today, on your behalf, your Conveyancer will:
- Liaise with the seller’s legal representatives and sign the final documents
- Organise for your lender to pay the balance of the purchase price to the vendor
- Pay other fees and duties to the government
- Receive the property title and officially register you as the new owner
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