Buying a home is an exciting milestone, but the legal jargon involved in contracts and the conveyancing process can be overwhelming, especially for first-time buyers.
This article explains some key terms that you’ll likely encounter through your property journey. Remember, the information is general only. Conveyancing regulations and processes vary across Australia and getting professional advice from an experienced conveyancer or lawyer is essential so you can make informed decisions about your property purchase.
Conveyancing
This is the legal process of transferring the ownership (title) of a property from the seller to the buyer. A conveyancer or solicitor can handle the necessary legal paperwork and ensure the transaction is completed correctly. They will conduct searches, review contracts, and manage the settlement process.
Contract of Sale
This is a legally binding agreement between the buyer and seller. It outlines the terms and conditions of the property sale, including the:
- legal description of the property
- parties’ details
- purchase price and deposit requirements
- settlement date
- fixtures and fittings / inclusions and exclusions
- standard conditions and special conditions
Typically, contracts use a standard format of terms and conditions, however, additional special conditions are often included by the seller, for example, penalty clauses for late settlement. It is essential to have the contract reviewed by a conveyancer or property lawyer before proceeding with your purchase.
Vendor’s Disclosure
Typically, vendors have specific disclosure obligations and must include prescribed documentation in or with the contract for sale. The type of material and format required varies between jurisdictions. Disclosure material provides important information about the property and helps buyers make informed decisions. Your lawyer or conveyancer will ensure that the relevant disclosure information is included for your purchase.
Fixtures and Fittings
It is important to understand the distinction between fixtures and fittings, so you know what items form part of the property purchase. Generally, fixtures are items permanently attached to the property such as built-in wardrobes and built-in appliances, while fittings are removable items such as furniture. The distinction between some fittings and fixtures can sometimes be unclear and the contract should explicitly state what is and is not included in the sale.
Due Diligence
While vendors have certain disclosure requirements, they are generally not obliged to disclose everything about the property. Accordingly, the onus is on the buyer to ensure they are satisfied that the property will meet their expectations. Due diligence includes:
- Local council records can confirm whether the dwellings on a property comply with regulations and zoning laws and if there are any outstanding notices. Councils also provide important details that can impact the future use of a property such as information on zoning restrictions, flood and bushfire risks, environmental concerns, and heritage listings.
- Pest and building reports conducted by a qualified building professional are essential for commenting on the state and repair of the property’s dwellings and if the property is affected by pest infestation. These reports can flag costly issues to help buyers make informed decisions before entering a binding contract.
- Government searches and enquiries help uncover potential issues affecting a property, for example, whether an authority has a future proposal for road widening or an interest in acquiring part of the land for future infrastructure.
- Strata inspection reports for strata properties provide important information on the financial status of the strata scheme and details on levies, past and planned maintenance and expenditure, any building defects, insurance, and recent by-laws. Reviewing past meeting minutes can reveal potential issues, disputes, and ongoing projects.
Easements
An easement is a right that allows one party to use a portion of another party’s land for a specific purpose. Easements may be private, such as a shared driveway allowing owners or occupiers of neighbouring land access to their property; or public such as an easement for the maintenance of sewage or electricity services.
Easements are generally registered on the property’s title and shown on the deposited plan. They can affect the value of the property and how the land can be developed or used.
Cooling-Off Rights
Cooling-off periods allow buyers an opportunity to conduct further due diligence, seek legal advice, secure finance, and address concerns that may arise after the signing/exchange of contracts.
During the cooling-off period, buyers can rescind (terminate) the contract by providing written notice by the relevant deadline to the seller or their representative. If the cooling-off right is exercised, the buyer is usually required to pay a nominal penalty fee to the seller. This is typically calculated as a percentage of the purchase price.
Cooling-off rights, the timeframe for exercising those rights, and the applicable penalties vary, depending on the location of the property. For example, cooling-off rights are not mandatory for residential properties in Tasmania and Western Australia although they can be included in the contract by agreement.
Generally, cooling-off periods may also be waived or varied by negotiation and do not apply in certain circumstances, for example, when a property is sold by auction.
Joint Tenants or Tenants in Common
If you are buying a property with someone else, your conveyancer or lawyer will ask whether your legal interests should be held as joint tenants or tenants in common.
When co-owners hold property as joint tenants, their interests are held equally as a whole and cannot be separately apportioned. The owners must deal with the property collectively and joint tenancy is subject to the rules of survivorship. If a co-owner dies, their share passes to the remaining owner/s.
Conversely, tenants in common can hold specific individual shares in a property that may or may not be equal. Each owner’s interest can be individually transferred, sold, or left to a beneficiary in a Will.
Settlement/Completion
This is the final stage of the property transaction, where the balance of the purchase price is paid to the seller, and ownership is officially transferred to the buyer. The relevant authorities are provided details of the new owners and the agent (if applicable) is authorised to release the keys to the new property owner.
Electronic Conveyancing (e-conveyancing)
Traditionally, settling a conveyancing transaction involved the physical meeting of lawyers, conveyancers, and lenders to check and swap documents and bank cheques. Electronic conveyancing streamlines the entire process through an electronic platform which removes the location and time barriers of physical settlements.
Conclusion
Conveyancing involves complex legal processes, and entering a contract to buy property creates binding legal obligations. Engaging a conveyancer or lawyer early in your property journey can help you navigate the property market and conveyancing process with confidence. They can identify potential risks, explain legal jargon and terms, and advise you on your rights and obligations so you can make informed decisions.
If you or someone you know wants more information or needs help or advice, please call (08) 8232 8446 or email [email protected].