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Australia: Purchase Procedure

Overview

Here we detail the purchase procedures for buying a home in Australia. They are generally straightforward, although (as in all countries) there are possible pitfalls for the unwary. It’s wise to employ a lawyer before paying any money or signing a contract and, if necessary, have him check anything you’re concerned about regarding a property that you’re planning to buy.

Once a suitable property has been found and a price has been agreed, the estate agent completes a Contract of Sale, which is signed by both parties. Contracts are published in standard form by the Law Society and the Real Estate Institute. Since July 2001, all contracts have carried a government statement bringing to your attention important matters such as the recommendation to seek legal advice and information on cooling-off periods (see below) and the payment of deposits. The client as well as the estate agent must sign this statement in front of a witness. You should never sign a contract without having it checked by a legal adviser. It’s important to check that a property’s particulars are complete in every detail and have been entered correctly and that the terms of sale are correct, including any changes made to the standard terms. A deposit (typically 10 per cent of the purchase price) is paid by the buyer to the agent and deposited in the agent’s escrow (trust) account until completion, which is usually around a month later. The deposit is forfeited if you pull out of a purchase after signing a contract and aren’t covered by a clause in the contract. However, a holding deposit paid before signing a contract (as a sign of ‘good faith’) is refundable if you change your mind.

Only after the contract has been signed do the searches and checks (see Conveyance below) take place and, when all searches have been satisfactorily completed, the sale is completed. After signing and exchanging contracts, called simply ‘exchange’, both parties are legally obliged to go through with the deal, subject to cooling-off rights in some states, e.g. NSW, SA and Victoria, of two to five working days. For example, buyers in NSW have a cooling-off period from the day of exchange until 5pm on the fifth working day following, during which they can withdraw from the purchase without penalty other than forfeiting 0.25 per cent of the purchase price. Cooling-off rights don’t apply when buying at public auction. Any conditions attached to a sale must either be dealt with before the exchange or during the cooling-off period, otherwise they must be included as a specific provision (conditional clause) in the contract. Note that vendors sometimes refuse to sell unless a certificate waiving the cooling-off period is signed.

Conditional Clauses

Contracts often contain conditional clauses, such as the sale being conditional on a clear survey. Conditions usually apply to events out of control of the vendor or buyer, although almost anything agreed between the buyer and vendor can be included in a contract. If any conditions aren’t met, the contract can be suspended or declared null and void and the deposit returned. However, if you fail to go through with a purchase and aren’t covered by a clause in the contract, you forfeit your deposit or might even be compelled to complete a purchase. If you’re buying anything from the vendor such as carpets, curtains or furniture which are included in the purchase price, you should have them listed and attached as an addendum to the contract. Any fixtures and fittings present in a property when you view it (and agree to buy it) should still be there when you take possession, unless otherwise stated in the contract.

When signing a contract to buy a home or land on which you require a loan, you should complete the clause regarding your ability to obtain finance. This makes the contract ‘subject to finance’; if you cannot obtain finance within the time specified in the contract, e.g. 7 to 14 days, it becomes null and void and you won’t have to proceed. Without a finance clause, you could be sued by the vendor for failing to buy the property. If you cannot arrange finance in the specified time, you can ask for an extension to the settlement date.

Most properties in Australia are owned freehold, where the owner receives a copy of the certificate of title (deeds) or the strata title. A certificate of title is usually issued by the state lands title office (land registry), where land and property ownership is recorded. Mortgages are also recorded at the lands title office.

Conveyance

Conveyance (often improperly called conveyancing) is the legal term for the process of buying and selling properties and transferring the deeds of ownership. A conveyance is a deed (legal document) that conveys a house from the vendor to the buyer, thereby transferring ownership. There are two main stages when your conveyancer becomes involved. The first stage takes you up to the exchange of contracts and the second leads to the completion of the sale, when you become the new owner.

Conveyance includes ensuring that proper title is obtained, arranging the necessary registration of the title, checking whether the land has been registered and the existence of any restrictive covenants, enquiring about any planned developments that may affect the value of the property (like a new airport runway or motorway at the bottom of your garden), and drawing up a contract of sale. However, conveyance duties and laws in Australia vary according to the state or territory where the property is situated. Searches should include a building inspection report, drainage or sewerage service diagram, enquiries with the local council and utility companies as to whether the property is clear of any debts, identifications survey (to identify the rightful owner), pest certificate, property certificate, strata inspection, technical report and zoning certificate. Land tax, council and water rates are a charge on the property and, if they haven’t been paid by the previous owner, the new owner must pay them.

Property conveyance in Australia is usually done by a solicitor (lawyer) or a conveyancer (also called land brokers, land agents and settlement agents), although you can also do it yourself. In the ACT, Queensland and Tasmania, solicitors have a monopoly on conveyance, and in Victoria a conveyancer must work with a solicitor, but in other states you can engage a conveyancer. In some states (such as South Australia and Western Australia), the majority of settlements are handled by conveyancers, which helps reduce costs. Some lenders carry out conveyance as a free service to borrowers. Separate conveyance fees are usually paid by both the buyer and the vendor (in some states the buyer’s costs are higher, as there’s more work involved).

There isn’t a fixed fee for conveyance, which can range from around $500 to $1,700. Shop around for the lowest rate, as some solicitors and conveyancers negotiate. Conveyance companies are generally cheaper than solicitors and usually levy fixed fees with no hidden charges. Always check what is included in the fees and whether a quoted fee is ‘full and binding’ or just an estimate. A low basic rate may be supplemented by much more expensive ‘extras’ (called disbursements). Ask your colleagues, friends and neighbours whether they can recommend a solicitor or conveyancer and try to obtain a binding quotation in writing. It isn’t wise to use a solicitor or conveyancer who is acting for both the borrower and the lender, as conflicts of interest could arise.

It’s possible and perfectly legal to do your own conveyance, and there are a number of DIY kits available. However, you will need to do at least ten hours’ work and you require a good grasp of details plus a good measure of patience. Conveyance isn’t recommended for most people, as it’s complex, risky and time-consuming. If you miss a mistake in the lease, you could be left with an unsellable property – if a solicitor or licensed conveyancer is at fault, you can at least sue him!

© Survival Books Limited 2006

“Buying a Home in Australia & New Zealand” 1st Edition, Graeme Chesters.
Reproduced with the permission of Survival Books Limited.

Further information on this topic can be found in “Buying a Home in Australia & New Zealand” 1st edition, by Graeme Chesters.

For extensive information about buying a property in Australia & New Zealand, you can purchase this book at www.survivalbooks.net

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