Conveyancing Process

What is Conveyancing?

Conveyancing is the process of transferring ownership (or title) in a property from one party to another and includes all of the steps involved in the transaction.

Before placing any property on the market, the seller must have a copy of the Contract of Sale prepared by a Solicitor or Licensed Conveyancer. Attached to the Contract are the other Certificates the seller must provide, namely:

• a Section 149 Certificate from the Local Council, detailing zoning and other information
• a sewerage diagram
• a copy of the title folio from the Land Titles Office
• copies of all documents creating easements or restrictive covenants
• a cooling off period statement has to be provided
• a notice directing the parties to section 52A of the Conveyancing Act Sale of Land Regulations
• if the property is strata unit, the seller must attach copies of the folio of the Register for the lot and common property and a copy of the strata plan.

If the purchaser discovers, after the exchange is effected, that the seller's information is incorrect or misleading, or if the seller does not attach the disclosure information (the prescribed documents), the purchaser may be entitled to rescind (terminate or cancel) the contract.

In any event the purchaser must serve written notice to the seller of rescission within 14 days of exchanging contracts.

Cooling-Off

A statement of the purchaser's cooling of rights must be attached to or included in every contract for the sale of residential property. If that statement is not attached or included, the buyer can withdraw from the contract at any time up to settlement and obtain a full refund of any deposit paid.

Certificates

After going through the warranties given by the seller and the prescribed documents attached to the contract, the purchaser's solicitor or conveyancer should decide which certificates are needed in relation to the property.

The Steps of Buying

When you find the right property to purchase, a copy of the "Contract of Sale" is obtained from the real estate agent or is sent to your solicitor. It is very important that you understand the terms and conditions of the sale and to check if there are any obvious problems in the contract.

Expressing an interest in the property

Most real estate agents will ask you to pay an initial or part deposit as a sign of good faith.

If you haven't signed and exchanged the contract this payment does not `hold' the property. It is refundable if you change your mind. Paying an initial or part deposit only indicates that the agent will be less likely to show anyone else the property. It is important to note here that if someone else exchanges contracts before you, you will miss out on the purchase.

You can make arrangements through your solicitor or conveyancer with the agent to exchange contracts with a five day cooling off period in order to secure the property.

Apply for the loan

Submit a formal application to your lending body for a loan on the property as soon as possible. You should not exchange contracts for the property (with or without the cooling off period) before finance has been approved in writing. With your formal application you will have to pay fees to the lending body, such as establishment and valuation fees.

The lending body will value the property to determine whether the property is adequate security for the amount of the loan. The lending body leads a percentage of the valuation of the property, not a percentage of the purchase price.

Although the five-day cooling off period can be used to secure quick exchange, it is wiser to make sure your loan has been formally approved in writing before signing and exchanging contracts.

Property inspection

Pest & building inspections should be organised at this stage before the exchange of contracts to ensure the property is structurally sound and free of pests' infestation. If buying strata property, you should order strata inspection.

Survey

If the seller does not have a recent survey attached to the contracts, your solicitor or conveyancer may obtain a survey report. This will identify the property, show the position of the buildings and also fences in relation to the correct boundaries and show any encroachments onto the land or on the neighbouring property. Most lending bodies require an up-to-date survey.

Exchange of contracts

When all of the above reports are in order and the loan is formally approved your solicitor or conveyancer will organise the exchange of contracts.

This is arguably the most important aspect of the Conveyancing/property transaction and is the point where the parties enter into a legally binding relationship and the contract is formed. The term exchange of contracts is a literal exchange of contracts where two identical contracts, one signed by the vendor and one signed by the purchaser are exchanged. The purchaser also pays a deposit at this time which is normally 10% of the purchase price but can be reduced by negotiation if necessary.

Five day cooling off period

After the exchange of contracts, there is a provision for a five business day cooling off period. This means you can change your mind and cancel the contract without any limitations.

If you decide not to proceed during the five day cooling off period you will forfeit 0.25 percent of the purchase price to the seller eg on a $400,000 property you will forfeit $1000.

There is no cooling off period if:

• you instruct your solicitor or conveyancer to sign a section 66w certificate which waives your cooling off right; or
• you are a successful bidder at an auction.

It is important to have your loan formally approved and inspections carried out before attending an auction or before waiving your cooling off rights.

After exchanging contracts

It can take four to eight weeks between exchange and settlement. During this time enquiries and searches are made and documents prepared by your solicitor or conveyancer.

1. The transfer document is prepared and taken to the office of state revenue for stamping together with the original contracts. The transfer is then sent to the seller or his representative.

2. All relevant enquiries relating to your land are made.

3. Your lender will prepare the mortgage document, which sets out the terms and conditions of the loan. Requisitions on title are sent to the seller or the seller's representative. Requisitions provide the purchaser with information from the seller, which may not have been previously disclosed or discovered during inspection of the property. An example is whether there are any disputes relating to fences with neighbours.

4. Close to settlement a `settlement statement' is sent to the seller. It details the final amount owing including the adjustments for rates and taxes as the date of settlement. The seller will direct your solicitor or conveyancer how the cheques are to be drawn.

Insurance

If you are buying a home unit, a `certificate of currency' should be obtained from the body corporate's insurer to make sure the property is adequately insured. Your lender requires details and proof of this on or before settlement.

If you are moving into the property before settlement, the seller would probably want to make a special arrangement whereby you are responsible for insurance from the time you take possession.

Final Search

On the day of settlement it is imperative that a final search of the title is obtained from the land titles office. This is to ensure that the property is clear from any interest or restrictions, which may have been recorded between the date of exchange and settlement.

You should carry out a full inspection of the property to ensure that the property has not been damaged and all fixtures and fittings listed in the contract are intact.

Settlement

"Settlement" is the conclusion of the transaction between the vendor and the purchaser. While settlement normally occurs 6 weeks (42 days) after exchange, the settlement period can be altered to suit the particular transaction or to suit the needs of the parties. For example a developer may wish to have a lengthy period of time (for instance 9 months) between exchange and settlement so that they may obtain council approval for their proposed development prior to settling on the property. In regards to this type of transaction the purchaser may pay their deposit monies but will not have to pay the balance until the development is approved by council.