Put simply, conveyancing is the process of transferring the ownership of property from a seller to a buyer. Like any sale, this requires the creation of an agreement. In conveyancing this is the contract for the sale and purchase of land.
A lawyer or a licenced conveyancer will be able to assist you with all the points below. However, the below are some of the issues you should be aware of when buying a property:
Valid contracts
Ensure you have a valid contract for the sale of land. This contract will essentially set out the nature of the property that is being sold, the agreed price, condition of the property, and any terms and conditions. As the buyer, your role will consist of ensuring your investment is a good one by arming yourself with the best possible information about the transaction and what you are buying.
Searches and Investigations
Making all the relevant investigations or searches on the property is required to ensure your purchase is a safe one. These searches will involve building inspections, strata record inspections and title searches. If you retain a licenced conveyancer or lawyer in your purchase, they can arrange these inquiries and searches for you.
Cooling-off Period
In NSW, the law permits buyers to have a minimum 5 business-day “cooling off” period (or in the case of “off the plan” contracts, 10 business days) after entering into a contract to buy a residential property. During the cooling off period, the seller is not allowed to sell the property to anyone else, but the buyer has the option of pulling out of the purchase.
This period is supposed to be used by buyers to make relevant searches and inquiries, arrange finance and obtain legal advice. The buyer must pay at least 0.25% of the agreed price as a deposit when contracting with a cooling off period. This deposit is forfeited to the seller if the buyer decides not to proceed with the purchase. If the buyer does proceed, the balance of the agreed deposit (e.g. 9.75% of a 10% deposit) must be paid before the cooling off period expires.
In practice, when there are other buyers competing to buy the same property, the seller usually requires anyone wanting to enter into a contract to purchase the property to provide a certificate (called a “Section 66W certificate”) waiving the cooling off period.
There is no cooling off period allowed when purchasers buy a residential property at an auction.
The seller going back on the purchase
Once a seller has entered into a contract to sell a property to a buyer, there are only limited circumstances in which either party can “back out” of the sale. This requires the contract to be “rescinded”, which means cancelling it by mutual agreement and returning any deposit paid. A seller can generally only rescind a contract if there is a clause in it that permits the seller to rescind.
Buyers therefore need to ensure they have received legal advice on the terms and conditions in the contract and ensure that there are no clauses permitting the seller to be able to rescind the contract except for in those limited circumstances when it is commonly agreed (e.g. if a party dies or goes insane). If a seller rescinds a contract, it must still be on the basis of ‘reasonable grounds’ (i.e. not be arbitrary or capricious).
Specifically for off the plan purchases
The situation regarding rescission by a seller is a bit different with contracts to buy a property “off the plan”. In off the plan contracts, the seller is usually a developer building a number of properties in a larger development and dealing with many possible factors that can delay construction work. Such contracts usually have a “sunset clause” giving both parties the right to rescind the contract if the development has not reached completion by an agreed date.
However, since 2015 the law in NSW has been tightened to prevent developers from doing things like delaying a development in the hope of rescinding contracts entered into before a rise in the property market values. Section 66ZS of the Conveyancing Act 2019 (NSW) requires developers to either obtain the buyer’s consent to such a rescission or else prove their case to the Supreme Court to obtain a court-ordered rescission of the contract.
Off the plan contracts generally present a range of additional issues for buyers that really require expert legal advice before a buyer enters into a contract to buy one.
Specifically for strata property
A strata property purchase (generally apartments) is essentially the same as any other purchase. However, be aware that by purchasing strata property, you will automatically become involved with an Owners Corporation. This will mean different property management and dispute resolution arrangements. It will also mean you are required to pay strata levies.
You will need to carry out searches on the records of the Owners Corporation. This is to ensure you are not entering into a situation where the Owners Corporation is poorly managing the strata scheme or its financial position is not sound. A search will also reveal if there are any major, or expensive, disputes or problems with the property and whether there is a likelihood of any “special levies” being raised to pay for things that the ordinary levies cannot cover. You should also obtain legal advice about whether the contract would unfairly pass on such special levy costs from seller to buyer.
Specifically for a business premises
Aside from the usual title searches, when purchasing a business premises, you may wish to conduct other investigations involving:
- whether the property suits your business;
- what fixtures will be included; and
- whether purchasing the property will be more financially viable than leasing it.
Buying a property is complex and can be risky. Having a specialist property lawyer act on your behalf will ensure that the purchase will go according to plan. If you would like guidance or support with your next property purchase, please give the lawyers at Craddock Murray Neumann a call.
The law is complex and changes frequently. The law may have changed since this article was published.