CONVEYANCING, CONTRACTS & INSPECTIONS
If you want to buy or sell a home, land or investment property you’ll have to sign a contract. The legal work involved in preparing the sales contract, mortgage and other related documents, is called conveyancing. It’s possible to do your own conveyancing, however, most people get a licensed conveyancer or solicitor to do the work for them. This fact sheet explains what is involved with conveyancing.
Before the conveyancer or solicitor starts the work it is important for you to have a realistic idea of how much it will cost.
The best way to do this is to ask for an itemised statement of the likely costs.
USING A CONVEYANCER
In NSW, conveyancers must be licensed with NSW Fair Trading. Most conveyancers hold an unrestricted licence that allows them to perform the full scope of conveyancing work for residential, commercial and rural property.
Conveyancers are licensed to do legal work such as preparing documents, giving legal advice on contracts and explaining the implications. Before you decide to use a particular conveyancer, check if they are licensed with us first.
Licensed conveyancers must have professional indemnity insurance to protect you in case they make a mistake or are negligent in their work. If they are dishonest with the money you have entrusted to them, you may have access to the Compensation Fund administered by Fair Trading.
USING A SOLICITOR
While conveyancers and solicitors are equally qualified to do conveyancing work, solicitors can also give you legal advice about other matters.
Solicitors, like licensed conveyancers, must also have professional indemnity insurance for your protection.
The conveyancing process
The conveyancing process can involve the following steps:
arranging building and pest inspections
examining a strata inspection report if the property is part of a strata scheme
arranging finance if necessary
examining and exchanging the contract of sale
paying the deposit
arranging payment of stamp duties
preparing and examining the mortgage agreement
checking if there are outstanding arrears or land tax obligations
finding out if any government authority has a vested interest in the land or if any planned development could effect the property (eg. local council, Sydney Water, Roads and Traffic Authority)
finding out any information that may not have been previously disclosed such as a fence dispute or illegal building work
calculating adjustments for council and water rates for the property settlement
overseeing the change of title with the Land and Property Information NSW
completing any final checks prior to settlement
Fees will vary between solicitors and conveyancers as there is no official charge for conveyancing. In addition to a legal service fee you will usually be charged for ‘disbursements’.
These can include:
a title search
certificate fees charged by authorities with responsibility for water, electricity, roads, schools etc.
registering the mortgage.
Costs other than legal fees and disbursements will usually include:
building and pest inspections
establishment of mortgage
home building insurance
stamp duty and mortgage duty
council and water rates.
Legal practitioners and conveyancers are required to disclose their costs to clients, including the clients’ right to negotiate a costs agreement, receive bills and be advised of changes, among other things.
CONTRACTS & DEPOSITS
THE SALE CONTRACT
By law, a residential property can not be put on the market until a sale contract has been drawn up. You have the right to examine the contract at any time once a property is on the market. If a particular property interests you, get a copy of the sale contract as soon as possible so you can ask your solicitor or conveyancer to review it. You should have this done before signing a sale contract.
EXCHANGING CONTRACTS AND PAYING A DEPOSIT
Exchanging sale contracts is the legal part of buying a home.
Before exchange, the agreement is usually just verbal and not binding.
Up until you exchange contracts either you or the vendor have the right to change your minds.
After you have discussed the contract with your solicitor or licensed conveyancer and all the proper inquiries have been made, and after all the financial arrangements are in place, you will be ready to exchange contracts. There will be two copies of the sale contract: one for you and one for the vendor.
You each sign one copy before they are swapped or ‘exchanged’. This can be done by hand or post and is usually arranged by your solicitor, conveyancer or the agent. If the agent is handling the exchange, you must expressly authorise them to do so.
At the time of the exchange you will be required to pay a deposit. While it is usual for a vendor to ask for a 10% deposit, any agreed amount of deposit is sufficient to make the contract binding on both parties. The amount must be agreed to by both parties and recorded on the contract. Following exchange, you have a financial interest in the property so it’s wise to consider getting it insured.
COOLING OFF PERIOD
When you buy a residential property in NSW there is a five business-day cooling-off period after you exchange sale contracts. During this period you have the option to get out of the contract as long as you give written notice. The cooling-off period starts as soon as you exchange and ends at 5pm on the fifth business day.
A cooling-off period does not apply if you buy a property at auction or exchange contracts on the same day as the auction after it is passed in.
You can waive the cooling-off period by giving the seller a ‘66W certificate’. This is a certificate that complies with Section 66W of the Conveyancing Act 1919. The certificate needs to be signed by your solicitor or conveyancer.
If you use your cooling-off rights and withdraw from the contract during the five business-day period, you will have to pay the seller 0.25% of the purchase price. This works out to be $250 for every $100,000.
Sometimes, there are more buyers looking for homes than there are properties on the market. This is called a sellers’ market. In this case, you may want to organise a quick contract exchange. This way you can reduce the possibility of someone beating your offer and get your building and pest inspections done during the cooling-off period. You will still be able to back out if there is a problem. However, it is important to have the contract checked by your solicitor or conveyancer before you sign it.
It is possible to waive, reduce or extend the cooling-off period with the consent of the seller. If your solicitor or conveyancer has examined certificates from the appropriate authorities, a pest and building inspection has been done and your finance has been approved, then deciding to waive the cooling-off period could make your offer more attractive to the seller.
Settlement usually takes place about six weeks after contracts are exchanged. This is when you become the legal owner of the property. The balance of the purchase price and other adjustments are paid on this date.
A contract has not been made and is not legally binding before the exchange of contracts and the payment of a deposit.
PRE-PURCHASE PROPERTY INSPECTION REPORTS
Knowing as much as you can about the condition of the property before you buy will help you avoid problems and extra costs down the track. The best way of doing this is to get a pre–purchase property inspection report – commonly known as a building inspection.
WHAT IS A PRE-PURCHASE PROPERTY INSPECTION REPORT?
It’s one of the different types of building inspection reports you can get done. As the name says, this building inspection report is the one you get before you buy a property. Sometimes referred to as a ‘standard property report’, a pre–purchase property inspection report is a written account of the condition of a property. It will tell you about any significant building defects or problems such as rising damp, movement in the walls (cracking), safety hazards or a faulty roof to name a few. It is usually carried out before you exchange sale contracts so you can identify any problems with the property which, if left unchecked, could prove costly to repair. Throughout this web page we will refer to the report as a ‘building inspection report’.
Note: A building inspection report is different to a ‘pest inspection report’. While a building inspection report should identify any visual damage that may have been caused by termites, it usually won't include the existence of termites or other timber destroying pests. It can be advisable to get a separate pest inspection report done before you buy a property.
WHY DO I NEED ONE?
There are three good reasons why you should get a building inspection report done before you buy a property:
so you will know in advance what the problems are
so you can use the information to try and negotiate a lower price for the property i.e. you may have to pay to repair some of the problems
so you can get specialist advice about any major problems and how they will affect the property over time.
Of course, the building inspection report will be one of many things you will need to consider before buying a property.
INSPECTIONS DONE DURING THE COOLING–OFF PERIOD
When you buy a property in NSW there is a 5 business day cooling–off period after you exchange contracts. During this period, you have the option to get out of the contract as long as you give written notice. The cooling–off period starts as soon as you exchange and ends at 5 pm on the fifth business day.
A cooling–off period does not apply if you buy a property at auction or exchange contracts on the same day as the auction after it is passed in.
If you want to get a building inspection done during the cooling–off period, make sure you give the consultant as much notice as possible. They will have to do the inspection, prepare the report and still give you time to make a decision. If you decide not to buy the property you will also need time to get a letter to the vendor or their agent, saying that you are withdrawing from the contract.
PEST INSPECTION REPORTS
While the building inspection report should identify any visual damage caused by termite activity, it won’t include the detection of whether termites and other timber destroying pests still exist.
You should consider getting a pest inspection done as well as the building inspection, especially if the property is located in an area where termites are known to be a problem.