Avoiding Conveyancing Traps
The conveyancing process is designed to ensure that the purchaser obtains good and marketable title to the property together with all the rights and restrictions that run with the property and that the seller (or vendor) releases all obligations in relation to the sale property.
For most people, buying a home is often the most significant milestone in their life, both from an emotional and financial point of view. Property investment has never been more popular in Australia with many people now preferring property investment over investing in the share market. Regardless of the reason for your purchase or sale, it is likely an incredibly important transaction.
The most important part of a conveyance is ensuring that our clients are aware of any risks relating to the purchase or sale of their property as this avoids surprises after entering a contract.
Why do searches & enquiries?
When buying a property there are some statutory obligations on the seller to disclose certain features about the property prior to contracts being signed.
However, this does not mean the contract discloses everything about the property as the disclosure requirements generally only relate to issues affecting legal title to the property. For example, there are still no requirements that the seller must disclose any current or previous termite activity, structural defects, and/or some unapproved building works.
The old saying “Buyer Beware” applies and the onus is on the purchaser to undertake searches and enquiries to satisfy himself/herself in relation to the property. We conduct searches on your behalf to ensure you are aware of any current or known future plans or licenses issued by government that may affect the property including heritage listings or environmental management orders.
We also ensure that questions in relation to the state of any buildings on the property are asked of the seller before you enter the contract.
Mortgages or encumbrances registered on title
A review of the searches attached to the contract is necessary to confirm that the seller actually has good title to the property and is able to transfer the title to you.
Searches will also provide information about any encumbrances on the title which can include:
• Mortgages registered against the property, to a bank or private mortgages, which must be removed from the title before/at settlement.
• Easements to the local council or utility company who may have the right to use a portion of your property (possibly above or below ground) for things such as sewerage, electricity, telephones or gas.
• Restrictive covenants which affect how the property can be used. For example, a neighbourhood may have building size and design requirements or there may be a part of the property which cannot be enclosed or built in as the public have the right to pass through it even though it is on title.
Special Conditions – avoiding the traps
Your lawyer can include special conditions in the contract, before it is signed, to deal with specific issues, not covered by the standard form contract, which may arise from searches or the property that you are purchasing (for example a pontoon may be attached to the property).
Special conditions are just as important for sellers to ensure that the purchaser is not able to rescind the contract at a later time after the property has been taken off the market.
A special condition can provide you with additional protection or rights in relation to adverse search results. For example, the contract could be made subject to satisfactory searches, work to be completed or can oblige the seller to compensate you as a result of adverse search results.
Generally, special conditions are negotiated prior to signing the contract. In some limited circumstances, it may be possible to negotiate amendments to the terms of the contract after signing the contract if there is a cooling off period or while the contract is still conditional.
Building and Pest Inspections
A purchaser who is unaware of building or pest issues when they enter a contract may have no protection if it is subsequently discovered that the foundations are sinking or the property is termite infested. A building and pest inspection can uncover such issues and allow a purchaser the possibility of addressing them in the contract or by reducing the offered price.
If you are buying a property that requires repairs or maintenance then you may wish to make the settlement conditional upon the completion of specified work and a satisfactory inspection before you are ready to settle on the purchase.
If there is a special condition in the contract, a purchaser may be able to delay or refuse to settle if the issues are not rectified.
Cooling Off Periods
Australia is unique in that every State and Territory has a different process for the purchase and sale of property.
While cooling off periods may be common in other States, due to the growing market they have become less and less common for purchasers in NSW.
A cooling off period allows the purchaser to pay a deposit, but then ensure that the deposit (or the majority of it) will be returned if they decide not to proceed prior to the end of the stated period. If a purchaser terminates a contract where there is no cooling off period, they will forfeit their deposit which can be substantial even at 5% (usually the minimum accepted) of the property value.
While the standard Contract of Sale in NSW allows for a 5 day cooling off period, most sellers will require the purchaser to waive their right to such a period prior to contracts becoming binding. This can make it difficult for purchasers who may not be able to get unconditional finance until the Contract is binding and it is therefore important to ensure you are confident in obtaining finance prior to entering the contract.
As is apparent from the above, there are many considerations in relation to purchasing or selling a property and we can help you navigate the process. If you need assistance with a conveyancing matter (either buying or selling) or would like more information, please call us on 61 2 9212 1099 or email firstname.lastname@example.org.