Thinking about buying a home

Buying a home can be one of the biggest financial transactions you will ever make. The purchase of a home involves a number of complex decisions so it is important to appoint a professional who understands your needs and situation and who will negotiate the best possible outcome for you.

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Conveyancing

Conveyancing is the transfer of real estate ownership from one party to another. It is a complex area of law, and unfortunately, small mistakes during conveyancing can lead to larger problems down the track. The best way to avoid any problems is to work with a qualified and experienced property lawyer. Unlike other service providers in this area, property lawyers are up to date on all state, local and federal requirements and are best placed to support you to understand the complexities for the purchase and sale of property. Buying a property can affect other matters, such as  taxation, Wills or family matters. If you are buying an investment property you need to know your rights and obligations as a landlord, negative gearing and GST.

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Estate Agents

Most properties are sold by estate agents or vendor advocates on behalf of the vendor (the seller). Estate agents are legally required to communicate any offer you make and must provide you with a copy of the vendor’s statement (Section 32) prior to receiving an offer on a property. The agent has a responsibility to act ethically in their dealings with you; however, the agent’s contractual responsibility is to the vendor.
If purchasing a property at auction, obtain all relevant documentation from the selling agent. Have your lawyer check the documentation and answer your queries before the auction day. If you buy at the auction or within three days of the auction, you lose the right to a cooling-off period.

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Finance

When buying a property, you need to calculate the total cost of the transaction, not just the purchase price. There are various fees and charges you need to pay which can add thousands of dollars including:

• Valuation fees

• Stamp duty

• Transfer of registration fees

• Bank charges

• Other professional fees

• Moving costs

• Inspection fees

• Mortgage insurance

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First Home Owners Grant and Stamp Duty Concessions

You may be entitled to government assistance under the First Home Owners Grant assistance scheme or a stamp duty concession if you purchase a property which will be used as your principal place of residence.

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Buyer Beware! Vendor’s statement and property inspections

The vendor’s statement (or Section 32 Statement) contains information about the land for sale. It does not contain any information about the condition of buildings and fittings. The vendor’s statement will contain information on:

• The property’s title

• Mortgages, covenants and easements

• Zoning permits and planning information

• Services connected to the property and rates information

• Owners corporation notices and liabilities

• Any notice, order or approval which may affect the land

• Building guarantees and permits obtained in the last seven years

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The vendor’s statement is a legal document and you may be able to withdraw from a contract of sale if it is inaccurate, incomplete or misleading. Have your lawyer review the vendor’s statement and advise you on its contents.

The contract of sale will contain no guarantees about the condition of the building unless you negotiate them with the vendor. Buyer beware! Do your own property inspection or hire a professional valuer, builder or architect to do one for you.

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The Certificate of Title

Your lawyer will search the relevant certificate of title at the Land Registry which will show all registered caveats, easements, covenants, mortgages and mortgage discharges which affect the property. Resolving a dispute over any discrepancy can be costly so check the accuracy to ensure the measurements on the title match those of the actual property. Your lawyer can also conduct searches to determine if other matters may affect the property, such as land contamination.

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The Contract of Sale

There are two types of written contracts: a contract of sale, and an auction contract. It is important to discuss clauses in all written contracts with your lawyer.
Contract of sale: The contract is prepared by the vendor’s lawyer. When you sign the contract you make an offer to the vendor. Once the vendor accepts the offer and signs, a contract for the sale has been made and you are bound to the contract.
Auction contract: The agent will expect the successful bidder to sign the contract and pay a deposit immediately. The buyer is legally bound the moment they sign the contract. Cooling-off rights do not apply to auction contracts.

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The cooling-off period

Cooling-off provisions may apply with a residential property or a rural property of less than 20 hectares excluding property bought at auction.

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Insurance

Although you may be able to take the benefit of any insurance contract the vendor has, it is essential you make independent arrangements to insure both the property and any fittings as soon as the contract has been signed. A mortgage lender will require a formal insurance policy to be produced by settlement day.

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Builder’s Guarantee

Building work is covered for a period of six and a half years from the date of completion. An owner/ builder who wishes to sell a home within six and a half years of its construction must obtain an inspection report. This report, subject to any defects listed, will guarantee the property for defects in workmanship for the remainder of the period.

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Settlement

The balance of the purchase money is paid in exchange for the transfer documents and the certificate of title. The property must be handed over in the same condition it was in on the day it was sold. You should carry out an inspection in the week prior to settlement to confirm this.   When change of ownership takes place your lawyer will notify all authorities on your behalf.

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Owners Corporation

If buying a property under a plan of subdivision you become a member of the owners corporation which is usually run by a committee of management made up of lot owners.   A certificate outlining details of the owners corporation and your fee obligations must be provided by the vendor.

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Off the plan sales

Buildings purchased off the plan, ie. before the plan has been certified by council or registered at the Land Registry, include lengthy contracts.  Have your lawyer check the contract of sale, check the measurements of the property against the plan of subdivision., have an independent architect or builder appraise the plans and specifications, check the rules of the owners corporation and  get an independent appraisal of the rental value of the property. Unless the contract provides otherwise, you may terminate a contract if after eighteen months from the date of the contract of sale, the plan of subdivision has still not been registered.

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Selling a Home

Selling a home can be the largest financial transactions you’ll ever make. It’s a time consuming and complex process and finding a lawyer at an early stage can assist you in ensuring all documentation is legally correct.

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Finding an estate agent

Most properties are sold by estate agents on behalf of the vendor (the seller). As the vendor, your lawyer will assist you to fully understand all contracts and agreements including the basis on which an estate agent is retained and the terms of any agreements.
Estate agents are bound by law and professional conduct regulations to always act in the best interests of you the vendor. They are required by law to:

• Advise you that commissions and outgoings, such as advertising costs, are negotiable

• Communicate all offers on the property to you

• Give an estimated selling price to you before the agency agreement is signed

• Disclose any vendor bids at auction (if vendor bids are allowed)

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These obligations must be communicated in writing to you before an estate agent obtains an authority to act.
Generally, unless stated otherwise, an estate agent’s agreement continues up to 30 days after a sale at auction and 60 days in other cases. If an estate agent is acting within their authority, statements they make can be legally binding on you.

You can also expect your estate agent to:

• Advertise the property and develop a marketing plan for the sale

• Advise you on the best method of sale

• Attract prospective buyers and organise house inspections

• Organise and conduct an auction if this is the chosen method of sale

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You can make changes to the estate agent’s agreement after the authority has been signed. Make sure you always make any changes in writing on the authority to sell. You and the estate agent must initial the changes.

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What is conveyancing?

Conveyancing is the transfer of real estate ownership from one party to another. It is a complex area of law, and unfortunately, small mistakes during conveyancing can lead to larger problems down the track. The best way to avoid any problems is to work with a qualified and experienced property lawyer. Unlike other service providers in this area, property lawyers are up to date on all state, local and federal requirements and are best placed to support you to understand the complexities for the purchase and sale of property.

Before you engage the services of a property lawyer, you need to be sure you are working with someone experienced and qualified in this specific area of the law. You may like to ask:

• How long have you worked in this area of law?

• Are you an Accredited Specialist in Property Law?

• How will we communicate when we work together?

• How recently have you been updated on the laws and regulations?

• Can you provide references?

• How do you plan to help me with my case?

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Your rights and obligations.

Your lawyer will assist you in understanding your rights and obligations in relation to a range of issues including:

• Estate agents

• Obtaining finance

• Planning and zoning restrictions

• Certificate of Title

• Vendor’s Statement

• Contract of Sale

• Cooling-off provisions

• Builders’ warranties

• Owners corporations

• Taxation

• Insurance

• Settlement

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Information about your property

Give your estate agent precise instructions about the condition of your property:

• A comprehensive list of all belongings which will be taken with you

• Be specific about what items are included in the sale

It is illegal to misrepresent your property in any way when promoting the property verbally, in writing or with photographs.
A buyer may be able to take legal action against you if they can show the property was misrepresented.

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The Paperwork

The vendor’s statement

A vendor’s statement (also called a Section 32) should be prepared by your lawyer as it is a legal document and must be factually correct.

• Must be supplied to the buyer before the buyer signs a contract and contains information about the land

• Does not contain any information about the condition of buildings and fittings

• A contract of sale can be withdrawn if the statement is incorrect or contains insufficient information

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The contract of sale:

Property purchases need to be by written contract. There are two sorts of written contracts commonly used: a contract of sale, and an auction contract. You need to be sure you understand all clauses in your contacts so it is important to discuss them with your lawyer before they are signed.

The Contract of Sale will include:

• Details of the parties

• The terms of purchase

• A description of the property and chattels

• The date of the sale and settlement

• Additional terms as agreed between you and the buyer

When both parties sign the contract you and the buyer are then bound by the contract.

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Selling at Auction

There are strict rules around the conduct of auctions to protect the interests of potential buyers and you, the vendor. Vendor bid is a bid made on behalf of the vendor and must be announced by the auctioneer. Where permitted, they must be negotiated between the vendor and the estate agent and disclosed to potential bidders before the auction starts.
Dummy bidding is used to force the bidding price up by making or accepting a false bid at auction. A vendor bid made by anyone other than an auctioneer is considered a dummy bid and is illegal with substantial penalties applying.

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Renovations completed as an Owner Builder

Where you have completed renovations on your home as an owner builder and are considering selling within six and a half years of its construction you must obtain an inspection report. This report, subject to any defects listed, will guarantee the property for defects in workmanship for the remainder of the period. You may also be required to provide particular warranties about the quality of building work carried out, the quality of the materials used, and the compliance with laws and requirements in carrying out the building work.

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Owners corporation members

If your property forms part of an owners corporation, you must provide a certificate in relation to owners corporation agreements.

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SOLD!

The deposit: The deposit will be paid to your estate agent who retains it as stakeholder for both seller and buyer.

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Rates

All rates and other recurrent outgoings relating to the property are adjusted between the buyer and seller.

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Settlement

Settlement is the final process where title documents and the purchase funds are exchanged between the parties. At settlement the balance of the purchase money is paid in exchange for the transfer documents and the certificate of title.

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Notification

When change of ownership takes place your lawyer will notify all authorities on your behalf.

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The cooling-off period

Cooling-off provisions may apply with a residential property or a rural property of less than 20 hectares.

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This information has been produced by the Law Institute of Victoria to help provide you with basic information around common situations that all of us are faced with during the course of our lives.  It is designed to help you better understand some of the specific elements related to each topic and to allow you to have a more informed discussion with your lawyer when the time is right. If you find you have additional questions and would like to know more we encourage you to contact us at Stern Legal.