Selling or buying a property can be very daunting and is probably one of the most stressful things you can do in life.
So, it pays to have a solicitor working for you who can take some of that stress away from you.
The Parties to the Contract
- The Vendor is the Seller and the Purchaser is the Buyer.
The Contract for Sale of Land –
- The Contract is prepared by the Vendor’s solicitor and, for residential property, the contract must be available to the Listing Agent before the Listing Agent can market the property for sale.
- The Contract is the document containing all of the terms and conditions of the sale and purchase, and it is required to have attached to it certain prescribed documents about the property such as –
- A Title Search;
- A Deposited Plan;
- A Council Zoning Certificate;
- A Sewerage Drainage Diagram;
- A Swimming Pool Certificate of Compliance
Tip – The Contract can only be varied in writing
Trap – The Contract cannot be varied “verbally”
Auction or Private Treaty Sale
Auction Sale –
- Bidders are required to be registered
- Exchange of contracts occurs upon the hammer falling to the highest bidder
- Purchaser signs contract & pays the 10% deposit at auction
- No “cooling off” rights – the contract is unconditional
- Obtain a Copy of the Contract before the Auction
- Get your solicitor to look over the contract & negotiate any changes required
- Carry out a Pest & Building Inspection before the Auction
- Obtain pre-approval for your loan
Private Treaty Sale –
- Involves private negotiation between the Vendor and Purchaser and upon agreeing on a price and any other special terms of agreement, contracts will be exchanged either by the Agent or the Solicitors or Licenced Conveyancers for the parties.
- Even if the Agent is going to do your exchange of contracts get your solicitor to look at the contract first – especially if you are the Purchaser
- Once contracts are exchanged, the terms and conditions of the sale & purchase are concluded
Exchange of Contracts –
- The term “Exchange of Contracts” is used to describe the formal part of a conveyancing transaction by which the Vendor will be bound to sell and the Purchaser will be bound to purchase the property.
- The Vendor & Purchaser do not sign the same copy of the contract but sign identical but separate counterpart copies of the Contract.
- On an exchange of contracts, each party will receive the other party’s signed copy of the contract, and from that point, each party will be bound by the contract.
Agent Exchange of Contracts –
- The purchaser pays a deposit of 0.25% of the purchase price on exchange of contracts. A 5 business day “cooling off” period applies (see below).
- The contract is a “conditional contract” during that period
- The Vendor cannot sell the property to anyone else during the cooling off period
- The Purchaser has those 5 business days to complete their due diligence enquiries
- The purchaser can rescind the contract for any reason during the cooling off period but will forfeit the 0.25% deposit paid
- If the contract is not rescinded the contract will become an unconditional contract after the cooling off period expires
- The balance of the 10% deposit must be paid immediately before the cooling off period expires
The Cooling Off Period –
- Applies only to the sale and purchase of residential property;
- Runs from the date of exchange of contracts;
- If a cooling off period applies, the Purchaser will pay an amount equal to 0.25% of the purchase price at the commencement of the cooling off period, and will pay the balance of the 10% deposit at the end of the cooling off period if the purchaser intends to stay in the contract;
- Is normally 5 business days from the date of exchange of contracts;
- The purchaser will have time during the cooling off period to do due diligence enquires such as pest & building inspections, survey reports and of course, obtaining written confirmation of unconditional loan approval.
- During the cooling off period the Purchaser can rescind the contract without giving any reason, but will forfeit to the Vendor the initial 0.25% deposit paid on exchange of contracts;
- The Vendor cannot sell the property to anyone else during the cooling off period;
- The cooling off period can be extended beyond 5 business days if both parties agree to do so, even after the exchange of contracts
- A cooling off period always applies if the Real Estate Agent carries out the exchange of contracts
- The cooling off period is usually waived if the exchange of contracts is carried out between solicitors because the above due diligence enquiries are normally carried out by them before exchange of contracts.
Solicitor Exchange of Contracts –
- The Purchaser provides their Solicitor’s details to Agent;
- The Agent sends off “Sales Advice” to both parties’ solicitors;
- The Vendor’s solicitor prepares & then issues a contract to the purchaser’s solicitor
- The Purchaser’s solicitor ensures the contract does not contain any inappropriate provisions & can negotiate with the Vendor’s solicitor to amend the contract or its annexures;
- The Purchaser’s solicitor completes pre-exchange due diligence enquiries enquiries & confirmation of finance;
- The cooling off period is usually waived & does not apply;
- The Vendor can issue a contract to another purchaser;
- The 10% Deposit is paid on exchange of contracts;
- When contracts are exchanged, however, the contract is an unconditional contract.
The Deposit –
- The deposit is paid on exchange of contracts and is usually 10% of the purchase price, although this can be varied by agreement.
- The Deposit can be either –
- Cash or cheque; or
- A Guarantee Deposit Bond.
Settlement or Completion of the Contract
- This is the date that –
- The balance of the purchase price is paid;
- Any mortgage loan is drawn down
- The Title to the property is transferred from the Vendor to the Purchaser; and
- The Vendor gives possession of the property to the Purchaser
- In NSW the normal time for settlement is 42 days (6 weeks) after exchange of contracts.
- The time for completion of the contract can, however, be shortened or extended by agreement between the parties – usually before exchange of contracts occurs, but sometimes it can be agreed to after exchange of contracts.
Title to property owned by 2 or more owners.
This can be either as –
- Joint Tenants; or
- Tenants in Common
Joint Tenancy is –
- Often the type of tenancy used by couples
- The whole of the property is owned by all of the owners rather than separate and divisible shares of the property
- Upon the death of an owner the deceased’s share passes to the survivor by right of survivorship
- Accordingly, the deceased’s share of the property does not form part of their estate and no grant of Probate will be required
Tenancy in Common is –
- Often the type of tenancy used for non-related investors or for tax benefits
- Each of the owners owns a separate & divisible share of the property (eg 50-50%, 70-30%, even 1-99%, etc)
- An owner can dispose of their share of the property during their lifetime
- Upon the death of an owner their share forms part of their estate & will be dealt with in accordance with their Will
Leading law firms committed to helping clients cost-effectively will have a range of fixed- priced Initial Consultations to suit most people’s needs in quickly learning what their options are.
At Brazel Moore Lawyers we have an experienced team who can answer your questions and put you on the right track.
For more information call 43247699 or visit https://brazelmoorelawyers.com.au/our-legal-services-gosford/conveyancing-gosford/