What is Conveyancing?
Conveyancing is the process of transferring ownership when an individual or entity is buying or selling residential or commercial land.
Set out below is a general guide to the conveyancing process in Queensland when selling or buying residential land:
As conveyancing is regulated by state laws in Australia the process of buying or selling residential property is unique to each state and territory. In Queensland, in the interest of protecting sellers and purchasers there are some of the most comprehensive conveyancing protocols across Australia. Early compliance with the protocols is necessary to ensure that:
- If you are a seller, you do not enter into a contract which imposes upon you an obligation that you cannot fulfil and exposes you to termination or damages; and
- If you are a buyer, you are aware of the limited protection that you obtain under a standard contract and the risk that you might have in settling on a property which suffers from deficiencies.
Therefore, each step of your conveyancing matter requires the careful execution of the necessary compliance requirements to ensure a smooth and timely settlement. Should there be any problems with the terms or conditions of the contract we can ensure that you are advised of your rights and you achieve your desired results. With our extensive experience in property conveyancing, our conveyancing lawyers can work with you through the negotiation stages of the Contract, whether it be at the onset or throughout the conveyancing process to ensure that you achieve your desired results.
When buying or selling residential property, our conveyancing lawyers always encourage clients to seek pre-contract advice before signing any documents. In our experience by obtaining pre-contract legal advice a client is able to consider:
- What matters should be investigated before deciding to buy or sell
- What responsibilities have to be fulfilled before selling
- What special conditions may have to be inserted into a contract to protect their interest
- Timelines for mortgagors and financiers
- Requirements for pest and building
When buying or selling residential property on the Gold Coast and throughout Queensland it is important to remember that a buyer and seller are bound by the terms of a contract from the moment the contract is signed. Seeking pre-contract advise from an experienced property lawyer prior to signing a contract you can ensure that you are fully aware of your rights and responsibilities under which you have agreed to buy or sell your property. Although, contracts can often appear relatively simple and “standard” it is always in your best interest to seek advice about your legal rights and ensure that there are no hidden factors that were not part of your negotiation to sell or buy the property.
Preparation of Contract when selling residential property
When selling residential property, the Real Estate Agent engaged to market the property is often the person who prepares the Contract of Sale. The terms of the contract should reflect the terms negotiated between the parties.
When preparing a contract, certain interests that affect the property such as encumbrances, covenants, tenancies, environmental issues, works carried out on the property as an owner builder must be disclosed to the Agent so that they can included in the contract. This may also include specific instructions with respect to any chattels or improvements that the seller may want to retain when they sell their property.
There are strict laws concerning disclosures and documents that are presented to the Buyer when signing a contract. If particular forms or pieces of information are absent from contract the buyer may inadvertently have been given a right allowing it to withdraw from the transaction any time until it is settled. The Gold Coast City Council’s local law 17 was one piece of legislation which allowed contracts to be terminated for non-compliance.
Our conveyancing lawyers can work with you and liaise with the Agent to ensure your interests as a Seller are protected and any disclosures pertaining to the property form part of the Contract.
Pre-Contract advice for a buyer
As a buyer, it is preferable to obtain advice before signing the contract but in any event, advice must be obtained as soon as possible after signing the contract. Frequently, the buyer’s rights to object to terminate the contract under building and pest conditions are significantly restricted by special conditions introduced to the contract by the agents acting in the sale. As an example, agents will often change the building and pest condition to only allow for termination in the case of structural damage or an active terminate infestation. This change can result in buyers being forced to settle notwithstanding the presence of damage costing tens of thousands of dollars to repair. Similarly, many buyers do not realize that there is no provision in the contract that allows the termination of the contract if there are improvements and structures on the land which are not approved by the local authority, even though the cost of obtaining those approvals can be many thousands of dollars. These are issues which could be avoided if the appropriate advice is obtained before the contract is signed. If, however the contract has been signed before obtaining advice, often the only remedy is for the buyer to terminate the contract under the cooling off period which expires 5 business days after the contract has been signed and returned to the buyer. For those reasons, it is critical that advice is obtained as soon as possible, and preferably before the contract is signed.
Time is of the essence
When entering into a contract to buy or sell a house in Queensland, time is of the essence of the contract. This is a legal term that means that each party must perform their obligations under the contract strictly by the due date. For example, you must be able to settle by 4pm AEST on the settlement date, otherwise the seller may terminate or seek to enforce the contract. In both cases, the seller may claim compensation from you. Sometimes arranging settlement with an outgoing financier and an incoming financier can be challenging. Our Gold Coast conveyancing lawyers are familiar with those matters and attempt to make the process as smooth as possible.
Cooling off period
Many contracts for residential property will be subject to a cooling off period. That cooling off period is provided for under the Property Occupations Act 2014. Termination under the cooling off period does attract a termination penalty under the Act.
It is important that you take legal advice before signing the contract even if it says that it might be subject to a cooling off period under the Property Occupations Act. It does not cover all kinds of property transactions, and the cooling off period can be waived or shortened. You should take legal advice before waiving or shortening the cooling off period. Rarely would a lawyer advise a client to waive or shorten a cooling off period unless satisfied with searches beforehand, and where it was critical to the transaction (as an example, immediately before an auction). Most contracts arising from the auction sale of property are not subject to any cooling off period.
Building and pest inspections
Contracts in Queensland can be made subject to conditions such the buyers requirement to have a building and pest inspection conducted at the property prior to a stipulated date in the contract. It is important to allow enough time for this condition to be addressed and for a qualified building and pest inspector to be engaged to carry out the inspections. Once a report has been obtained from the licensed building inspector, the buyer must review its contents carefully so that they fully understand the condition of the property they are buying. If results of the inspections are satisfactory to the buyer, the buyer’s lawyer must notify the Seller’s lawyers before 5pm on the stipulated date.
A number of buyers will be satisfied with the contents of the report but then after completion find that there are defects with the improvements on the land. They are often left with no remedy as the reports are written subject to various disclaimers and qualifications. If you are uncertain about anything in a report, you should check it. If invasive tests are recommended, you should take the recommendation seriously.
Subject to any special conditions to the contrary, should the results of the inspection not be satisfactory, a buyer may terminate the contract or choose to negotiate with the seller if they are still interested in proceeding with the transaction. Many agents acting in the sale of property will attempt to restrict the buyer’s right of termination by special conditions. Our conveyancing lawyers advise buyers against agreeing to those conditions which significantly adversely affect the rights of buyers to terminate the contact and can leave buyers compelled to settle contracts notwithstanding that the properties have significant defects
Swimming pool inspections
If you have a swimming pool, you must arrange for a licensed inspector to check that it’s safe. An inspection will ensure the pool meets construction standards and follows safety regulations with respect to fences, signs and access. Inspectors must be licensed by the Pool Safety Council. If the swimming pool complies with regulations the Seller will provide you with a Form 23 Pool Safety Certificate.
If the swimming pool does not comply with regulations the Seller must provide you with at Notice of no pool safety certificate. As a potential owner of the Swimming Pool you have rights under the standard terms of the Contract and the Seller has obligations that they are required to satisfy.
Our Gold Coast conveyancing lawyers can advise you on your contractual rights and obligations as a Buyer and Swimming Pool owner.
If a contract is subject to finance, the buyer must take all reasonable steps to obtain finance approval by the finance date. This includes making a finance application shortly after the contract date and pursuing the application diligently. If a buyer fails to take reasonable steps to obtain financial approval they may be prevented from relying on the finance condition to terminate the contract. The seller may request evidence that the buyer has taken reasonable steps to obtain satisfactory finance.
The seller must be notified in writing on or before 5pm on the finance date that finance is approved, waived or not approved. If the buyer gives notice that they have not obtained finance or if they fail to give notice at all, the contract will continue with both parties having a right of termination unless the clause is waived by the buyer.
There are many searches that can be obtained before selling or buying property. Currently, our conveyancing lawyers recommend that sellers carry out a number of searches before listing their property for sale or entering a contract for a sale of their property so that they are aware of any problems before they are bound by a contract to deliver something which may have become impossible.
As a buyer, searches are critical and can reveal any number of issues or deficiencies with the property which may give rights of termination or compensation if raised before settlement. Examples of things which might be discovered by appropriate searches include (but are not limited to):
- Unregistered easements which would restrict the construction of improvements on a property including pools;
- Potential requirements from the Department of Main Roads for road widening;
- Outstanding notices from the Local Authority requiring the removal of unauthorized structures or improvements;
- Amounts which owing in respect of the land which can ultimately become payable by the buyer including body corporate levies, rates, and land tax.
Our conveyancing lawyers will give you a list of the searches available for the subject property and the relevance that it might have and we will charge you for the searches that you select at the prices that we are charged.
Under most standard contracts, the buyer is entitled to carry out a pre-settlement inspection of the property. This inspection is important for a buyer to determine whether the property has been used reasonably since the date of contract and also whether any agreed inclusions have been removed from the property.
If the pre-settlement inspection reveals issues, we can advise you of your contractual rights and obligations prior to settlement.
Adjustments and preparation for settlement
There are a number of adjustments which can be made to the contract price. Generally, a seller is responsible for the costs of holding the property to the date of settlement, with the buyer being responsible thereafter. As a result, holding costs such as rates, land tax (to some extent) and body corporate levies will be the subject of adjustment, either in favour of the seller or in favour of the buyer depending upon whether or not they have been paid.
Settlement is then arranged in conjunction with the seller’s mortgagee (if there is one) and the buyer’s financier (if there is one). Both the seller’s mortgagee and the buyer’s financier will have certification and approval processes to satisfy before they will allow settlement to be booked. Dealing with these mortgagees can be frustrating and time consuming. Often, the mortgagees do not appear to appreciate that the failure to settle by close of business on the due date under the contract can result in the termination of the contract and the seller having to repay the deposit to the buyer.
At settlement, the following will usually occur:
- The seller’s financier will give to the buyer a release of any mortgage on the land in exchange for payment of the balance owing under the mortgage;
- The seller will provide to the buyer a transfer of the land (if the buyer does not already have it);
- The purchase price is paid by the buyer and/or the buyer’s financier;
- The buyer’s financier will take the transfer, any release of mortgage, and their own mortgage to be lodged with the Department of Natural Resources and Mines for registration.
As mentioned above, if settlement is not achieved on the settlement date, it is possible that a party will be found to be in breach of the contract. That can result in termination of the contract and claims for damages, or for claims for specific performance of the contract.
With those procedures and risks, it is recommended that not only do buyers and sellers engage lawyers to act on their behalf, but that they ensure that the lawyers who are engaged have skilled professionals acting who understand the contracts and the obligations of their clients rather than merely understanding the procedures. Our conveyancing lawyers provide the best service to that end, and are backed by our litigation lawyers if there is a breach by the other party.
NEW GST REMITTANCE RULES AFFECTING PROPERTY SALES
On 29 March 2018, in a bid to strengthen compliance with GST Laws, the Government made changes to the GST remittance rules affecting property settlements. Effective 1 July 2018, the new GST regime requires purchasers of newly constructed residential properties or potential residential land (i.e. new subdivisions) to withhold the GST amount and remit it directly to the Australian Taxation Office (“ATO”).
Why the changes?
The new GST regime has been introduced to shift the obligation to remit the GST to the ATO from developers onto purchasers. Largely, this shift is an administrative measure to prevent developers making taxable sales on residential property from failing to remit the GST collected from purchasers to the ATO while claiming input tax credits for development costs.
What is the rate of withholding?
The rate of withholding amount differs depending on the whether the margin scheme is applied to the transaction. If the margin scheme does not apply to the transaction, the rate of withholding is 1/11th of the GST inclusive purchase price set out in the contract.
If the margin scheme does apply the rate of withholding is currently set at the default position of 7% of the GST inclusive purchase price, however the legislation reserves the right for the Minister to make a determination amending this amount to a rate not exceeding 9%.
Withholding obligations for purchasers
Generally, purchasers of new residential land and potential residential land (including subdivision of land and the sale of home and land packages) will be obligated to pay the withholding amount directly to the ATO at settlement or by providing a cheque payable to the ATO to the developer at settlement. The amount required to be withheld calculated irrespective of whether the amount reflects the actual GST Liability for the transaction or not.
The purchaser is required to remit the withholding amount to the ATO on or before the date which monies (not including deposit) are first provided for the asset. For most property transactions this will likely be the date of settlement however, for contracts under which the price is payable in instalments, the withholding amount will be due on or before the date for payment of the first instalment of the balance purchase price.
If there is a discrepancy between the amount withheld and the actual GST liability of the transaction, the developer is required to seek a refund for the difference from the ATO.
Notification obligations for developers
The new GST regime creates an obligation on the developer to provide written notice to the purchaser 14 days prior to settlement, advising that the property is or is not new residential property and providing the vendor’s ABN. If the purchaser receives a notice that the property is not new residential property and this turns out not to be the case, then the purchaser can rely on the developers notice to avoid an administrative penalty from the ATO for not withholding. A failure by a developer to provide notice of an amount to be withheld can expose the developer to a fine of 100 penalty units for individuals (currently $21,000) or 500 penalty points for companies (currently $105,000).
Developers are obligated to provide written notice to the purchaser in the sale of all residential property (not just new residential land and potential residential land).
When does the new regime take effect?
The changes take effect on 1 July 2018 and exclude all contracts entered into prior to that date provided that the property transaction settles before 1 July 2020. If settlement occurs after 1 July 2020, the new GST regime will apply to pre-1 July 2018 contract date transaction.
The effect on developers
The new GST regime will have the potential to create cashflow issued for developers as they will no longer have the benefit of temporary access to the GST amount after settlement.
Do not hesitate to contact our conveyancing team on 07 5574 0623 or email@example.com to obtain a quotation or discuss a proposed sale or purchase. Getting us involved early can ensure a smooth transaction through until settlement.