Buying In New South Wales

Firstly, and most importantly it is vital to ensure that you have pre-approval for a mortgage on the property or sufficient funds in order to purchase. You should never sign a contract without knowing that come settlement you will have enough money available to you to pay the whole purchase price. Secondly you should never sign the contract before you provide us with a copy of it. If required, our property conveyancing solicitors will negotiate the terms of the contract with the vendor’s solicitors to ensure that you are protected and in a better position that that initially offered by the vendor.

Exchange takes place when you and the seller sign the contract, and you pay the deposit. The deposit under the contract is 10%, however, quite often the vendor will accept 5%, however, if you default on the contract you would still be liable to the seller for the full 10% of the purchase price, regardless of how much of a deposit you have paid. In addition, if the contract is subject to a cooling off period (5 business days) it is common to only pay 0.25% of the purchase price with the remainder of the deposit being paid on the expiration of the 5-day cooling off period.

The deposit under the standard contract is 10% of the purchase price. You can agree a lower deposit, however, if you default on the contract you may still be liable to pay to the vendor for the full 10% of the purchase price. The deposit is payable to the estate agent on exchange of contracts and is held in their trust account pending settlement. Exchange happens when you sign the contract and those contracts are exchanged between yourself and the seller. The deposit can be paid by personal or bank cheque. Some agents will also accept an electronic transfer. You may also be able to use a deposit bond to cover the cost of the deposit. A deposit bond is a deposit guarantee from an insurance company or bank. The cost of a deposit bond is approximately 1.5% of the deposit. However, in order to use a deposit bond to cover the cost of the bond you will need the seller’s agreement on this.

The deposit will be held by the estate agent in their trust account and can be invested until completion so that the interest earned may be shared equally between you and the vendor. If you wish to invest the deposit you should give your tax file number to the agent. If you do not provide your tax file number, tax will be taken out of the interest at the highest rate. With a small deposit over a short period of time such as 42 days it is unusual to invest the deposit, however, with an off the plan property it is common that the deposit will be invested.

You are not obliged to agree to any release of a deposit and should only do so when you can be sure that your funds are not at risk. We would only advise you to agree, if the vendor cannot proceed without it, and all settlements happen simultaneously, and the deposit is at all times held in the trust account of a solicitor or agent.

The standard contract provides for a 5-business day cooling off period following exchange. This means that if you want to pull out of the contract within 5 business days of signing the contract you can do so. However, if you pull out during this time frame and the vendor is not at fault you will lose 0.25% of the purchase price.  As soon as you sign the contract our property and conveyancing lawyers will set the date the cooling off period expires, and will contact you to obtain your instructions on whether you are happy to proceed when we are nearing the end of that time period.

If you proceed at the end of the cooling off period, the balance of the deposit is required to be paid. This is usually paid to the estate agent, who holds the deposit in their trust account.

A lot of vendors will request that the cooling off period is waived. If the cooling off period is waived the contract is unconditional from the moment you sign the contract and if you pull out of the contract, through no fault of the vendor, you will lose 10% of the purchase price. In the reverse if you find that the cooling off period is about to expire and you are still waiting on unconditional approval from your lender, it is possible to request that the vendor extend the cooling off period.

The cooling off period is invariably used in order to obtain unconditional finance, strata reports, pest and building reports etc.

Settlement, or completion is the day when the property legally transfers to you, you get the keys and you pay the balance of the purchase price.

The usual time before exchange of contracts and settlement is 42 days. There is nothing to prevent you from negotiating a different timeframe and the timeframe can be shortened or lengthened depending on your negotiation. Sometimes parties may require a different period in order to fit in with the end of a rental lease or because they are selling a property to fund the purchase. There is no hard and fast rule with the contract, and everything can be negotiated. Our property and conveyancing solicitors will handle all of this for you based on your instructions.

In the NSW contract, time is not of the essence. This means that you will not be in breach of your contract if something unexpected happens, and you cannot settle on your settlement date. However, the vendor could issue you with a notice to complete, which must provide you with reasonable time in which to settle. The time granted is usually 7 – 14 days, and you would likely pay interest on a daily basis on the outstanding amount due, until completion, plus an average amount of $300.00 to cover the vendor’s legal fees.

If the vendor fails to complete on the agreed date, you would be able to issue the vendor with notice to complete. Similar to yourself the vendor would not be in default of the contract as time is not of the essence in NSW. You would usually allow him a period of 7 – 14 days (it must be a reasonable period). You would be entitled to claim compensation from the vendor for moving, storage, and accommodation fees, along with any other expense reasonably incurred until you actually completed on the property.

You are entitled to assume that anything affixed to the property when you view the property is included in the sale. This includes carpets, curtains and blinds. For this reason, the contract includes a section labelled ‘inclusions’ on the front page. These need to be completed by the vendor, and they allow you to see at a glance what exactly is included in the sale.

If you view the property, and believe that a fixture or fitting, such as a washing machine, is included in the sale, it is best that you raise this with us. Our property solicitors can then ensure that this item is included in your contract before you exchange on the property.

You are not entitled to rely on any representations made by the agent, so if a certain item being included in the sale is important to you, we strongly advise that you raise it with us. Once you exchange it may be too late for us to rectify the situation. However, it may be that you didn’t want a lot of the items and would wish that they are removed before completion. Again. it is important that you raise this with our property and conveyancing lawyers prior to exchange so we can ensure those items are removed from the property.

The standard contract for sale provides for either vacant possession or subject to tenancy. If vacant possession is given, there cannot be a tenant living in the property when the matter completes and the property transfers to you. This also means that the property must be clear of all rubbish. For this last reason it is important that you advise our conveyancing solicitors what items are included in the sale, so we know which items are considered to be rubbish.

You are entitled to, and should inspect the property in the 3 days before settlement. By this stage you should know whether there is anything in the property that should not be there. If anything arises during this inspection, we would advise you to contact our property and conveyancing lawyers immediately and we will set about rectifying the problem. If you fail to do a property inspection and settle anyway, there is little we can do after settlement.

If vacant possession is to be given and vacant possession is not given you can claim compensation under the contract.

If the property is going to be an investment property and you want the current tenant to remain, you should advise our conveyancing lawyers of this. Our conveyancing and property lawyers will ensure that we are given a copy of the current tenancy agreement. We will ensure that the vendor’s solicitor provides notice to the tenant that you will be the new landlord, and that all rents are due to you from the day of settlement. We will also provide this notice to the tenant and we will ensure that any deposit on the property paid by the tenant transfers to you.

The estate agent will arrange for you to have access to carry out a pre-settlement inspection. A seller is obliged to keep the property reasonably preserved, given its state on exchange of contracts, but allowing for fair wear and tear (that is deterioration of the property due to both reasonable use and ordinary operation of natural forces).

Residential premises are not usually subject to GST. Residential premises, refers to land or a building that is either occupied as a residence; or intended to be occupied, and is capable of being occupied, as a residence.

The seller must state in the contract whether or not land tax is adjustable. We will also carry out a search on the property prior to settlement to discover whether any land tax is owing on the property.

If the seller has stated that land tax is not adjustable, we can require the vendor to pay any outstanding land tax prior to settlement.  If the property is to be your principal place of residence, land tax will not be payable by you.

In NSW the risk in the property does not pass until settlement. This means that the vendor will continue to insure the property up until completion. It is important that you have insurance in place which will cover you from the date of completion. Hence it is wise to arrange this in advance. In fact, your bank will insist that you have insurance in place and that they are marked on the policy as an interested party.

In the alternative you could take out insurance as soon as contracts are exchanged in the event that the current vendor does not have insurance in place. Your lender will want to be named in the policy as having an interest in the property.

If the property is a strata property, the strata management is under a statutory duty to insure the building and the common areas, however, it is important that you take out insurance on your own personal property. Any insurance company should be able to advise you on the best option for you in respect of this property.

In NSW the vendor has an obligation of disclosure and warrants to you that he either does not know anything adverse about the property, or, if he does know of something adverse that he has disclosed that in the contract.

These warranties provide that if you find out something about the property, which was known to the vendor and was not stated to you, and what you have found out would have made you not purchase the property to begin with then you can rescind the property (cancel the contract, without financial penalty). Essentially the vendor warrants to you that the property is not subject to anything adverse, within his knowledge. However, the legal meaning of adverse is not very broad and the concept of ‘buyer beware’, still applies. It is therefore important that all the necessary searches are carried out on the property.

It is possible to own a property as either as joint tenants or as tenants in common. With ‘Joint tenancy’ the joint owners together own the whole of the property and on the death of a joint owner the deceased’s share automatically goes to the survivor. For this reason, most couples prefer to buy as joint tenants. With ‘tenants in common’, each co-owner has a separate share in the property that can be sold, mortgaged, or left to anyone in a Will; it is suitable for business partners who would want their shares to pass to their own families. There may also be tax benefits for you if you hold the property in unequal shares, and this is something you should speak with your accountant about.

You may also want to consider whether you an eligible purchaser for the First Time Home Buyers Assistance Scheme. If you have never owned a property in Australia or if your spouse has never owned a property in Australia then you may qualify. If the person you are purchasing the property with, has owned a property in Australia then they will not qualify, this may determine how you own the property together.

On completion monies payable in relation to the property rates are adjusted between you and the seller. The seller is liable for all monies owing in relation to council rates, water rates, strata levies up to and including the date of completion. Prior to completion our property and conveyancing lawyers will obtain the necessary searches to ascertain this information for you and make the necessary calculations for the property.

We urge against taking possession of the property prior to completion. As if you make improvements to the property the cost will not be recoverable if the purchase does not go ahead. This is a risk that you must weigh. Our advice is that the property is not yours until you complete your purchase and it is unwise to spend money improving someone else’s property.

As a first home buyer, you may be eligible for a transfer duty concession or exemption.

• If your home is valued at less than $650,000, you can apply for a full exemption so that you don’t have to pay transfer duty.
• If the value of your home is between $650,000 and $800,000, you can apply for a concessional rate of transfer duty. The amount you’ll have to pay will be based on the value of your home.

• he contract of sale date must be on or after 1 July 2017 and must be for the whole property;
• you must be an individual, not a company or trust;
• you must be over 18;
• you, and your spouse or partner, must never have owned or co-owned residential property in Australia;
• you, and your spouse or partner, must never have received an exemption or concession under this scheme; and
• at least one of the first home buyers must be an Australian citizen or permanent resident.

You or one of the other first home buyers must

• move into the new home within 12 months after buying the property and
• live there for at least six continuous months.

The First-time Home buyers Assistance scheme only applies when 50% or more of buyers are eligible, i.e. can meet the conditions set out above, so:

• If you’re buying a home with others who aren’t eligible, you can still apply for the scheme if you and any other eligible buyers are purchasing at least half of the property. This is called a shared equity arrangement.
• Shared equity doesn’t apply if your spouse is one of the ineligible buyers.

A strata property is usually made up of a number of units, referred to as lots. Strata properties also have ‘common property’, such as hallways and gardens, which every lot owner is (usually) entitled to use. A strata property will usually always have a strata management in place to manage the property and be responsible for maintenance, repairs, insurance and holding general meetings to decide how the property should be managed. You sometimes find that a strata with just two properties forming the strata manage the insurance and repairs themselves without recourse to a strata management team.

When you purchase a strata property you will have to pay strata levies. These are billed in quarterly instalments. The levies are for the ongoing maintenance and management of the property common areas, such as walls and roofs. Your lot size will usually determine how much you pay in strata levies. Prior to you exchanging on the property, our conveyancing and property lawyers will ascertain how much the levies for a particular property are. Sometimes levies can be quite high and this may take the property outside your budget.

Strata properties will also time to time incur what is known as special levies. Special levies are levies that are imposed on all unit owners in order to carry out major repairs if there is not sufficient money in the capital works fund to pay for the repairs.

If special levies are imposed the amount of special levy you pay will depend on your unit entitlement. With the result that those with a higher unit entitlement will pay a higher amount for special levies.

With any strata property our property and conveyancing lawyers will:

• Obtain a strata report which will show the current amounts payable for the sinking fund and administrative fund.
• Check the strata report for special levies.
• At your request have a company inspect the books of the strata to ensure the strata company is financially sound.
• Obtain a copy of the insurance certificate over the common property.
• Ensure that any levies are adjusted between you and the vendor.
• Ensure that any special levies which are the responsibility of the vendor are paid by the vendor.

Company title is very similar to Strata, in that each owner has their own lot. However, as opposed to having a unit entitlement you own shares in a company. In essence, the company is the whole property and your shares reflect your lot and allow you to make use of other areas in common with other company shareholders.

When you sell the property you are not selling an interest in land, but rather selling your shares in a company and when you purchase you are still required to pay stamp duty and for all intents and purposes the property is treated as a normal property, hence as a first time home buyer you are still entitled to the exemption (provided you are eligible).

Company title contracts are very different to a normal contract for sale and for that reason it is important for a solicitor used to dealing with these types of contracts to consider it. Our property and conveyancing solicitors can provide you with advice and assistance in purchasing a company title property.