Continuing from our previous two articles, we follow up now with the third and final instalment of the series. We have outlined what the conveyancing process involves and some of the more relevant and important considerations and investigations you need to make, to ensure your interests and your investment are protected and to feel comfortable that you are receiving the right advice along the way.
We now continue with some final and more technical considerations and processes that you ought to understand to give you a 360 degree view of the conveyancing life-cycle.
It is very important that you take out insurance cover (including public risk) in respect of the property following exchange of contracts. That insurance policy should note your interest as an owner and also the interest of any mortgagee (or bank / financier) you have from that date. We suggest that the cover be for replacement value of the property.
Have You Contacted Your Mortgagee (Bank)?
It is best practice to inform your bank as soon as you have found the property which you intend to purchase. You should provide them with your solicitor’s contact details.
Your mortgagee will usually contact your solicitor and ask for copies of documents to be sent to them so that they can commence preparing the mortgage documents.
Usually, banks will need approximately twenty-eight (28) days to prepare the relevant documentation. You should never leave this to the last minute.
Are You Selling a Property to Buy This One?
If you are selling an existing property and using the proceeds from that sale to assist with the purchase of this property, you should ensure that you inform your solicitor immediately.
Appropriate arrangements will need to be made to ensure that the funds from the sale are sufficient and available upon settlement of the purchase of the new property.
Otherwise, negotiations may need to be had to accommodate this fact.
You should keep in mind that in addition to your pre-purchase inspections, solicitor’s fees and post-exchange government searches, you may also be liable to pay stamp duty on the purchase price.
Stamp duty is determined on the value of the land and can only be assessed on executed documents when they are lodged with the Office of Fair Trading. Stamp duty is generally payable within 3 months from the date of the contract (exceptions apply) however, a mortgagee will usually require you to pay it no later than upon settlement.
A stamp duty calculator is available on the Office of State Revenue’s website. It is helpful to use this when considering how much it will cost you to purchase the property. A link to that calculator can be found here https://www.apps08.osr.nsw.gov.au/erevenue/calculators/landsalesimple.php
Post Exchange Government Searches
Once the contract has been exchanged, the most prudent course is to instruct your solicitor to carry out relevant government searches. Some examples of the searches that may be obtained and their purpose are set out below:
- Outstanding Notices - this search is obtained from Council and discloses any notices which have been made by Council in relation to the property and which have not been complied with. Such notices include, but are not limited to, demolition orders and work/rectification/upgrade orders;
- Section 603 Certificate – this search is also obtained from Council and reveals the rates payable for the current year. This search is required for settlement purposes and must be obtained;
- Ausgrid – this search reveals whether Ausgrid has any unregistered interests in the property including, for example, easements or rights of way for electricity substations or high voltage lines which may be on or around the property;
- Department of Defence – UXO Enquiry – this search discloses whether there are any Unexploded Ordnances within the property;
- East Australian Pipelines – this search reveals whether this government authority has any interest in the property including with respect to the installation of gas pipelines in the property;
- Heritage Office of NSW – this search discloses whether there are any heritage items located on the land;
- Jemena Gas Networks – this search reveals whether this government authority has any interest in the property including with respect to the installation of gas pipelines in the property;
- Office of State Revenue – Section 47 Certificate – this search indicates whether any land tax in payable in relation to the property and is essential for settlement purposes;
- Sydney Water - Section 66 Certificate – this certificate indicates the water rates and usage charges payable for the current quarter and whether those rates are outstanding. This certificate is required for settlement purposes and must be obtained; and
- TransGrid – this search reveals whether TransGrid has any interest in the property including with respect to any easements required for access to your land to repair and maintain power lines.
While these searches may cost a few hundred dollars, it is very important that you obtain them as they will reveal significant information about the property (that the seller may not have told you) including issues which may affect your intended use and enjoyment of the property and any rights that you may have to therefore get out of the contract.
Who Pays the Rates?
Land, water and council rates are usually adjusted at settlement.
This means that the seller pays the rates from the beginning of the rate period up to settlement and you pay the rates from settlement up to the end of the rates period.
For example, assume you are settling on 27 February. For water rates for the quarter from 1 January to 31 March, the seller would be liable for the rates from 1 January to 27 February and you would be liable for the rates from 28 February to 31 March. Your solicitor prepares these adjustments for you.
What Happens Before Settlement?
Make sure that:
- You have insured the property before settlement – the risk of damage to the property transfers to you upon settlement;
- You have made arrangements to move into the property – don’t forget to arrange a removalist if you need one;
- Notify relevant authorities/others of your change of address – RMS, medicare, medical funds, electoral roll, bank, etc;
- You have contacted the relevant authorities and companies to arrange connecting of your phone line, any TV cable service and gas service;
- Arrange for Australia Post to re-direct your mail;
- You have reviewed the adjustment settlement sheet prepared on your behalf by your solicitor and given instructions as to how you would like the settlement monies drawn;
- You have made arrangements to collect the keys from the agent after settlement; and
- You have inspected the property and requested that any rubbish and debris remaining at the property are removed and any damage caused to the property after exchange is repaired by the seller.
You should inspect the property just before settlement to ensure all is in order. The property should be in the same condition as at the date of settlement, as it was when you saw it prior to exchange of contracts, fair wear and tear excepted.
If relevant, you should ensure that any tenant and /or the owner has vacated the property.
What Happens After Settlement?
After settlement, should also receive a letter from your solicitor confirming various issues and providing you with a copy of the Settlement Adjustment Sheet and Vendor’s Cheque Directions for your tax records.
On settlement, the Certificate of Title for the property and the Transfer will be handed to your lender (if any) who will in turn arrange for registration of the Transfer at NSW Land and Property Information. Your lender will hold the Certificate of Title for the term of the mortgage.
We suggest that 1 to 2 months after settlement you contact the NSW Land and Property Information to ensure that registration of the Transfer has taken place and that it is in order. Your solicitor/conveyancer will only do this if you instruct them to.
Also, a Notice of Sale is provided to your lender to lodge at the NSW Land and Property Information which notifies Council, Sydney Water and the Valuer-General that you are the new owner. In future, rate assessments and notices of valuation should be sent directly to you. You should let Council, Sydney Water and your solicitor, if necessary, know if you do not receive any rate assessments after settlement.
We genuinely hope you have enjoyed this brief three part series aimed at providing some useful information regarding the conveyancing process, but also important items you need to consider or action when involved with the process.