Property Sales – Some Basic Elements of the Process
- Property Sales – Some Basic Elements of the Process
1. The Contract
The sale contract is usually in a standard form, entitled “Contract of Sale of Real Estate” and might incorporate a form in basic terms prescribed by the Law Institute of Victoria or the Real Estate Institute of Victoria. It is usually prepared by the vendor’s solicitor, along with a number of other documents and attachments, and scrutinised carefully by the purchaser’s solicitor (if they have one) before signing. It includes provisions covering each and every aspect of concern, from the state of the property to the purchase price. Special conditions will be added as necessary.
There are many important implications in signing a contract of sale; both the vendor and the purchaser incur certain liabilities at this stage. If in doubt, ask a professional before you sign.
2. Preliminary enquiries
The vendor must make certain information about the property available,.This information includes, but is not limited to, information about current leases, availability of essential services to the property, and any legal conditions which may affect the way that the purchaser is able to use the land, from encumbrances to council zoning. Whilst most of this should be covered by the vendor’s statement, some are not required, yet may still be very important to the purchaser’s decision to buy the property.
A property lawyer with conveyancing experience can handle these searches for you.
3. Vendor’s statement
The vendor must make, and the purchaser should inspect closely, a special legal statement about the property that includes details of their title to the property, details of its condition, notices from authorities, debts connected with the land (such as land tax), services connected to the property, building permits issued in the past 7 years, etc.
This statement should always be prepared by a lawyer, or at the very least, the vendor should receive legal advice so that t the nature of the guarantees being given are fully understood.
A caveat is a legal instrument that can help protect the purchaser’s interest in the property once they have signed the contract of sale. It prevents the property being sold to someone else, or otherwise interfered with. For a small investment, the purchaser could protect against a very damaging loss.
Ask a property lawyer for more information if you are unsure as to whether it affects you.
5. Dealing with incoming and outgoing mortgages
If the property is mortgaged, or is going to be subject to a mortgage, there are special procedures that need to be followed in terms of discharging the old mortgage and bringing the new mortgagee into the picture. If these are not handled in the right order, it can cause delays and confusion. It can often help to think of the transaction as being between three or four parties, not two- although your conveyancing lawyer will be able to keep track of all this for you.
There are many costs associated with owning and maintaining a property, such as council rates, strata fees and land taxes. These are usually split very precisely between the vendor and the purchaser on the date of settlement, so for example if the vendor has paid for something and that payment covers a period after the property is due to change hands, the purchaser may pay the difference. These costs are all drawn up by the vendor’s solicitor in what’s known as a ‘statement of adjustments’, and should be looked at carefully by the purchaser’s solicitor too.
The settlement is where the purchaser pays the balance of the purchase price to the vendor in exchange for their title to the property. This needs to be followed up by lodgement of a number of cheques and documents, for example the transfer, upon which stamp duty needs to be paid.
If something goes wrong during settlement, the title to the land may not be able to be passed. This is why, especially with complex transactions, it is best to have an experienced conveyancing lawyer handle your transaction.
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