Emil Ford Lawyers

Selling a Property

Need help selling your property?
Contact +61 2 9267 9800

1.   I Want to sell – what do I do first?

2.   Contract for sale of land

3.   Real Estate agents and agency agreements

4.   Exchange of contracts

5.   Cooling off period

6.   Discharge of any mortgage

7.   Building insurance

8.   Sold with vacant possession but tenant in possession

9.   Council, water rates and strata levies

10. Settlement

11. Sold with an existing tenant

12. After settlement



1.  I WANT TO SELL – WHAT DO I DO FIRST?

When you have decided to sell any residential property the first thing you should do is consult your property lawyer.  You may have been contacted by a Real Estate Agent or you may have one in mind to use, but they cannot proceed until after you see your property lawyer.

The Law provides that before anyone, Real Estate Agent or owner, can place a property on the market they must have a proposed contract prepared and so that a prospective buyer can inspect the contract. There are hefty fines imposed on anyone caught promoting the sale of a property in any way whatsoever before a contract is prepared.

Your property lawyer will prepare the contract for you so that you can instruct your Real Estate Agent to proceed with the marketing of the property.


2.  CONTRACT FOR SALE OF LAND

The Contract details the ownership, title details and the terms of the sale together with what is included in the sale. It is prepared leaving blank the buyers details and the sale price.

There are certain documents that must by law be attached to the contract. These documents are called “Prescribed Documents”, without these documents attached, a buyer has 14 days from the date of exchange of contracts to pull out of the contract with no penalty.

These documents are: 

  • zoning certificate (section 149 certificate) from council.
  • Sewer diagram showing the location of the authorities sewer main.
  • A full title search obtained from the LPI.
  • Copies of any easements, restrictions on use registered on title.
  • If strata or community title, copies of any management statements.
  • Notices relating to smoke alarms and swimming pools. 

There are certain warranties that the seller must give as described in law. These warranties are called “Prescribed Warranties”.

The warranties are that as the date of the contract and unless disclosed in the Contract:

  • the land is not subject to any adverse affectation,
  • the land does not contain any part of a sewer main,
  • the zoning certificate attached to the contract specifies the true status of the land,
  • there is no matter in relation to any building that would justify on upgrading or demolition order
  • if the land is burdened by a positive covenant by a statutory authority, no amount is payable in relation that covenant, and
  • the land is not subject to an annual charge for the provision of coastal protection services.

There must also be attached to the contract evidence of owner builder warranty insurance if any building work has been done in the previous six years, the value of which exceeded $12,000.00. This should be discussed with your property lawyer before putting the property on the market for sale. 


3.  REAL ESTATE AGENTS AND AGENCY AGREEMENTS

An Estate Agent must have an agency agreement signed before he can list your property for sale. If you are not sure of the terms of the agency agreement you should have your property lawyer explain it to you. Your property lawyer may suggest changes to the agency agreement that will protect your interests.

There are several types of agency agreements:

Exclusive agency agreement is most commonly used to sell residential real estate. In this agreement, you are giving the agent the exclusive right to sell your property. While the exclusive agency agreement is current and someone else sells the property (including yourself), the agent is entitled to be paid the agreed commission.

Sole agency agreement is very similar to the exclusive agency except that it gives you the right to sell the property yourself without being liable to the agent for a commission.

Multiple listing agreement allows the agent who may be part of a network of agents working together to sell the property. You only pay a commission to the agent who you have signed the listing agreement with.

Auction agency agreement is used when the property is to be sold by auction. It is similar to an exclusive agency in that you give exclusive right to the agent to sell the property by auction.

Open agency agreement will allow you to list with any number of agents you wish. You only pay a commission to the agent who finds the buyer for your property.

Agency agreements are usually for a fixed period of time and cannot be ended prior to the end of that period unless both seller and agent agree. The period of the agreements is negotiated with the agent, it is usually 90 days but can be for any period agreed to. Make sure you only have one agreement at a time and do not commit yourself to payment of a commission to more than one agent. Make sure any agreement is properly ended before entering into another agreement with another agent.


4.  EXCHANGE OF CONTRACTS

Contracts are signed by all parties involved in the transaction and when the seller and buyer have both agreed on a price and the terms of the sale, the contracts are exchanged and dated and the deposit paid by the buyer.

Contracts are drawn up in duplicate and one copy is signed by the seller and one copy is signed by the buyer. The exchange of contracts is the exchanging of copies so that each party ends up holding the copy signed by the other party.

The contract can be exchanged in one of two ways:

  1. By the estate agent;
  2. By the property lawyer.

Until such time as the contracts are exchanged either party can withdraw from the transaction. It is only once contracts are exchanged that the parties are bound to proceed, and in the case of the buyer having a cooling off period the buyer is not bound until the cooling off period expires.
 

5.  COOLING OFF PERIOD  

Every contract for the sale of residential property (less than 2.5 hectares) has a standard cooling off period of five working days. The cooling off period ends at 5.00pm on the fifth business day after the date that contracts are exchanged (so if you exchanged on a Friday, you have until 5pm on the following Friday to rescind the Contract). This means that after entering into the contract the purchaser has five working days in which to "cool off". The seller is locked into the contract and cannot withdraw from the sale. If the purchaser finds that for any reason he or she does not want to proceed with the purchase they can rescind the contract within the five day period. If they do rescind the contract they forfeit to the vendor 0.25% of the sale price. The contract is then at an end and neither party has any further claim against the other.

The purchaser can waive the cooling off period by having the contract explained by a property lawyer and a certificate signed by that property lawyer. The certificate is drawn under Section 66W of the Conveyancing Act and is commonly called a "Section 66W certificate"

The cooling off period can be shortened or extended provided the parties agree.

NOTE: There is no cooling off period if the property is sold at public auction or on the same day as the property was listed for auction sale.
 

6.  DISCHARGE OF ANY MORTGAGE

If you owe money to a lender who has a mortgage registered then you will need to have the mortgage discharged at settlement. Your property lawyer will communicate with your mortgagee requesting they prepare a discharge of mortgage for settlement, however most lenders will not do anything until they have your written authority to prepare the discharge, this authority also authorises the lender to communicate with your property lawyer, in particular regarding the amount required to payout your loan.

Your property lawyer will try and organise your lender to send their authority form to you but as this can sometimes take time and hold up settlement, you are advised to contact your lender to organise this yourself.

The final payout figure will be given to your property lawyer, often only a day or two before settlement, and the loan will be paid out from the proceeds of your sale.
 

7.  BUILDING INSURANCE

All buildings on the property are at the seller’s risk until settlement. It is therefore essential that all building insurances be maintained and not allowed to lapse before settlement.
 

If the buildings are damaged by fire or flood or some other catastrophe the buyer is not bound by the contract to proceed with the purchase. Depending on the amount of damage, a buyer may proceed with the purchase after negotiating the price down to cover the cost of repairs but it is in the seller’s best interests to keep the buildings insured.

If your policy is due for renewal before settlement, you are advised to renew the policy and then claim a rebate after settlement. As the saying goes, it is better to be safe than sorry.
 

8.  SOLD WITH VACANT POSSESSION BUT TENANT IN POSSESSION

A tenant is not bound to move out of the property until the term of the lease has expired and a notice to vacate has been served.

If you are selling a property that is tenanted, you need to confirm that the lease has expired or will expire before settlement is due.

Assuming that a longer a notice period is not required, you must give 30 days notice to vacate to the tenant and as the settlement date is normally 42 days after exchange of contracts, you must arrange with your managing agent to give the notice immediately after contracts are exchanged. However, if you have exchanged with a cooling off period, it is advisable not to give the tenant notice until the cooling off period has expired. You do not want to be left with a vacant property, should the purchaser decide to not proceed with the purchase.

It is either you as the landlord or your managing estate agent who must give the notice to the tenant. Your property lawyer cannot give the notice but should check to see that the notice has been served.
 

9.  COUNCIL, WATER RATES AND STRATA LEVIES

The Contract provides that council rates be adjusted between the vendor and purchaser as at the settlement date.

Council rates are levied for the financial year. They will be adjusted so that the vendor pays the rates up until the day of settlement and the purchaser will be liable from then until the end of the rating period, in this case the 30 June. They are adjusted as if the rates are paid in full regardless of whether they are in fact paid or not. Any outstanding rates are paid from the sale proceeds (being the vendor’s money).

Council rates may be paid by instalments but are an annual levy and it is normal practice to adjust the rates for the next full year not according to what instalment may be due next.

The rates are a charge on the land and any outstanding rates become the liability of the purchaser, so it is essential that they are paid up to date at settlement. One of the inquiry certificates the purchaser’s property lawyer will obtain is from council and sets out the amount of the annual rates, what payments have been made and what is outstanding.

Water Rates
In some country areas the water rates are paid to council and may be incorporated within the council rates. In other areas where a separate water authority supplies the water and or sewer an adjustment of these rates must be made at settlement.

Water rates are usually quarterly rates and the adjustment made will only be for the current quarter. The same principles apply to water rates as they do for council rates.

A water usage charge may have to be paid by the vendor. To assess whether a charge is payable or not can be done in one of two ways:

  1. A meter reading can be organised but this will incur a fee from the water authority, or
  2. An estimate can be done, by using the last quarter's water usage charge.

It is usual to use the estimate system to calculate the usage charge because quite often the cost of having the meter read is more than the charge itself. The seller will make an allowance to the purchaser for the usage charge so that when the actual bill for water usage is received the whole bill becomes the purchaser’s responsibility. 

Strata Levies – Unit, Townhouse, Villa.
If you are purchasing a lot in a strata scheme the quarterly strata levy will need to be adjusted. This levy is adjusted in the same manner as council rates except that they are adjusted on the quarterly not annual rate. The quarter for strata levies may begin at any time, they are not necessarily the quarters of the calendar year. As the levies would have commenced on a date determined at the first annual general meeting of the Owners Corporation, the quarterly levies can commence at any date but for convenience it is usually but not necessarily from the beginning of a month.

There may also be special levies to take into consideration. A special levy is struck when and if there are not enough funds held by the Owners Corporation to cover either the normal running expenses or a special job has to be carried out and there are not enough funds held to cover the cost of that job.

Normally a special levy struck before the date of the contract has to be paid in full by the seller. Sometimes the special levy may be paid by instalments, if this is the case all instalments must be paid by the seller. If however a special levy is struck after the date of the contract then that levy is adjusted between seller and buyer.


10. SETTLEMENT

If the property is sold with vacant possession then you need to make arrangements to vacate the premises prior to or by the time of settlement.

The property should be left in a clean and tidy condition and all possessions removed from the property. You cannot leave furniture and other items in the property, even if you think the Purchaser would want them. Items should only be left if they are included in the Contract or if the Purchaser has agreed to accept them. Items otherwise left in the property could delay settlement or have the effect of requiring you to compensate the Purchaser for the costs of disposing those items.

It is not always easy to arrange for removalists etc. to have you moved out before the settlement time but you should be advised that the buyer does not have to settle if you have not left the property vacant by the settlement time. If need be, and you are able, you might consider moving out the day before settlement but remember that you are still liable for insurance and the safety of the premises until such time as settlement takes place.

If you are selling and buying simultaneously you may have to arrange to have left the sale property and to be en-route to the property you are buying while the settlement takes place. If this is the case make sure you can be contacted in case something goes wrong or there is a hold up in the settlement.

11. SOLD WITH AN EXISTING TENANT

If there is a tenant in the property who is staying after settlement, an adjustment of the rents will be made at settlement.

If the rent is paid in advance then you will make an allowance in the settlement figures to credit the new owner with that part of the rent that applies after the settlement date. If the rents are in arrears no adjustment in your favour is made as the new owner is not expected to take over a debt that is owed to you.

Quite often the managing agent may be holding rent in trust as they may collect rent weekly but account to the owner monthly. If this is the case the adjustment of rent will be made by the managing agent. Your property lawyer will determine how and what adjustments are to be made.


12. AFTER SETTLEMENT

When settlement has been completed your property lawyer will account to you for any of the proceeds of sale that are to be paid to you after all adjustments are made and any loan repaid. You may have to make special arrangements for collection of any cheques from the property lawyer depending on where you have moved to etc. Your property lawyer should be willing to bank your cheques into your nominated account/s.

The change of ownership details will be notified to Council, Water Authority and Valuer General when documents are lodged for registration at the Land Titles Office following settlement. This may not happen for a couple of weeks depending on the transaction and if you receive either council or water assessments for the property you should redirect them back to the new owners or to your property lawyer to deal with. Please do not throw them away as the new owner may then have interest to pay on late payments of rates they never received. 


Need help selling your property?
Contact +61 2 9267 9800 

Suite 4 Level 5
580 George Street
Sydney NSW 2000
Phone: +61 2 9267 9800
Fax: +61 2 9283 2553