Selling a Property
Are You Ready to Sell? Consult your solicitor or conveyancer.
If you have decided to sell your property the first thing you should do is consult your solicitor or conveyancer. The law requires a contract to be available for inspection by prospective purchasers, so doing this before your property is listed or advertised for sale will save you time. Some sellers (vendors) like to act for themselves but you still need to have a contract prepared before proceeding.
Assuming you are using an agent, Metro Conveyancing can prepare a contract in accordance with your instructions and the legal requirements for forwarding to your nominated agent.
THE STANDARD CONTRACT FOR SALE OF LAND
The Contract must show the owner(s), title details, all the conditions of the sale and what is included in it. It is important to be clear about which (if any) furnishings, light fittings, floor coverings etc you intend to sell with the property and which you wish to retain and therefore have excluded from the contract. We leave the area for the buyer’s name and the sale price blank at this stage.
Certain documents (“Prescribed Documents”) must be included in the contract. If they are not, a buyer (purchaser) with whom you have exchanged contracts can withdraw from the contract, leaving you without a sale.
The required documents are:
(1) A zoning certificate (s149 ) from the relevant council;
(2) a sewer diagram showing the location of the sewer main;
(3) a title search showing ownership and interest details and any restrictions on the property; and
(4) where a building is included, a statement that smoke alarms have been installed in accordance with legal requirements.
In addition, there are certain warranties?? (“Prescribed Warranties”) that you, as vendor, must give.
The required warranties are that, as at the date of the contract:
(1) The land being offered for sale is not subject to any adverse affectation:
(2) the land does not contain any part of a sewer main;
(3) the zoning certificate attached to the contract specifies the true status and permitted uses of the land; and
(4) there is no matter in relation to any building that would justify the issuing of an upgrading or demolition order
unless specified otherwise in the contract.
If any building work has been done in the previous six years (the value of which exceeded $12,000.00), the contract must also include evidence of owner-builder home owners warranty insurance. You should discuss this with us before putting your property on the market.
REAL ESTATE AGENCY AGREEMENTS
An Estate Agent must have an agency agreement signed before they can list your property for sale. If you are not sure of the terms of the agency agreement, please ask Metro Conveyancing to explain it to you.
You may come across several types of agency agreements:
This type of agreement is most commonly offered to vendors selling residential real estate. If you sign such an 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 still entitled to be paid the agreed commission. Some agents will only agree to list a property under this type of agreement.
This is very similar to the exclusive agency agreement except that it gives you the right to sell the property yourself without being liable to the agent for a commission.
A multiple listing agreement allows an agent who may be part of a network of agents working together to sell your property. You only pay a commission to the agent who you have signed the listing agreement with.
This type of agreement is used when the property is to be offered for sale by auction. It is similar to an exclusive agency in that you give exclusive right to the agent to sell the property.
An open agency agreement allows 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.?? Many agents will not offer this type of agreement.
Most agency agreements are for a fixed period of time and cannot be terminated prior to the end of that period unless both you and the agent agree. The period of the agreements is usually 90 days but can be for any period agreed to by both parties. 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 one.
EXCHANGE OF CONTRACTS
Contracts for sale of land are signed by the vendor and the purchaser when they have agreed on a price, the inclusions and all the conditions of the sale. The dated contracts are exchanged between the parties and the agreed deposit is paid by the purchaser. Each party ends up holding the copy signed by the other party
The contract can be exchanged by the real estate agent but we at Metro Conveyancing prefer to do it ourselves to ensure the contracts are identical, reflect the agreed terms and conditions and thus protect your legal rights.
Before the formal exchange of contracts, either side can withdraw without penalty. Pre-contractual negotiations do not usually constitute enforceable agreements and we can ensure that they are worded to prevent this possibility. The exception to being bound after exchange is during any cooling off period that follows the exchange.
COOLING OFF PERIOD
NSW law provides for a cooling off period in contracts for the sale of residential property (fewer than 2.5 hectares) of five working days. The cooling off period ends at 5.00 pm on the fifth working day. This means that after entering into the contract the purchaser has five working days in which to “cool off” (rescind). After expiration of this period, you are locked into the contract and cannot withdraw from the sale. If the purchaser rescinds during the cooling off period, they will have to pay you an amount prescribed by law – 0.25% of the sale price. This means a payment of $250.00 for each $100,000.00 in the purchase price (or part thereof).?? The contract is then at an end and neither party has any further claim against the other. Metro Conveyancing can explain the operation of and consequences of the use of the cooling off period.
As a vendor, you can require purchasers to waive their cooling off rights i.e. the purchaser agrees to sign the contract without the right to rescind and is thus immediately bound by the contract. This is done by having the waiver explained to the purchaser by the purchaser’s solicitor and having the purchaser sign a s66W certificate. A cooling off period can be shortened or extended by negotiation with the purchaser’s solicitor or conveyancer and we can do that for you on instruction. You do not, however, have to agree to extend a cooling off period
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..
DISCHARGE OF MORTGAGE
If you still owe money to a lender who has a registered mortgage over the property, then you will need to have the mortgage discharged at settlement. The lender will not release the title documents they hold until the loan is fully paid out, in accordance with the terms of the loan. We will communicate with your lender and request a discharge of mortgage be prepared in readiness for settlement.?? We will need you to complete and sign an authority to prepare the discharge and to communicate with us in relation to it and the settlement. Some lenders take time to prepare discharges and advise of payout figures so your prompt return of any documents is important to ensure the sale process proceeds smoothly.
Your lender will give us a payout figure and the loan will be paid out from the proceeds of the sale.
All buildings on the property are at the vendor’s risk until settlement. It is therefore essential that you maintained building insurance right up until settlement.
If the buildings are substantially damaged by fire, flood or some other catastrophe the purchaser is not bound to proceed with the purchase. Depending on the degree of damage and the cost of repair, a purchaser may choose to proceed with the purchase after negotiating the price down to cover the cost of repairs but it is clearly in your best interest to keep the buildings insured.
Your policy may be due before settlement. If so, we advise you to renew the policy and then claim a rebate after settlement. Discuss the circumstances with your insurer to ensure the situation is clear.
TENANTS AND VACANT POSSESSION
The contract for the sale of land we prepare stipulates either “vacant possession” or “subject to existing tenancies”. If you intend to offer your property with vacant possession, it is important to observe legal requirements.
If your property is tenanted, the tenant is not bound to vacate the property until the term of the lease has expired and a valid notice to vacate has been served. If your property is subject to a fixed term tenancy, you should be sure that the term of the lease has expired or will expire before the settlement is due.
Assuming expiration of any tenancy period, the notice period you must give is 30 days. As the settlement date is normally 42 days after exchange of contracts you must arrange with your managing agent to give the notice immediately contracts are exchanged.
Either you (as the landlord) or your managing estate agent must give the notice to the tenant.
The standard Contract provides that council rates be adjusted between the vendor and purchaser as at the settlement date. The purpose is to fairly apportion the responsibility for payment depending on the day ownership changes hands. As vendor, you will pay the rates up to and including the day of settlement. Any outstanding rates are paid from the sale proceeds (being your money).
Whilst council rates may be paid by instalments, they are an annual levy and it is therefore normal practice to adjust the rates for the full financial year, not according to what instalment may be due next.
As the rates are a charge on the land and any outstanding rates become the liability of the purchaser after settlement, it is essential that they are paid up to date at settlement. Metro Conveyancing will liaise with the purchaser’s solicitor or conveyancer to ensure the settlement figures reflect the exact day of the change of ownership.
Some rural councils raise water rates along with council rates. In other areas a separate water authority (such as Sydney Water) supplies the water and / or sewer services. Either way, an adjustment of these rates must be made at settlement.
Water rates are usually levied on a quarterly basis and the adjustment made will only be for the current quarter.
A water usage charge may have to be paid by you. If this is the case, Metro Conveyancing will ensure the necessary adjustment is made.
It is usual to use an estimate system (based on previous usage) to calculate the usage charge. In the figures prepared for settlement, we will make an allowance to the purchaser for the usage charge so that when the actual bill for water usage is received after settlement, the whole bill becomes the purchaser’s responsibility.
If you are selling 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. Because the levies commenced on a date determined at the first annual general meeting held by the Owners Corporation the quarterly levies can commence at any date but for convenience it is usually from the beginning of a month.
In some strata schemes, there are also special levies to consider. 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 special maintenance or repairs that have to be carried out. It is important to remember that owners corporations must maintain and repair common property and if a special levy has been struck before the date of the contract, it has to be paid in full by you. Sometimes the special levy may be paid by instalments, if this is the case all instalments must be paid by you.
SETTLEMENT (OWNER OCCUPIED)
If you are selling with vacant possession, then you need to make arrangements to vacate the premises prior to or by the time of settlement. You should leave the property in a clean and tidy condition and ensure all possessions (unless they form part of the inclusions) are moved from the property.
The purchaser does not have to settle if you have not left the property vacant by the settlement time. It may be advisable to move 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, please make sure you advise us well in advance of all the details so we can help to coordinate your sale in such a way as to minimise any inconvenience. Making sure you are available on the day of settlement is also important.
SELLING WITH AN EXISTING TENANT
If your property is being sold with a tenant who is staying after settlement, an adjustment of the rent will need to be made.
If the rent on your property is paid in advance, we will make an allowance in the settlement figures to credit the purchaser with that part of the rent that applies after the settlement date. However, if the rent is arrears, no adjustment will be made as the new owner cannot expected to take over a debt that is owed to you. It is important to ensure the rent is up to date at settlement.
Metro Conveyancing will determine how and what adjustments are to be made.
After your matter has settled, we will account to you for any of the proceeds of sale after all adjustments are made and any loan repaid. We will seek your instructions as to where to deposit any cheques and will do so at the earliest opportunity.
The change of ownership details will be notified to Council, the water authority and Valuer General when the title documents are lodged for registration at the Land and Property Management Authority following settlement. If you continue to receive notices requiring payment, we ask that you do not discard them as the new owner may have to pay interest for late payments of rates they never received.
We trust the above information will assist you to understand the process of selling property. We are happy to discuss any questions you may have and look forward to assisting you.