Understanding conveyance and legal costs when buying

While some home buyers contemplate undertaking the legal aspects of a property purchase themselves, it is generally recommended that buyers seek the advice of a legal specialist or conveyancer.

The conveyancing process (the legal aspects of buying and selling property) can be extremely complicated. A licensed conveyancer or solicitor can steer you around the potential legal pitfalls that may arise when buying property.

We spoke with Joan Lentini, President of the Australian Institute of Conveyancers Victorian Division and Kaylene Widderick, President of the Australian Institute of Conveyancers New South Wales Division, to find out exactly what is involved in conveyancing and how much it costs.

Conveyance processes on a standard contract for sale

According to Joan Lentini, the following common conveyancing procedures on a property purchase may attract fees:

• Reviewing the contract of sale: The conveyancer or solicitor reviews the sale contract and communicates the terms and conditions to the purchaser. This includes references to the zoning of the property; utility connections; any special conditions, including deadlines; purchase price and settlement date; deposit and payment date; matters relating to title (references to covenants, restrictions, easements and the like); and owners corporation matters.
• Supplying a Costs Disclosure Statement: This is confirmation of the fee for standard conveyancing procedures, and fees for any variations. It may also include references to out-of-pocket expenses such as for title searches, obtaining certificates and meter readings.
• Applying for a full set of certificates: The conveyancer may request a full set of certificates pertaining to the purchase property, particularly where the Section 32 statement (also known as a Vendor’s Statement) contains outdated or missing certificates. The Section 32 statement must be provided to the buyer before the sale and contains information about the property’s title, including mortgages, covenants, easements and zoning. The certificates provide information such as the latest owners corporation fees, a Water Information Statement, disclosures about any unregistered easements, indications from the relevant road authority showing whether the property has been acquired for road widening, building information regarding works undertaken during the previous 10 years, as well as reference to final inspections, outstanding orders and flood levels.
• Title search and certificates check: A cross-reference against information in the Section 32 statement.
• Drawing up a Transfer of Land: The purchaser signs this document then the conveyancer or solicitor forwards it to the representative for the vendor at least 10 days prior to the settlement date.
• Supplying copies of signed documents to the financier: This includes the contract of sale, Transfer of Land and title search, which allow the mortgage to be arranged. The legal representative may witness the purchaser signing the mortgage documents.
• Lodging a caveat with the land authority: This protects the purchaser’s interests.
• Preparing a statement of adjustment of rates and taxes
• Arranging settlement with all parties: The legal advisor represents the purchaser at settlement with the purchaser’s financier and the vendor.
• Arranging payment: A conveyancer would calculate the difference between the sum provided by the financier and that owed to the vendor, and arrange a bank cheque from the purchaser for that difference.
• Notice of Acquisition: This is lodged with the relevant authorities.

According to Lentini, some conveyancers deem the following tasks outside the scope of normal conveyancing: the completion of government forms for stamp duty assistance (for example, when applying for a first home buyer concession or a pensioner concession); changes to any contract terms and conditions; nomination of an additional or alternative purchaser; and lodging a caveat to protect buyer interest.

Additional services a conveyancer can provide

• Negotiation with the vendor’s representative in relation to any changes to the contract of sale terms and conditions. An example would be an extension of time relating to finance approval or granting of a licence to occupy the property prior to settlement.
• Legal advice relative to the property purchase.

Legal implications of buying at auction or by private treaty

“When you purchase a property at auction there is no cooling-off period – the purchaser must be 100 per cent committed to the purchase,” Kaylene Widderick says. “The contract is not subject to any reports or finance [these should be arranged prior]. Negotiations to a contract must be made and approved prior to auction. The deposit is paid at the fall of the hammer, and the purchaser and vendor will be immediately bound to proceed with the contract and sign the contract.”

Purchase by private treaty will generally, but not always, incorporate a cooling-off period. Each state and territory has different regulations regarding specified contractual cooling-off periods and the deposit required to secure a property during the cooling-off period. For example, in New South Wales, Queensland and the Australian Capital Territory the cooling off period is five business days; in the Northern Territory it’s four business days; in Victoria three business days; and South Australia two business days. Western Australia and Tasmania have no specified cooling-off period. A vendor or buyer can negotiate to have no cooling-off period.

“In the cooling-off period, [the purchaser] would arrange building inspections and pest inspections, and strata inspections if it is a unit. They’d formalise finance, and take advice on the contract and their requirements,” says Widderick.

“Should there be no cooling-off period, then a prudent purchaser will have carried out all matters [before signing the contract] … they will have finance in place, they would have done any inspections and have a deposit ready to pay because there is no cooling-off period and they are bound to the contract, similar to the terms of an auction contract.”

Common legal pitfalls

Unfortunately, many home buyers encounter common property purchase pitfalls. Widderick explains: “The main thing that happens is that the sense of urgency is overwhelming for a purchaser, and fear is invoked in them that they will lose the property if they do not sign immediately.”

According to Widderick this can lead to legal complications such as a lack of funds, the valuation conducted by the bank not meeting the contract price, or adverse conditions and terms in the contract that can’t be negotiated.

Lentini also cites inspection and title problems.

“It has been known that a purchaser believes he or she is buying a property with title, when, in fact, the purchase relates to company shares entitling the buyer only to the exclusive use and occupation of the property, not title,” Lentini says. “Not all banks lend on company share.”

Buyers should also take care when it comes to pre-purchase inspections. Lentini warns that a careless inspection can lead to surprises on settlement, such as “cracks in the wall behind bookcases, leaking taps, broken roof tiles, a faulty stove, or ceiling and water damage”.

One way of avoiding legal speed bumps is by engaging qualified help from a licensed conveyancer or solicitor early in the process. “A buyer should consult a conveyancer before they sign a contract or before they start negotiating the purchase of a property, just to make sure they’ve got everything in line,” Widderick says.

Conveyancing costs

There are no set fees for engaging a Certified Practising Conveyancer (CPC), or solicitor, as not all property transactions are the same. It is always important to use a licensed conveyancer or solicitor and it is a good idea to obtain a number of quotes or a service recommendation. When engaging legal property services, the lowest price is not always the best service.

Lentini provides a breakdown of the types of conveyancing fees (within Victoria) a home buyer may encounter:

1. Finance application fees: Mortgage costs.
2. Government fees: State Revenue Office stamp duty on transfer and Title Office registration fees on transfer.
3. Conveyancing (standard matter) fees: On average these are $900 plus out-of-pocket expenses. Out-of-pocket expenses for a house may be around $260 for a full package, and for a unit may be $260, plus $150 for each owners corporation certificate required.

An out-of-pocket conveyancing package may include title searches with plans and instruments, organising special meter readings and obtaining a council land and building statement, water rate and encumbrance certificate, roads authority certificate, land tax certificate, planning certificate, EPA certificate and owners corporation certificate. A full package of out-of-pocket expenses will not be required if the Section 32 statement has the relevant certificates and they are up to date.

Some conveyancers charge on a sliding scale depending on the property sale price. There may also be miscellaneous charges for photocopying, telephone calls and other administrative costs. Matters outside the scope of standard conveyancing are charged in accordance with the Costs Disclosure Statement. For example, a notice of default may be charged at $400.

To find a licensed conveyancer in New South Wales, Victoria, Tasmania, South Australia, Western Australia and the Northern Territory, visit the Australian Institute of Conveyancers in your state or territory. Home buyers in the Australian Capital Territory or Queensland should contact the ACT Law Society or Queensland Law Society. To find a solicitor check with your local state or territory law society.