2) Date for Completion item. Is it written 42 days after the contract date, or 70 days after the contract date, or some other number? Do we have enough funds, or been given unconditional loan approval, to be able to complete this purchase within these days? If not, do not sign on the Contract till we negotiate with the vendor or the vendor’s solicitor for a longer completion period. The default period in NSW is 42 days for completion; which means if one already has pre-approval before exchange, immediately after exchange and within the next 42 days, the bank should be able to grant unconditional approval and be ready for completion.

3) Land item. Confirm that this is the house address we want to buy.

4) Improvements item. On completion, would we get the house under “Vacant Possession”, or is it going to be “Subject to existing tenancies”? Which of these are ticked? Also, what else is ticked – is “House” ticked, “Garage” ticked, and “Other” ticked and filled in; if we are buying a house that comes with a garage and some other stuff, we want these ticked.

5) Inclusions item. Things like blinds, built-in wardrobes, clothes line, dishwasher etc, things that are included in this purchase should be ticked.

6) Price and Deposit amount. Is this the purchase price we want to buy at, and is the deposit amount (up to 10% of purchase price) correct and what we are prepared to pay on exchange day or when cooling off period expires.

On the second page of the Contract, we check whether Land Tax is Adjustable item is ticked or not. If it is, it means we will have to help pay the vendors land tax for the year, for the period from Completion date till the end of the land tax year.

On the third page of the Contract, List of Documents heading, some vendor’s solicitor leave these unticked – this is not that an important page for us.

After these first 3 pages, next come 17 pages of the Contract’s warnings and standard clauses, ending in page 20. Standard clauses are what they are, standard. The way we vary these are in the Special Conditions pages.

 

Explanation:

This is a very common special condition. This paragraph means that if the purchaser or the vendor cannot complete (or settle; complete and settle are used interchangeably) on the completion date (i.e. the date stipulated in the Date for Completion item on page 1 of the Contract), then either the purchaser or vendor can issue a Notice to Complete requiring the other party to complete within 14 days.

So, for example, say Date for Completion on page 1 of the Contract states that it is 42nd day after the Contract date. Say for example, the Contract date on page 1 of the Contract states that it is 15 October 2018. (Reminder: Contract date is also called the date of exchange, i.e. this is the date both purchaser and vendor sign on identical copies of the Contract.)

42nd day after Contract date of 15 October 2018 = 26 November 2018.

So Date for Completion (also called settlement date) is 26 November 2018. Say purchaser could not settle on this day, so from the 27th November 2018 onwards, the vendor solicitor can choose to issue a Notice to Complete to the purchaser requiring the purchaser to complete within 14 days.

So if the vendor solicitor emailed a Notice to Complete to the purchaser on 27th November 2018, the vendor solicitor will state in the Notice to Complete that the purchaser must complete by 11 December 2018 (thereby giving the purchaser another 14 days to be ready for settlement).

 

Explanation:

We often see this paragraph after the previous paragraph about a Notice to Complete within 14 days, and this is about interest payable if the purchaser cannot complete on the Date for Completion as stipulated on page 1 of the Contract. Using the same example as before, if Date for Completion is 26 November 2018 and the eventual final completion date is 11 December 2018, then the purchaser has to pay to the vendor, on top of the balance of the purchase price, interest of 10% on the balance of the purchase price.

Say, purchase price is $770,000.

Deposit is 10% of purchase price = $77,000.

Then, balance of the purchase price is $770,000 – $77,000 = $693,000.

On the eventual final completion date of 11 December 2018, the purchaser will not only have to pay $693,000, but he’ll also need to pay 10% of $693,000 for 14 days = $2658.08.

Note that this interest only applies to the purchaser when s/he cannot complete by Date for Completion as stipulated in the Contract. If the vendor is the party who cannot complete by the Date for Completion, the vendor does NOT need to refund any interest to the purchaser, by virtue of the words written in this special condition!

 

Explanation:

We often see this paragraph after the previous 2 paragraphs on Notice to Complete and interest payable. Using the same example, the vendor’s solicitor will receive another $350 from the purchaser on the eventual final completion date if s/he issues a Notice to Complete on or after 27th November 2018.

 

Explanation:

This paragraph normally comes under the heading of Settlement in Special Conditions pages.

This paragraph refers to paper settlement. In electronic settlement platforms like PEXA, this paragraph wouldn’t apply.

In paper settlement, the physical settlement venue is normally nominated by the vendor’s lender and agreed by the vendor or the vendor’s solicitor. It is normally a venue in the city, like SAI Global Sydney office for example.

This paragraph states that if the vendor owns the property for sale outright, with no mortgage, and hence s/he holds the Certificate of Title, then the physical settlement venue should be at the vendors solicitor’s office. If the purchaser requests that settlement should occur in some city venue instead, the purchaser needs to pay the vendor another $110 on completion to cover the vendor’s cost of hiring a settlement agent to settle in the city.

 

Explanation:

This paragraph normally appears under the heading of Cancelled Settlement or Re-scheduled Settlement in Special Conditions.

In short, it means that if settlement needs to be re-booked for another date and time, the purchaser must pay $220 on completion for the vendors solicitor’s costs in cancelling and rebooking settlement.

 

Explanation:

If either party before completion dies, becomes mentally ill or becomes bankrupt; or if either party is a company and before completion this company goes into liquidation, then either party can walk away from this Contract, i.e. purchaser would be able to get back his deposit monies paid on exchange.

 

Explanation:

In short, this paragraph states that the purchaser is buying the property as is, in its present condition, and therefore cannot ask for compensation or walk away from the Contract by blaming the state of the property later (i.e. after exchange but before completion).

 

Explanation:

This paragraph applies when the vendor appoints an agent to sell his/her property. In short, the purchaser should have been introduced to this property by the agent listed on the front page of the Contract, and by no one else. If somehow a purchaser is introduced to this property by another agent, and this other agent tries to claim his commission from the vendor, the purchaser would have to pay the vendors costs in defending the claim from this other agent.

 

Explanation:

This is to prevent the purchasers solicitor from raising Requisitions on Title using the many varied forms out there. When we see this clause, we will look for an attached Requisitions on Title form attached to the contract and raise (email) this particular one with the vendor’s solicitor.

 

Explanation:

This paragraph applies when a swimming pool comes with the property. In short, the purchaser takes the swimming pool and the surrounding fencing as is, and cannot force the vendor to comply with the requirements of the Swimming Pools Act if such a notice is issued after exchange. Instead, the purchaser has to comply at his expense.

 

Explanation:

Purchaser needs to rely on his own enquiries and should not trust the Survey report or Building certificate that may be attached to this contract.

Furthermore, if the purchaser applies for a Building certificate from the Council before completion, and if the Council informs that there are issues to be remedied, the purchaser cannot force the vendor to remedy these issues nor walk away from this contract. Worse still, the purchaser will have to pay the vendor for his expenses in complying with any work order notice arising out of the purchaser’s application for such a Building certificate.

 

Explanation:

These are pretty standard amendments to the standard clauses in pages 7 to 20 of the Contract. As purchaser’s solicitor, we are not overly concerned with negotiating these away with the vendor’s solicitor, except if this property is one of the vendor’s many investment properties, and Land Tax is ticked adjustable on page 2 of the Contract, we would request the vendor’s solicitor to undelete Clause 14.4.2.

 

Explanation:

This is not such a common special condition. This paragraph protects the vendor and allows him to walk away from the contract if there is an error/misdescription in the contract.

 

Explanation:

This is a very common special condition. In short, it means regardless of the amount of deposit a purchaser pays on exchange, if the vendor becomes entitled to forfeit the deposit, the purchaser has to top up the deposit to 10% of the purchase price upon demand by the vendor.

 

Explanation:

As the name suggests, this clause allows the vendor to use the purchaser’s deposit monies for purposes stated in points a, b and c before Date for Completion. Normally, when we see this clause, we ask the vendor’s solicitor to delete it. Of course, the vendor’s solicitor can refuse to do so, and if this is the case, we can decide if we still want to proceed with the purchase and exchange.

 

Explanation:

This applies if there is a paper settlement, not applicable for electronic settlement like PEXA. The Transfer form should be mailed to the vendor’s solicitor at least 14 days prior to completion, otherwise, the purchasers have to pay another $165 on completion for mailing the Transfer form late.

The things to note in this s10.7 Planning Certificate are highlighted in the sample file, in particular:

1) what this land is zoned under (in this sample, it is zoned Zone R2 Low Density Residential),

2) what is permitted with and without consent,

3) are there minimum land dimensions for erection of a dwelling house,

4) is the land affected by road widening,

5) is the land subject to flooding,

6) is the land bush fire prone,

7) is there an Order under Trees,

8) is there any affected building notice or building product rectification notice.

Given these answers by the Council, do we still want to proceed with buying this property? The answers highlighted in this sample certificate are acceptable, so a purchaser considering buying this particular property should be able to go ahead.

 

Next, we look at the Sewerage Service Diagram. Below is an example of what it looks like.

The important thing to note in a Sewerage Service Diagram is the bolder Boards Sewer line. As we can see in this sample diagram, this bolder Boards Sewer line runs outside of this lot (the lot we are interested to buy is the lot enclosed in the rectangle drawn in this diagram). In this diagram, the bolder Boards Sewer line runs outside the property, which is good.

We see that a thinner sewer line runs from the bolder Boards Sewer line into this lot, and into the house. In this diagram, there are 5 water connections into the house. As a purchaser, check that these connections are what are seen when inspecting the house. If you see more water connections in the house than what is in this diagram, then it means that the owner of this house has done some water works in the house without informing nor getting consent from Sydney Water. At this stage, we can ask the owner for clarification.

If we see the bolder Boards Sewer line running inside this lot, then we would preferably like to see it running near the edge of this lot. This is because if Sydney Water needs to do maintenance or repair, it has a right to come and dig up this part of the lot to gain access!

Having looked at where the bolder Boards Sewer line runs, whether inside the lot or outside it, we can then carefully consider if we really want to buy this property.

 

Lastly, we look at the Sewer Mains Location Diagram. Sample file is Sample Sewer Mains Location Diagram. This diagram normally comes in colour, and it shows the sewer diagram with respect to the surrounding neighbourhood. The lot we are interested to purchase will normally be in a different colour to the surrounding lands.

During this 5-days cooling off period, we can order a pest report, a building report or both. (If this is a strata unit, we can order a strata report.) Depending on the result of these reports, we may or may not proceed with the purchase.

We will also try to get the bank to give us unconditional loan approval during this cooling off period. Sometimes, the bank may not be ready to do so, in which case we may ask the vendor’s solicitor to extend the cooling off period by another 5 business days to allow us more time to get the unconditional loan approval.

Needless to say, it is very important to get unconditional loan approval during this cooling off period, because it means that we will have the loan funds needed for completion/settlement. Imagine unconditional loan approval is rejected after expiration of the cooling off period, then potentially we could lose up to 10% of the purchase price because we weren’t able to proceed to completion on an exchanged and on-foot contract.

2) Or the deposit could be 5% or 10% of the price, and the purchaser does not need a cooling off period (though he can still choose to have the cooling off period).

Signature and Exchange

In either case, the purchaser would sign on the first page of the Contract, on the line where it says purchaser and a witness will sign on the line where it says witness (beside the purchaser’s line).

The vendor will also sign an exact identical copy, but he and the witness will sign on the line where it says vendor and witness.

Then, we will exchange the contracts – we will give our signed copy to the vendor, and s/he will give us his/her signed copy.

Now, completion is as per Date for Completion (unless we have chosen to just pay 0.25% of the price and buy ourselves 5 business days cooling off period, and we rescind by 5pm on the 5th business day and not proceed to settlement).

We can calculate the amount of stamp duty payable (for a non first home buyer), and amount of stamp duty if a first home buyer.

2) If we are a first home buyer, we may be eligible for a concessional rate of stamp duty (if the purchase price of the property is between $650,000 and $800,000), or be exempted from paying stamp duty altogether (if the purchase price is less than $650,000). The form we will print out, fill in, and sign in front of an authorised witness is the First Home Buyers Assistance Scheme form. Again if this purchase is a paper settlement, this form will be lodged with a cheque for the stamp duty is payable. If this purchase is going to be electronically settled like on the PEXA platform, still the stamping agent will rely on this form to generate an OSR reference number to key in on the PEXA platform, but this time Revenue NSW will know that it will not be collecting any stamp duty or just collect a concessional rate of stamp duty on settlement day.

3) Because it is the purchasers solicitor’s job to prepare the Settlement Adjustment Sheet, we will need supporting certificates. We will need to order the s603 council rates certificate AND the s66 water rates certificate. The s603 council rates certificate can be ordered from the relevant councils online, or for convenience, we can order the s603 and the s66 certificates from an information broker like SAI Global. (Click Dye & Durham Login for how to login.)

A screenshot of what to tick in order to make the order is shown below:

4) Next, we will prepare the TRANSFER form, if this is a paper settlement. After filling in the details and signing this form (see below), we will pay the stamp duty and get this TRANSFER form STAMPED – for stamping, law firms either engage a stamping agent, or stamp in-house. We will then mail the STAMPED TRANSFER form to the vendor’s solicitor.

If settling electronically via PEXA, we will create an electronic TRANSFER document in PEXA, entering essentially the same information as for a paper Transfer.

The TRANSFER form for paper settlement looks like the below, in 2 halves, the top half and the bottom half:

Here, we are assuming the sale/purchase price of this house is $650,000, as shown in panel D.

Purchaser’s solicitor needs to fill in Panels A, C, D, E and H.

Purchaser’s solicitor, or purchaser, will need to sign on the bottom right, under transferee.

5) We will raise Requisitions on Title. Click on sample Law Society Residential Requisitions on Title form to have a look.

6) We will also prepare the eNOS – a document to inform NSW Land Registry Services that ownership has changed hands as on settlement date and future council rates and water rates notices should be mailed to the new owners.
If this purchase is a paper settlement, we will prepare an eNOS online, by clicking on “Create eNOS” on the left tab. We will then go through the steps online, and print out an eNOS to bring with us on settlement day to give to the incoming bank (if we have a lender).

If this purchase is settled electronically via PEXA, we will create an electronic eNOS document in PEXA.

How to work out the final amount a purchaser is going to pay:
(Settlement Adjustment Sheet)

• Council Rates, s603 certificate:

The below image shows the middle portion of the sample s603 certificate. In this case, the council rates for this property from 1 July 2018 to 30 June 2019 is $405 + $25 + $931.35 = $1361.35. Rates outstanding is $1020.90.

Normally instead of working out the yearly rates, we ring the council, ask for the rates section, and we would ask what is the rates outstanding and what is the yearly rates, and sometimes the current quarter’s rates. These yearly rates or current quarter’s rates will be used in the settlement adjustment sheet.

 

• Water Rates, s66 certificate: 

Next, the below image shows most of what a sample s66 certificate looks like. In this case, the service charges for the quarter from 01/10/18 to 31/12/18 is $191.50. Water rates outstanding is $194.22. Normally, we would get a verbal update by ringing 1300 361 369, as the water rates outstanding may have changed since this certificate was ordered. This is a computer-generated verbal update, we just need to key in the property number and a computer-generated voice will provide updated information. The quarter rates of $191.50 will be used in the settlement adjustment sheet.

 

The Settlement Adjustment Sheet, based on the above s603 and s66 certificates figures would look like:

The purchaser’s solicitor is responsible for preparing such a settlement adjustment sheet and send to the vendor’s solicitor at the latest one to two days before settlement.

Assume in this case that this property is sold for $770,000 and deposit received on exchange is 10% at $77,000. Hence balance outstanding is $693,000. However, this is not what the purchaser will pay on settlement, because s/he still has to pay his portion of council and water rates from the date of settlement.

Let’s look at the panel for Council Rates. $1,361.35 is the council rates from 1 July 2018 to 30 June 2019, taken from the s603 certificate or by ringing the council. Assume our settlement date is 15-Dec-2018. The purchaser would have to pay his share of the council rates from 15-Dec-2018 to 30-Jun-2019, because from 15-Dec-2018, s/he is the new owner of the property and hence liable to pay council rates from this day on; i.e. 197 days out of 365 days of $1,361.35 = $734.76. This amount would have to be added to the balance outstanding of $693,000.

Likewise, for the Water Rates panel. The current quarter water rates from 01/10/18 to 31/12/18 is $191.50, taken from the s66 certificate. The purchaser has to allow for water rates from 15-Dec-2018 to 31-Dec-2018, by virtue of him being the new owner; i.e. 16 out of 92 days of $191.50 = $33.30. Again, this amount would have to be added to the balance outstanding of $693,000.00.

So, $693,000.00 + $734.76 + $33.30 = $693,768.06. However, this is still not the final amount payable by the purchaser.

Now, let’s look at the Water Usage Panel.

From the s66 certificate, we see that:

Last Meter Date of Reading was held on 03/10/18.

Average Daily Usage is 0.533kL.

Costs is $2.08 per kL.

Which means the vendor has to allow for water usage between 03/10/18 to the settlement date of 15-Dec-2018, since s/he is the owner till 15-Dec-2018 and liable to pay for his own water usage; i.e. 73 days at 0.533kL per day at $2.08 per kL = $80.93.

Next, say the Title Search of this property shows that there is a mortgage. The lodgement fee charged by NSW Land Registry in 2018 is $141.60 to register a discharge of mortgage. Since it is the vendor’s mortgage, it is his responsibility to pay for this lodgement fee of $141.60. Of course, if there is no mortgage on this property, then the vendor wouldn’t need to pay this $141.60 for lodgement of discharge of mortgage.

So, vendor needs to pay for $80.93 (water usage) + $141.60 (lodgement fee for discharge of mortgage) = $222.53

Finally, the purchaser needs to pay the interim figure $693,768.06, minus what the vendor has to pay $227.33, to come up with a final payable figure of $693,545.53.

So at settlement, the purchaser needs to fork out $693,545.53.

The vendor however does not get this full amount of $693,545.53. Why? Remember those outstanding rates in the s603 and s66 certificates? Those are amounts payable by the vendor which has not yet been paid. So it is the vendor’s responsibility to pay out these outstanding amounts, for the s603 certificate, council rates outstanding is $1020.90 and for the s66 certificate, water rates outstanding is $194.22.

So that’s why at the bottom of this settlement adjustment sheet above, we wrote:

So as purchaser, we expect to pay $693,545.53 on settlement day, and out of this amount, we expect $1020.90 to be payable to Cumberland Council and $194.22 to be payable to Sydney Water.

After sending this settlement adjustment sheet and its supporting s603 and s66 certificates to the vendors solicitor, we await confirmation that these figures are correct, and we await a “cheque direction” (if paper settlement) or a “payment direction” (if PEXA settlement). The “cheque direction” tells the purchaser’s solicitor how the vendor wants his monies, in the form of bank cheques drawn payable to who and for how much. So once we receive the “cheque direction”, we will inform our lender so they know how to draw the bank cheques. As for “payment direction”, it is equivalent to the “cheque direction”, except that the vendor’s solicitor key in these instructions in PEXA.

If this is a paper settlement, on settlement day, our lender, the vendor’s solicitor or his settlement agent, and us or our settlement agent, will arrive at the settlement venue at the time we suggested.

Our lender will hand us the bank cheques as per the “cheque direction” and we will pass these cheques to the vendor’s solicitor (except the Council and Sydney Water cheques which we will mail to the relevant authorities after settlement), in return for the “Discharge of Mortgage” form together with the “Certificate of Title” and the “Transfer” form to hand over to our lender. We will also hand over the eNOS form we have prepared to our lender.

We would have prepared an “Order on the Agent” to give to the vendor’s solicitor if the vendor has engaged a real estate agent to sell his/her property. (An “Order on the Agent” authorises the real estate agent to release the purchaser’s deposit monies which has been held in the real estate agent’s trust account to the vendor. To prepare an Order on the Agent, please open the sample file and substitute words in red with the correct information.)

By this time, with payment made, the vendor or the vendor(s) real estate agent (if one is engaged) can release the keys to the purchaser and the vendor can get the deposit monies from the real estate agent on production of the “Order on the Agent”.

In electronic settlement, all the exchanges of monies and documents (mainly Transfer document, eNOS document, Discharge of Mortgage document if vendor has and needs to discharge his loan, Certificate of Title) will happen electronically.

Finally, after settlement is completed, we need to email the “Order on the Agent” to the real estate agent who has been holding our deposit monies in its trust account to give these deposit monies to the vendor. We will also collect the keys to the property from the real estate agent.

 

(Note 1: you may have realised that we have not included any screenshots or description on how to use PEXA. This is because PEXA is currently only available to lawyers and conveyancers. There is no real point in showing how to use PEXA when you can’t even log in and see or practise for yourself how it works.)

(Note 2: even though you may now know how the conveyancing process works in Sydney/NSW, it is advisable that you refer to Revenue NSW advice on the risk of doing your own conveyancing. In short, Revenue NSW does not recommend that you do your own conveyancing because it comes with significant risks.)

If you find all these conveyancing steps too labourious and cumbersome, you can engage us to do your conveyancing from start to finish – from advising you about the contract all the way to settlement where you receive the keys to your house. Please feel free to contact us!
Importantly, solicitors are covered by professional indemnity insurance. In the unlikely event that something does go wrong, you are protected.