Settlement / Completion (Settlement Adjustment Sheet)
Summary of what we will learn in this webpage:
- What must we give the vendor’s solicitor from about 2 weeks prior to the day before Settlement
- As a purchaser, we are expected to prepare the Settlement Adjustment Sheet, using the information contained in the s603 and s66 certificates we ordered
- We go through how to work out the Settlement Adjustment Sheet, and therefore
- How much finally is the purchaser liable to pay for the purchase of this property
Step 6: A couple of weeks before settlement, to up to the day before settlement, we need to send the vendor’s solicitor a settlement adjustment sheet and its supporting s603 and s66 certificates.
s603 is a council rates certificate, it advises the council rates payable.
s66 is a Sydney Water rates certificate, it advises the water rates payable.
If this is a paper settlement, a few days before settlement, the vendors solicitors would ring us and we would have agreed on a settlement venue, date and time. We would then ring our lender to book the same venue, date and time, so that our lender can be present to pass us the bank cheques to pay to the vendor’s solicitor.
When ringing our bank, we would also ask what is the net loan funds available, so that we can advise the purchaser the shortfall funds needed for settlement.
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 the 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 currently charged by NSW Land Registry 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 $222.53, 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 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.
This completes our conveyancing step by step guide
on the purchase of a house in Sydney and NSW!
(Note 1: you may have realised that we have not included any screenshots or description on how to use PEXA. This is because PEXA currently is only available to lawyers and conveyancers. There is no point in showing how to use PEXA when you can’t even log in and see 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 consider it is not worth the risk to do your own conveyancing on a property that’s worth $500,000+ or $1,000,000+ or much more; or if you find all these conveyancing steps a bit too labourious and cumbersome; you can engage us to do your conveyance from start to finish – from advising you about the contract to settlement where you receive the keys to your house. Please feel free to contact us!
Why risk? Because the house you are buying costs $500,000+ or $1,000,000+. Conveyancing fee charged by a professional solicitor on such a purchase is now rarely more than $2000. Comparing the risk of buying $500,000+ or $1,000,000+ to a conveyancing fee of say $1,050; objectively speaking, is $1,050 really a cost you want to save on?
More importantly, solicitors are covered by insurance. In the unlikely event that something does go wrong, you are protected.
We offer you peace of mind that your purchase will be well taken care of.
For a standard house in Sydney or NSW, we charge a cheap, fixed fee of $880 (inclusive of GST) + disbursements at costs.
Disbursements, for a purchase, are mainly costs of ordering s603 and s66 certificates, plus outside agency stamping charges.
For a purchase of a standard house, disbursements is approx. $150, so the final fee is $1,050 all-in fixed!
(Please note: Online, you may see conveyancing quotes being advertised for less. Please ask for their final fee, as it is not uncommon that disbursements are hiked up to a few hundred dollars, making the final fee payable by you $1400 or more!)
Our contact details:
Mobile: 0466 278 034
Address: Suite 20, 1-5 Harrow Road, Auburn NSW 2144