Once you have

decided to buy

The contract for sale

When you buy a property in NSW your rights depend, in large part, on what is in the contract for sale. However, there are some things a contract for sale must do, including properly identifying the property as well as the terms on which it is being sold. It should also attach a number of documents, the most common of which are:

  • A zoning certificate
  • A drainage diagram showing any sewer lines
  • A copy of the property certificate
  • A copy of the plan for the land
  • Copies of any documents showing easements (the right of someone else to cross or use the land), rights of way, restrictions, covenants etc.
  • Certificate of compliance or non-compliance for any swimming pool
  • Certificate showing whether or not land tax is owing on the property.

Sellers of strata title properties (generally units or townhouses) should also have attached:

  • A copy of the property certificate for the common property and strata plan
  • A copy of the by-laws for the strata scheme.

Identity documentation

When first meeting with your solicitor, do not be surprised if your solicitor asks you to bring along identity documentation such as your passport, birth certificate, driver's licence, marriage certificate etc. Under NSW laws, your solicitor will likely need to verify your identity and take copies of your identity documentation for your file. The documentation will also be needed for Commonwealth reporting requirements.

Buying on your terms

Many of the terms in any contract for sale will be standard, which means they have been in use for a long time and are fair to both seller and buyer.

However, a seller does not have to include these terms and instead may choose to include something in the contract which favours themselves at a buyer’s expense. That is why the first thing your solicitor will do is make sure the contract for sale is not just legal, but that it also is not unfair.

Where a clause is not in your interests, your solicitor will negotiate with the seller’s solicitor to get it changed. This includes working out a time to settle the sale, which is when you will pay the balance owing and take ownership of the property.

Should you pay for inspections?

Because you are expected to take the property “as you find it”, that means you will also sign up to any structural problems, pest infestations or other defects that might not be obvious to the naked eye. That is why it is always best to have someone who knows what they are doing look over the property. After all, you may be paying a few hundred dollars up front to save yourself thousands, or even tens of thousands of dollars down the track.

The real estate agent may be able to tell you if any inspection reports have already been prepared in respect of the property. But you should be aware of who they were provided for and any other limitations or disclaimers which may reduce your ability to rely on such a report.

Your solicitor should also check whether the contract includes:

  • A survey
  • A building certificate
  • A homeowner’s warranty insurance certificate for any renovations done on the property

If you are buying at auction it is important that you have any pest and building inspections carried out before the auction. Once the hammer comes down it is unlikely you will be able to get out of the contract.

What is included in the sale?

Unless the contract specifically says otherwise, the property will be sold “in the state you find it”. That also means any fixtures are automatically included.

A fixture is anything that cannot easily be taken away without doing damage to the property. For instance, stoves are usually fixtures because they are wired in, whereas fridges are not because they only need to be unplugged. Sometimes a seller will attempt to exclude a fixture from a contract for sale. At other times, what constitutes a fixture isn’t so clear cut, for instance, removable floor coverings or an above ground pool.

Where anything is in doubt, it should be expressly included in the contract for sale. Your solicitor will help make sure you know everything that is included in the sale.

Your mortgage documents

To buy a property most people will need to take out a mortgage. A mortgage gives a lender rights over the land for which they are lending money, including the option of selling it if you default.

A solicitor can help you make sense of what your obligations are under the mortgage, including whether you will be penalised for refinancing or paying out your loan early.

Types of ownership

When you buy a property with another person, there is usually two ways you can choose to own it.

Most couples choose to buy as Joint Tenants, which means they own the whole property jointly and if one person dies the other is immediately entitled to the whole property (regardless of what any will might say).

Business partners or people not closely related usually choose to buy as Tenants in Common, which means they each own a specified share in the property. That share can then be passed on or sold to anyone and can be left in a will.

What is exchange?

A contract to sell a property becomes binding when the buyer and seller each sign a copy of the contract for sale and exchange them. At exchange, the buyer also usually hands over a deposit (often 10 per cent).

At an auction, exchange happens immediately after the winning bid is accepted. For private treaty sales, exchange usually means you will deliver your signed contract to the seller’s agent and pick up the seller’s signed copy. Sometimes a seller will be happy to exchange contracts by mail, in which case the seller’s signed contract will be delivered to your solicitor. In all cases, a formal exchange of the contracts is done by either the seller’s agent or the seller’s solicitor.

Signing the contract is not always final

Sometimes you will be able to get out of the contract for sale and get your deposit back, even when you have signed the contract for sale (and that includes when you have bought a property at auction).

For instance, sellers must always comply with the “vendor disclosure requirements and warranties”. These rules require anyone selling a property to let prospective buyers know certain information about the property they are selling in the contract for sale. This includes making promises about the property and attaching certificates that reveal such things as any rights of way, drainage and zoning.

Your solicitor will be able to tell you if the seller has not complied with these obligations and whether you will be able to recover your money and pull out of the contract.

The first home owners grant

If you are buying your first home, you may be entitled to a little help from the government. For more information visit the Revenue NSW.

Duty and other tax

In NSW, the purchase of property is taxed. This tax takes the form of duty, which is calculated based on the price of the property. Usually you will need to pay this duty at or before settlement. However, your obligation to pay is sometimes waived if you are a first home buyer or if you are buying a newly constructed home. For more information visit the Revenue NSW.

If a property is not purely residential in its nature, the sale may incur GST. Investment properties can also be subject to Land Tax. It is important your solicitor goes through the contract for sale to make sure the cost of these taxes it is not unfairly passed onto you as the buyer.

What happens behind the scenes?

While you are getting ready to move into your new house, your solicitor will be working so that everything proceeds smoothly to settlement. To make sure the seller has not left something out of the contract, they will be carrying out enquires about the property with the local council and government departments.

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