Conveyancing

What are Deposit Bonds?

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Deposit Bonds are becoming a common part of the conveyancing process. So it is important for vendors and purchasers alike to understand what Deposit Bonds are.

A Deposit Bond is a substitute for all or part of the usual cash deposit. The deposit is typically paid on exchange of Contracts in the conveyancing process. It almost like a form of insurance where the institution providing the deposit bond is saying the purchaser is good for the money.

The term of the deposit bond can be from 6 months to 48 months. Longer term deposit bonds are usual when purchasing off-the-plan property.

Where can you get a Deposit Bond from?

Deposit Bonds can be obtained through specific companies that only deal in deposit bonds, or through your banking institution.

In order to obtain a deposit bond you will need some documents to support your application. Documents such as the following a typically required:

  • Copy of your loan approval;

  • Evidence of funds to complete the purchase;

  • Signed and dated Contract for Sale (if selling existing property)

What is the cost of a Deposit Bond?

The cost varies between institutions and will vary depending on the value of the deposit bond and how long you need it in place for.

What is the benefit of a deposit bond versus cash deposit?

Greater flexibility at auction. You select your maximum bid amount and the deposit is then valid for up to 10% of that amount. You can then retain the same deposit bond for up to 6 months until you are successful at auction.

First home buyers. With high property prices first home buyers may not have access to 10% cash deposit but can get loan approval for excess of 5%. A deposit bond (possibly with the need for guarantor) is therefore an option to avoid committing to a cash deposit.

Buying off the plan. When buying off the plan, typically the vendor invests the deposit in a low interest earning account which you may only get half of the interest earnt on settlement. However, with a deposit bond you can leave your money where it is and still secure the perfect property.

For more information, please contact:

Kylie Fuentes
Licensed Conveyancer & JP
kylie@couttslegal.com.au
1300 268 887

This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.

ABCs of Retail Leasing!

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Whether you are a Landlord or Tenant there are some terms that it is good to have a refresher on from time to time, especially with the changes introduced to the Retail Leases Act in 2017.

Below is an overview of the basic terms and concepts you may come across in retail leasing.

In the beginning… negotiations…

Retail Tenancy Guide

When negotiating a lease with a Landlord they are required to provide a copy of this Retail Tenant’s Guide to prospective Tenants for their information. Click here for more info.

 

What is a ‘retail shop’ under the Act

The definition of ‘retail shop’ under the Act has been further clarified with the recent amendments. As such, the Act now notes that a retail lease is required for a shop selling and supplying goods and services where the shop is less than 1,000 sqm and is used for a retail business.

This definition excludes ATMs, vending machines, internet booths, children’s rides, telephone boxes and storage areas (not within the shop).

 

Disclosure Statements

Lessor’s Disclosure Statement

The Landlord is required to provide a Lessor’s Disclosure Statement at least 7 days prior to the commencement of the Lease.

The Disclosure Statement set out important details regarding the shop and the lease. If the shop is within a shopping centre than additional information is required.

Lessee’s Disclosure Statement

Once the Lessor’s Disclosure Statement has been received by the Tenant, the Tenant has 7 days to respond by providing the Lessee’s Disclosure Statement. The Lessee’s Disclosure Statement must state if:

• you have received the Lessor’s Disclosure Statement;

• you have a draft lease;

• you have obtained professional advice regarding the Tenant’s lease obligations; and

• whether the Landlord has made any other verbal agreements or representations to you and any relevant details. All agreements reached during negotiations must be set out in the Disclosure Statement. If not, the Tenant must notify the Landlord immediately and request a new Disclosure Statement.

 

The forms of the Lessor and Lessee Disclosure Statements can be obtained from the NSW Small Business Commissioner here.

 

Condition Report

It is advisable that prior to taking possession of the shop that the Landlord and Tenant undertake an inspection of the shop and complete a report regarding the condition of premises. This allows both parties to understand what the expectation is when the lease ends regarding the condition the premises should be left in. The NSW Small Business Commissioner provides an example report if the Landlord does not have a standard form.

 

Permitted Use

The permitted use sets out the type of business the Tenant can operate from the shop. If the Tenant intends to use the shop for another use then the Landlord’s and Council’s consent will need to be obtained.

 

Minimum 5 year term

As of 1 July 2017 there is no longer a minimum 5 year term under a retail lease or a need to waive the Tenant’s right to minimum 5 year term.

Despite the term of the lease, the Landlord is required to provide a fully executed lease to the Tenant within 3 months of receipt from the Tenant.

 

Option to Renew

During the initial negotiations of the lease, the Landlord may offer or the Tenant may request that there be option to renew the lease at the end of the initial term.

If there is an option to renew under the lease, then a set period of time is stated during which the Tenant must notify the Landlord in writing of their intention to take up the option.

 

Outgoings

Outgoings are expenses relating to the shop that are in addition to the rent. The details of any outgoings that have been agreed between the parties should be set out in the Lessor’s Disclosure Statement.

The Landlord’s obligations in relation to outgoings is that estimates are to be provided prior to the end of the financial year, with audited statements to be provided within the first 3 months of the new financial year.

If the Landlord does not meet their obligations following a request for the information, then the Tenant cannot withhold payment of the outgoings until the required information is received.

 

Rent Review Methods

Rent can only be increased once every 12 months and typically occurs on the anniversary of the commencing date of the lease. There are several methods of rent review as set out below:

CPI

This is a percentage increase based on the rate of inflation. While the Landlord is required to give notice of the increase, by signing the lease you have agreed to the increase on this basis.  

Fixed Percentage

This is a set percentage as agreed between the Landlord and Tenant during negotiations of the lease. As above, if the Landlord fails to give notice of the increase you have agreed by signing the lease and are committed to paying the increased amount of rent going forward from the date as set out in the lease.

Market Rent

A rent review by market rent is most common upon the exercise of option to renew. This can be negotiated by the Tenant prior to commencement of the option to renew after requesting for an early determination of market rent.

The Landlord and Tenant can reach an agreement on the market rent, or they can appoint a valuer to determine the rent payable. If the parties cannot agree on a valuer, they can request that the NSW Small Business Commissioner appoint a specialist valuer.

 

Lease Incentives

Lease incentives are something that shopping centre Landlord’s may offer to encourage a new Tenant to take a lease.

Rent Free Period

A rent free period usually occurs at the beginning of the lease term. This type of incentive is typically given to allow the Tenant to set themselves up and commence trading. Rent free periods can be for a period of 1 to 3 months.

Fitout Period

A fitout period also typically occurs at the beginning of the lease term, it may also occur prior to the lease commencing. It allows the Tenant time to install and set up the shop with the necessary fixtures and fittings without trying to operate a business or account for lost potential income while increased expenses are being incurred. During a fitout period a rent free period will typically apply.

 

Landlord’s works

The Landlord may be required to undertake works, known as ‘Landlord’s works’ to prepare the shop for the new Tenant prior to the Tenant undertaking their fitout works. If this occurs then the Landlord may require the Tenant to contribute to some of these costs. These costs should be agreed prior to entering into the lease and be set out in the Lessor’s Disclosure Statement.

Any works undertaken by the Landlord will typically remain the property of the Landlord following the end of the lease, unless previously agreed between the parties.

 

What is required from the Tenant prior to the commencing date?

In addition to providing the Landlord with a signed lease and relevant registration fees (if requested), the Tenant must provide a Certificate of Currency satisfactory to the Landlord, along with a Bank Guarantee or cheque for the Retail Bond. Details of these items are set out below.

 

Insurance and Certificate of Currency

It is common practice among Landlords to require the Tenant to take out insurance policies for public liability, and in retail spaces plate glass. Under the lease the requirements of the Landlord will be set out to include the level of cover, generally speaking this is $20,000,000 for public liability and that the Landlord should be noted as an interested party. An example of this is a requirement that the insurance policy will not lapse without the landlord being given at least one month's prior written notice.

In order to meet the obligation under the lease, the Tenant is required to provide a Certificate of Currency for each policy prior to the commencing date, with updated Certificates of Currency to be provided upon request by the Landlord.

 

Bank Guarantee or Retail Bond

A bank guarantee or retail bond is provided by the Tenant to the Landlord at commencement of the lease. This is typically in the amount of 3 months rent. If the Tenant is providing a retail bond then the following Retail Bond Lodgement form should be used by the Tenant and Landlord when lodging the bond with the NSW Small Business Commissioner. The Landlord is required to lodge the Retail Bond with the Commissioner within 20 days of receipt.

The purpose of a bank guarantee or retail bond is to provide coverage to the Landlord in the event that a Tenant is in arrears under the lease or if the Tenant vacates the premises and does not satisfactorily complete the make good requirements under the lease. If the Landlord needs to make a claim on the retail bond paid then they are required to use the following Claim for Retail Bond Money form issued by the NSW Small Business Commissioner.

If the Landlord draws down (uses) the bank guarantee or retail bond during the term of the lease and the Tenant remains in occupation of the premises, then the Tenant will be required ‘top-up’ the bank guarantee or retail bond to the amount required under the lease. If the Tenant does not attend to the ‘top-up’ then the Tenant will be considered in breach of the lease.

At the end of the lease, provided the Tenant has fulfilled all of their obligations under the lease, then the Landlord is required to return the bank guarantee within 2 months.

 

After signed lease provided by Tenant

Registration requirements

If a retail lease is for a term of 3 years or more (including any option to renew) then the lease must be lodged for registration within 3 months. There are exceptions to this time frame in mortgagee’s consent to the lease is required.

If the lease is not being registered, then the Landlord must returned the fully executed lease to the Tenant within 2 months after receipt from the Tenant.

 

The end of the lease

Make good

The make good requirements are set out in a retail lease and usually require that the Tenant returns the shop to the same condition it was in prior to the lease commencing, except for fair wear and tear. This is when the Condition Report the parties completed at the beginning of the lease becomes important. The existence of a completed condition report may result in less misunderstandings surrounding the original condition of the shop. It is advisable for the Tenant to discuss the make good requirements with the Landlord prior to the end of the lease to determine what works the Landlord expects.

It is also important to establish whether the Landlord will require the make good works to be completed by the end of the lease, or whether they will allow a period of time after the lease ends for the works to be completed.

Assignment of Lease

An assignment of lease occurs, most commonly, when a business is sold and the lease is transferred to the new business owner. An assignment of lease needs to be consented to by the Landlord. A request for assignment of lease must be made in writing to the Landlord along with details about the business and financial resources of the proposed assignee. Typically under a retail lease the Landlord cannot unreasonably withhold consent provided they are respectable, solvent and capable of meeting the Tenant’s obligations under the lease. The Landlord has 28 days under the Act to provide their response to the request for consent. If no response is received from the Landlord within 28 days then consent is assumed to be provided.

Once the Landlord provides consent a Deed of Assignment will be prepared, generally by the Landlord’s solicitor which will be signed by all parties, including the Landlord. The Deed will include a Transfer of Lease that is to be lodged with Land Registry Services to record the change of Tenant on the Certificate of Title for the property.

Under an assignment of lease the Tenant will be required to pay the Landlord’s legal and other costs related to providing the consent.

There is set process to be followed in relation to an assignment of lease under the Act and as such it is recommended that you obtain legal advice when undertaking this form of action.

The information provided above is not a comprehensive list of all matters that you may come across during a retail lease. If you need specific advice on a particular matter please contact our office.

This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.

PEXA: Dispelling the myth from the facts

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Melina addresses the elephant in the room dispelling the myth from the facts about PEXA and electronic settlements.

 

As reported by the Sydney Morning Herald, two Victorians recently lost $1.25 million between them, due to a computer hack. Similar stories were aired on Nine News and news.com.au

Property Exchange Australia’s e-transfer system is already mandatory for some transfers of title in NSW with the balance of transfers becoming mandatory from 1 July 2019.

 

So what happened…

Based on the information provided by the legal industry and the media, we understand that the Conveyancers emails were hacked. The hackers obtained the Conveyancers PEXA login information from their emails and used them to log into the PEXA system. Once logged into the system as the Conveyancer, they added themselves as a user. From here they entered their account details for the surplus funds in place of the owner’s.

 

What have PEXA done since this happened…

Since the computer hack, PEXA have implemented a number of additional security measures including increased monitoring of accounts to detect unusual activity, changing the way new users are added to the system, introducing a two-step login process and a Residential Seller Guarantee.

We recently experienced this first hand. We had a new staff member join the property team and added her as a user in the PEXA system. This staff member was not immediately able to access the system. Instead, a member of the PEXA team phoned the office to confirm it was, in fact, our office that added the user. Only once this was confirmed with PEXA over the phone did they allow this additional user to start accessing the system.

The two-step login process, which has also been implemented since the hacking incident was reported, involves a login with a password and a code. The code is sent to a mobile device, once the email address and password are entered. Only after inserting both the password and then the code sent to the mobile device can you enter the PEXA system.

The PEXA Residential Seller Guarantee provides protection to sellers in the event of fraud. It gives the seller the option to make a claim under the Guarantee, rather than trying to recover the costs another way if their funds have been misdirected.

 

What should I consider as a seller or a buyer whose transaction may be completed in PEXA…

  • PEXA has assured the industry that the platform is secure

  • The incidents were isolated – our firm has been transacting in PEXA since 2015. We have not encountered any incidents where funds were misdirected and all our clients have been very pleased with the system

  • Ask your Conveyancer about the security systems and procedures they have in place to protect against hackers

Stay tuned for more information about PEXA and e-conveyancing as we get closer to the mandating dates.

For further information contact:

Melina Costantino
Licensed Conveyancer
melina@couttslegal.com.au
02 4607 2104

Surcharge purchaser duty exemption/refund for Australian-based developers

On 21 June 2016, the NSW Government introduced surcharge purchaser duty “surcharge duty”, payable by foreign persons or entities purchasing residential property. As the name suggests, surcharge duty is payable in addition to transfer duty (previously known as stamp duty). When first introduced, surcharge duty was 4% of the purchase price/value. On 1 July 2017 it increased to 8%.

 

We have recently seen some changes to the Duties Act 1997 “the Act”, specifically, the addition of s104ZJA. This section of the Act provides:

1.     an exemption from surcharge duty; and

2.     a refund of surcharge duty, paid prior to the introduction of s104ZJA.

 

The exemption and refund apply to foreign-owned, Australian-based developers who satisfy the following conditions:

a.     Following completion of the transfer, a new home was constructed on the land and then sold to a non-associated party without the home having been occupied (other than as a display home); or

b.     The land has been subdivided for the purpose of the construction of a new home and then sold after the issue of a subdivision certificate.

 

No surcharge duty is payable if it is determined that foreign-owned, Australian-based developer is an exempt transferee. If the Chief Commissioner determines that the foreign-owned, Australian-based developer is likely to become entitled to a refund of the full amount of surcharge duty, then they may approve them as an exempt transferee. The approval as an exempt transferee is subject to conditions and can be revoked at any time.

 

Time restrictions apply in relation to making an application for a refund of surcharge duty.

 

We are pleased to have been the first firm to apply for and to have received, an exemption from surcharge duty on behalf of our client.

 

It is not currently possible to process an exemption from surcharge duty on EDR. As such, an application is required to be made by written submission to Revenue NSW.

 

The application for an exemption from surcharge duty must include the grounds for exemption and must enclose the Contract, Transfer and Purchaser/Transferee Declaration together with a statutory declaration stating the Purchaser will meet the requirements set out in s104ZJA of the Act.

 

For further information contact:

Melina Costantino
Licensed Conveyancer
melina@couttslegal.com.au
02 4607 2104

Illegal waste dumper jailed in the NSW Land and Environment Court

On Thursday, 31 May 2018, Dib Hanna was sentenced to three years in prison, being the first person to be jailed in the NSW Land and Environment Court under the 2014 anti-dumping legislation.

 

Mr Hanna is being called Sydney’s most notorious waste dumper after repeatedly been caught illegally dumping asbestos over the past ten years.

 

The NSW Environment Protection Authority commenced its prosecution in 2016, Mr Hanna failed to appear in Court to answer the charges and he was arrested in Victoria and extradited to NSW.  This was the first time that a person had been extradited in relation to environmental offences.

 

Mr Hanna pled guilty to one charge of illegal transport of waste and four counts of illegal dumping of waste on private properties during 2015 and 2016. 

 

The Court heard that Mr Hanna had advertised free clean top soil, clay and crushed by way of a letterbox drop bitumen and when he was contacted by interested residents he would send truck drivers to dump waste, including asbestos at their homes.  It was found that Mr Hanna instructed the dumping of some 461 tonnes of waste, including asbestos to people’s homes.

 

As well as the prison sentence Mr Hanna was ordered to clean up the dumped waste, pay the Environment Protection Authority’s legal costs and take out newspaper advertisements publicising his punishment as a deterrent to other would-be offenders.

 

Mr Hanna’s sentences was backdated to 17 April 2017, the earliest Mr Hanna can be released is 16 July 2020.

For any further advice or legal assistance on this issue, please contact us at Coutts on 1300 268 887.

Licensed Conveyancers & Solicitors - The Basics!

As a Licensed Conveyancer, I act on property transactions day in and day out but I always try to remember that the people I help are not necessarily people who do this sort of thing all the time. Sometimes they are first home buyers and other times they are people who just haven’t bought or sold in years. Because of this, I find it’s so important to get back to basics and give simple answers to common questions, none of this legal jargon. So in saying that…

What is a Licensed Conveyancer?

A Licensed Conveyancer is a legal professional who facilitates the legal process of buying or selling for you.

 

What is the difference between a Licensed Conveyancer and a Solicitor?

 

A question I get a lot is whether a Licensed Conveyancer is the same as a Solicitor. The short answer is no. In saying this, when buying and selling, a Licensed Conveyancer provides the exact same service that a Solicitor would.

 

The key difference is that a Licensed Conveyancer only practices in the area of Property Law and a Solicitor is qualified to practice in other areas of law.

 

Both Licensed Conveyancers and Solicitors are qualified and regulated professionals who can act for you in relation to your property transaction.

 

Another question I get is ‘If I instruct a Licensed Conveyancer, do I still need a Solicitor?’. The answer to this is also no. You can instruct a Licensed Conveyancer or a Solicitor to act on your property transaction. If you instruct a Licensed Conveyancer you don’t also then need to instruct a Solicitor.

 

If you found this information helpful, please share it with your family and friends. You may also want to check out some of our other blogs.

For further information contact:

Melina Costantino
Licensed Conveyancer
melina@couttslegal.com.au
02 4607 2104

How does e-Conveyancing benefit me?

What is e-Conveyancing?

To answer this, we must first answer the question ‘What is Conveyancing?’. Conveyancing is the legal process involved in buying or selling property. e-Conveyancing is the same process, only done electronically meaning the traditional processes and paperwork involved in a manual conveyance are substantially reduced. e-Conveyancing aims to simplify and digitise what can be a complex process as it brings the manual conveyance into the 21st century.

Legal documents are electronically signed and lodged online, instead of in person. In addition to this, funds are paid and received electronically instead of via bank cheques. It is because of this that e-Conveyancing eliminates the need for a physical presence, be it to sign documents and/or at settlement.

e-Conveyancing is already being practiced across several states of Australia including New South Wales as we as an industry try to transition toward a 100% digital future.


How will this benefit me as a seller?

You get your money faster. Funds are paid and cleared in your account instantly, on the day of settlement. There is no more waiting for cheques to be banked and for funds to then clear. With e-Conveyancing you have immediate access to funds from settlement.

Safety first. e-Conveyancing is tightly regulated. Processes are in place to verify the identity of the parties and allow parties to electronically sign documents securely. For all those tech savvy people, the data is encrypted and the receiving computer checks the data to make sure it wasn’t changed in transit.

Less paperwork. Sending documents in the post to be signed increases the risk of delays to settlement, particularly when documents are lost. With electronic signing, there are less documents being posted.

Saves time. In order for Contracts to exchange, you must sign the Contract, and in order for settlement to occur, you must sign the Transfer. Electronic signing means you can exchange sooner - there’s no waiting for the ‘original’ signed Contracts to be provided. It means you can avoid the hassle of printing, scanning and posting documents too. You don’t need to make time to drop into the office to sign the Transfer either. The Transfer is signed by the Conveyancer on your behalf, using their digital certificate.


How will this benefit me as a buyer?

Reduces costs. Some banks charge $10, even $15 per bank cheque required for settlement. With e-Conveyancing, funds are paid electronically, eliminating the need for bank cheques and additional expenses like bank cheque fees.

Safety first. e-Conveyancing is tightly regulated. Processes are in place to verify the identity of the parties and allow parties to electronically sign documents securely. For all those tech savvy people, the data is encrypted and the receiving computer checks the data to make sure it wasn’t changed in transit.

Less paperwork. Sending documents in the post to be signed increases the risk of delays, particularly when documents are lost. e-Conveyancing allows electronic signing. This reduces the chances of a delay to settlement.

Saves time. Electronic signing means you can sign the Contract and/or loan documents in the comfort of your own home, at a time that suits. You don’t need to take time off work or print, sign and post originals in.

Less risk and more certainty. I was reading something the other day that reported 1 in 5 people surveyed experience delays to settlement. As a buyer, if the delay is with you, the seller can impose penalties. Delays can also be quite stressful particularly when removalists have already been organised. With e-Conveyancing the risk of errors and delays is significantly reduced, giving you added certainty of a successful on-time exchange and settlement. This is achieved through electronic signing as well as better checks and balances through electronic channels. For example, there are no cheques drawn in e-Conveyancing, the funds are electronic. This eliminates the chances of cheques being drawn incorrectly resulting in a delay or even a cancellation to settlement.

Peace of mind. In the manual world documents required to transfer ownership to you are typically not lodged for days or sometimes weeks after settlement. With e-Conveyancing it is instant, giving you peace of mind. You can be sure you become the owner on the day of settlement with electronic lodgement to the Land Titles Office. This also means Government authorities like Council and Water are advised of the change of ownership sooner.


How will this benefit me as a Real Estate Agent?

Have you ever waited days, even weeks to receive a cheque for your commission? Only for you then to have wait for the cheque to be banked and cleared into your account. Instead of drawing cheques, e-Conveyancing pays funds instantaneously on settlement. Where the commission is required to be drawn from the sale proceeds, rather than deducted from a deposit you already hold, they are transferred and appear as cleared funds in your account on the day of settlement.


Buying or selling a house? Get your fixed fee conveyancing quote from Coutts Solicitors & Conveyancers today.

Differences between NSW & QLD property purchasing

Purchasing interstate is a great way to expand your property portfolio however not everyone is aware that each state differs in their processes and procedures.

If you choose to diversify your portfolio in this way, it is important that you understand the differences. Below are the two key differences between the processes in NSW and QLD.

 

The Contract for Sale of Land – who prepares it, and what does it contain?

NSW

  1. Vendor's solicitor prepares contract

  2. Contract contains multiple searches detailing the nature of the property

  3. Contracts are exchanged

  4. Purchaser inspects searches contained in the contract

In NSW, the Contract for Sale of Land is prepared by the vendor’s (owner’s) solicitor or conveyancer. Once it is completed, the contract is then sent to the real estate agent for the purposes of marketing the property.

In order for the contract to comply with the regulations (and as such be a valid contract), it must contain specific documents which are known as the ‘prescribed documents’. These documents contain information to assist the potential purchaser in assessing the suitability of the property for their purchase. For example, the documents contain the zoning of the property (and its permitted use), a sewer diagram, a title search, and all easements or restrictions that apply to the property.

There are various other searches that can be conducted by the purchaser’s representative on behalf of the purchaser in addition to the prescribed documents, however in most cases these additional searches do not show results that might affect the decision to purchase the property (e.g., an RTA search to ensure that a road is not being widened next to your property).

QLD

  1. Real estate agent prepares contract

  2. Contract does not contain searches regarding the nature of the property

  3. Contracts are exchanged

  4. Purchaser carries out thier own property enquiries as soon as possible

In QLD, whilst it is possible for the Contract for Sale of Land to be prepared by the vendor’s solicitor or conveyancer, it is usually the selling agent who prepares it. The documents that are required to be attached to the contract by the regulations contain little to no information regarding the nature of the property, and subsequently the suitability of it for your purchase. This is because the law of “let the buyer beware” applies in QLD.

This means that the purchaser is required to conduct their own searches and enquiries to ensure that they are satisfied with the property prior to exchange or in the cooling off period.

 

When does the Contract become unconditional (i.e., the purchaser is “locked in”)?

A five-business day cooling off period applies in majority of purchases in both NSW and QLD, mostly to enable the purchaser to obtain legal advice on the contract. Whilst the purpose of the cooling off period differs between NSW and QLD, the purchaser will be required to pay a 0.25% deposit in both states to exchange with a cooling off period.

NSW

  1. Contracts exchanged on a 5 day cooling off period

  2. Purchaser meets with legal adviser, carries out property inspection

  3. Cooling off period expires

  4. Contacts unconditional

In NSW, the purpose of the cooling off period is for the purchaser to meet with their legal representative to obtain advice on the contact, to carry out their property enquiries (for example pest and building reports, strata reports, and council certificates), and to obtain their formal loan approval.

If the purchaser is satisfied with their enquiries made, and they receive formal loan approval during the cooling off period, they are required to pay the balance of the 10% deposit to the real estate agent by 5pm on the last day of the cooling off period. Once the cooling off period expires, the contracts becomes ‘unconditional’ and are legally binding on both the purchaser and the vendor.

In the event that the purchaser does not want to proceed with the purchase as a result of their enquiries during the cooling off period (e.g., the pest report details that the house is termite infested, or the purchaser is unable to obtain formal loan approval), they are entitled to rescind the contract before the expiration of the cooling off period. In this situation however, the purchaser forfeits the 0.25% deposit paid to the vendor.

QLD

  1. Contracts exchanged on a 5 day cooling off period

  2. Purchaser meets with legal adviser and carries out property inspecation

  3. Cooling off period expires

  4. Purchaser receives pest & building reports and formal loan approval with 21 days

  5. Purchaser confirm receipt of these

  6. Contract become unconditional

In QLD, the main purpose of the cooling off period is for the purchaser to obtain legal advice and carry out the property searches that are not included in the contract (e.g., title search, plan of the land, flood search, and council enquiries).

In addition to the cooling off period, most contracts in QLD are conditional upon the purchaser receiving satisfactory pest and building reports within a specified time (usually 21 days after the date of the contract). If the reports are not received within the specific time the purchaser can request an extension to the due date however it is up to the vendor to agree or not. If the reports received are not satisfactory to the purchaser, or are not received and the vendor does not agree to an extension, the purchaser is entitled to terminate the contract and retrieve all deposit monies paid back (including the 0.25% deposit).

The same principal also applies to the purchaser obtaining formal loan approval – that is, the contract is conditional upon the purchaser obtaining formal loan approval within the specified period (also usually 21 days). This means that the purchaser does not need to obtain formal loan within the cooling off period, as required in NSW. Once the purchaser confirms the receipt of satisfactory pest and building reports and formal loan approval, the contracts become unconditional (and the purchaser is “locked in”).

 

If you’re looking at expanding your property portfolio, why not consider purchasing interstate. Coutts has a wide range of experience in purchasing and selling in both NSW and QLD and can assist you in your transaction no matter where the property is located.

To buy or sell first? Part two

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If you are looking to buy a new home and sell your existing home you've most likely wondered whether you should buy or sell first.

There are several things to consider when making this decision so you are best prepared for the journey. In part two here we'll look at things to consider when buying first.

Buying first

Pros

  • There is less pressure to just ‘get’ a new home so you can settle on time – you can really shop around
  • You have greater certainty that you will only have to move once
  • In a quickly rising market you may be able to achieve a higher sale price and secure a better price on your new home

Cons

  • Bridging finance may be required if you do not sell your existing home in time for settlement
  • You won’t have a clear budget for your new purchase
  • You will need to ensure you have a cash deposit sufficient to cover the purchase or be prepared to obtain a deposit bond

Deposit Bond

When buying a property, first you will need consider options for payment of the deposit.  The traditional method of payment of a deposit is cash.  However, when cash is not available like when your equity is tied up in your existing home, a deposit bond maybe a suitable option.

There are private companies that issue deposit bonds and banks can issue the equivalent being a bank guarantee.  Each issuing institution will have different fees and criteria so you will need to investigate these and ensure you comply.

Your conveyancer and mortgage broker can assist in this process.

Bridging Finance

When buying first your ability to cover the mortgage of two properties will be a main consideration.  Bridging finance is an option worth discussing with your mortgage broker.  Bridging finance loans have:

  • shorter terms of between 6 and 12 months;
  • fixed and variable rates are typically still offered;
  • higher interest rates; and
  • Lenders Mortgage Insurance may still apply if the loan is more than 80% of the total value of both properties.

Extended Settlement

As noted above, a longer settlement period of approximately 10-12 weeks (or longer if you are moving to an area where properties are scarce) maybe a necessary consideration.

The downside of an extended settlement is you may need to accept a sale price that is lower than you originally expected in order to sell in time to achieve settlement.

Contingency Plan – Conditional Purchase

A last resort to overcome the cons is to make your purchase dependant on the sale of your home.  As noted above, this can be negotiated be your conveyancer or solicitor.  Keep in mind that a vendor does not have to agree to this request.

Other Considerations

If settlement of both your sale and purchase have been timed perfectly there are some last minute considerations that need to be covered to ensure settlement goes well.

  • Timing for final inspection

When buying property you are entitled to a final inspection of the property within 48 hours prior to settlement.  This is also relevant for the people buying your property.

  • Timing for settlement

If settlement has been timed perfectly it will occur at the same time on the same day.  Otherwise, settlement may need to occur a few days apart to allow funds to clear and cheques to be drawn.  Settlement is most likely going to occur after 2pm as many banks have this requirement.

Do you have to attend settlement – the short answer here is no.  Your solicitor to conveyancer will arrange attendance by a settlement agent on your behalf.

  • Timing for moving out/moving in

So, settlement has been set for the same time on the same day.  Great news – you only have to move once.

Now it is time to co-ordinate moving.  The best option tends to be hiring a removalist with a truck large enough to fit all of your furniture and possessions in, in one go.  This will allow you to pack up and vacate the property easily prior to settlement.

  • Moving into new property including the collection of keys

Once you have moved out of your old home, you will be waiting for the keys to move into your new home.  In order for you to collect the keys , your solicitor or conveyancer will call the agent and let them know settlement has been finalised, this will happen within 30 mins to 1 hour of the set settlement time.  This call will enable the agent to release the keys to you and you will finally be able to move into your new home.

If you're thinking of selling first, have a read of part one here.

If you would like more information on the process of buying and selling please contact Kylie Fuentes our licensed conveyancer in Picton.

To buy or sell first? Part one

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If you are looking to buy a new home and sell your existing home you've most likely wondered whether you should buy or sell first.

There are several things to consider when making this decision so you are best prepared for the journey. In part one here we'll look at things to consider when selling first.

Selling first

Pros

  • You are in a better position to negotiate your sale price
  • You will know what your limit is on purchase price when buying your new home
  • The need for bridging finance is less likely
  • You can plan ahead and extend the settlement period to allow you to secure your new home

Cons

  • In a quickly rising market your new home may be more expensive than you planned for
  • You may need to consider temporary accommodation if you have not secured a new home by settlement on your sale
  • Possibility of storage fees or double the removalists fees
  • If permitted under your contract you may use the deposit paid by the purchaser towards the deposit payable on your new home

Negotiating power

A main benefit in selling your existing home first is that you will know exactly what you can spend on a new home.  This will help you budget your family expenses and make the right move for you and your family.  By selling first, you also put yourself in a better position to negotiation the best sale price as you are not under pressure to achieve settlement on a certain date.

Extended settlement

In this scenario however, a good option is to have a longer settlement period of approximately 10-12 weeks (or longer if you are moving to an area where properties are scarce).  This will allow time for the cooling off period on your sale to come to an end and for you to secure a new home to move into.  This will also reduce the likelihood of needing temporary accommodation and extra moving costs.

Releasing your deposit

Many people looking to move on in the property market may be hesitant due to access to funds for a deposit, especially if your deposit funds are tied up in the equity in your home.  By selling first you can overcome this issue.  Ensure when your Contract is prepared that it allows you to use the deposit being paid by the purchaser prior to settlement.  By having this provision in your Contract you will be able to access these funds for your purchase.

Leaseback

If an extended settlement will not work for your buyers you could raise the option of a leaseback provision.  By doing this you effectively extend your moving out date until you secure a new home.  This is useful if your existing home is one investors are likely to be interested in as they will have a guaranteed tenant from the settlement date.  The details of this kind of provision are usually negotiated at the time of exchange.

Contingency plan – Conditional Sale

A last resort to overcome the cons is to make your sale dependent on you purchasing your new home.  Your conveyancer or solicitor can insert a clause into the Contract that stipulates that settlement is not triggered until you have secured your new home which will allow you to line up settlement allowing you to only have to move once.  Keeping in mind this may reduce the number of buyers interested in your existing home.

Contingency plan - Renting

If the above options do not suit your needs or your purchaser you may need to consider a short term rental until you have secured your new home.  If you do consider this option, when looking at rentals be very clear that it is short term situation and check what the termination costs are if you move out earlier than the lease expiry date.

If you're thinking of buying first keep an eye out for part two where we'll outline further considerations to help you prepare for the journey.

Ready to discuss your next buying or selling property transaction? Talk to the team at Coutts Solicitors & Conveyancers.

What should I tell my Conveyancer?

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A lot of people do not know when exactly they should start talking to a conveyancer. The simple answer is, the earlier, the better. As your conveyancer, the more we know about your buying or selling situation, the better we are able to act on your behalf.

As a purchaser or seller it is important to remember that the smallest amount of information, while it may seem unimportant to you, can have a severe impact on your transaction. As your conveyancer we don't want to come across any surprises so it is extremely important that you communicate to your conveyancer if you have, for example, severe financial restrictions, tight time limits, or any other specific concerns or requirements relating to your situation.

To assist you in your next sale or purchase, we have prepared a short summary listing some of the things you'll need to tell you conveyancer in your first meeting.

Selling

If you are selling, be sure to make your conveyancer aware of the following, if they apply to you:

  • If you are looking at changing/have changed your name since you bought the property (meaning the legal owner on the Certificate of Title will differ from your new name);
  • If you are separating/have recently separated (in these circumstances, instructions will be required from both parties);
  • If you are getting married/have recently married (meaning that your legal name has or will change);
  • If you are re-financing/recently re-financed (this may hold up settlement of your sale – important for us to know right at the start);
  • If you are not an Australian Citizen/Permanent Resident (this is extremely important given the new laws regarding foreign purchasers and sellers);
  • If you pay land tax;
  • If you pay local land services rates;
  • If you anticipate your property will sell for $2,000,000.00 or over;
  • If a party to the Contract has passed away; and
  • If you are also looking at purchasing at the same time (and require a simultaneous settlement).

Buying

If you are buying, be sure to make your conveyancer aware of the following, if they apply to you:

  • If you are looking at changing/have changed your name (we will need to ensure that the name on the Contract is correct);
  • If you are getting married/have recently married (again, we will need to ensure that the name on the Contract is correct);
  • If you have a guarantor to your loan (this is important for settlement/mortgage document purposes);
  • If you are re-financing during your purchase (again, very important for settlement purposes);
  • If you need a 5% deposit to be acceptable by the Vendor;
  • If you need another person on the Contract (such as a parent or sibling) for the purposes of loan approval;
  • If you are not an Australian Citizen/Permanent Resident (this is extremely important given the new laws regarding foreign purchasers and sellers);
  • If this is your first purchase; and
  • If you are relying on the sale of another property to be able to purchase.

Whilst the above is not a conclusive list of what your conveyancer needs to know in your first appointment, it is a start. Before you meet with your conveyancer it is a good idea to have a think about how your situation differs or is special from what you would consider a normal situation, and be prepared to discuss this with your conveyancer.

Ready to discuss your next buying or selling property transaction? Talk to the team at Coutts Solicitors & Conveyancers.

Identification requirements & foreign investment

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Are you aware of the new identification requirements that took effect back in May 2016? Here's a quick guide to what you need to know.

As your Solicitor/Conveyancer we are required to verify the identity of our clients and to make sure that you have the authority to deal with the property. This being the case, you will be required to produce at least 100 points of identification from the following:

70 points

  • Birth Certificate
  • Citizenship Certificate
  • Current Australian Passport
  • Expired Australian Passport which has not been cancelled and was current within the preceding two years
  • Current Passport from another country

40 points

  • Current Australian Driver’s Licence
  • Current Photo/ID card

25 points

  • Current credit card from a bank or building society or credit union
  • Current telephone, gas, electricity bill
  • Foreign Driver’s Licence
  • Medicare card

Not only are there new identification requirements, it is also now a legal requirement that all purchasers of a property sign a purchaser declaration. The purpose of this declaration is:

  • to determine whether a transaction is a transfer of residential land to a foreign person;
  • to identify foreign persons for surcharge land tax liability;
  • to collect and report to the ATO, information on transfers of land in NSW.

Please note that if you are identified as a foreign person, you could incur surcharges in relation to stamp duty as well as land tax. The Office of State Revenue can provide you with more information in regards to his matter.

Do you need assistance with meeting the new identification requirements or completing a purchaser declaration? The team at Coutts Solicitors & Conveyancers can help.

First home buyer benefits and your spouse

First home buyer benefits

Some of the most common questions we receive in relation to obtaining first home buyer benefits are:

  • “If my spouse has purchased a property before, can I still claim first home benefits?”
  • “If my spouse purchases this property and I purchase a property later, can we both receive first home benefits?”

A spouse is a husband or wife and in relation to the term “de facto”, the Office of State Revenue uses the definition found here under Section 4AA of the Family Law Act 1975.  You should ensure you fall into either of these categories and if you are unsure, it is best to check before you enter into a Contract for Sale.

There are currently two benefits available to first home owners:

  • First Home New Home Scheme
  • First Home Owner Grant

First Home New Home Scheme

This scheme provides an exemption from stamp duty on properties up to the value of $550,000.00 and concessions on properties valued between $550,000.00-$650,000.00, you must meet the following eligibility criteria:

  • The Contract and Transfer must be for the purchase of the whole of the property.
  • All purchasers must be ‘eligible purchasers’.
    • An ‘eligible purchaser’ is defined as a natural person (i.e not a company or trust) at least 18 years of age who has not, and whose spouse/de facto has not:
      • At any time owned (either solely or with someone else) residential property in Australia other than property owned solely as a trustee or executor;
      • Previously received an exemption or concession under First Home New Home.
    • At least one eligible purchaser must occupy the home as their principal place of residence for a continuous period of six months, commencing within 12 months from the date of settlement.

First Home Owner Grant

To receive this grant you must meet the following eligibility criteria:

  • Each applicant is a natural person and not a company or trust.
  • Each applicant must be at least 18 years of age.
  • All applicants and/or their spouse/de facto have not owned a residential property, jointly, separately or with some other person, in any State or Territory of Australia before 1 July 2000.
  • All applicants and/or their spouse/de facto have not previously owned a residential property jointly, separately or with some other person in any State or Territory of Australia, and occupied that property for a continuous period of at least 6 months.
  • Each applicant has entered into a contract for the purchase of a new home or signed a contract to build a home on or after 1 January 2016. In the case of an owner builder, laying of the foundations commenced on or after 1 January 2016.
  • The total value of the property does not exceed the cap amount of $750,000.00.

This must be the first time an applicant and/or their spouse/de facto has received a first home owner grant and at least one applicant must occupy the home as their principal place of residence for a continuous period of six months, commencing within 12 months from the date of settlement.

Basically the short answer is that, as ALL applicants for each first home benefit must NOT have either jointly or solely owned a property previously, you will not be entitled to any first home benefit if your partner has previously owned a property.

The Office of State Revenue will assess each application on a case by case basis so if you feel that you have circumstances that don’t quite fit into any of the above criteria, we can submit an application on your behalf for individual assessment.

If you would like to speak to Carina about first home buyer benefits please contact us.

Article written as an update to the original entry posted in June 2016. Updated 30 September 2016.

Do we need to pay our property grants back?

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If you have recently built a home with your partner, or bought a brand new home, and you have now separated, there is a chance that you will need to pay your property grants back.

Below we explain when you need to pay your property grants back, when you don’t need to, and what else you should know to protect yourself.

If you are selling the property

If you are selling the property for which you received property grants, then there is a high chance that you will need to pay back those grants. The rules for property grants are as follows:

  • New Home Grant

    • If you purchased a home complete and ready for occupation or an off the plan purchase you are not required to pay back the grant.

    • If you purchased vacant land with the intention to build a dwelling:

      • But did not commence construction within 26 weeks of settlement then you must repay the grant; or

      • If you completed construction then you will not be required to pay back the grant.

  • First Home New Home Stamp Duty Exemption/Concession

    • If you purchased vacant land with the intention of building a dwelling; or

    • If you bought a new home that had not been lived in previously, then:

      • At least one purchaser must have occupied the Property for a continuous period of 6 months in the first 12 months. If this has been achieved then the stamp duty exemption/concession does not need to be paid back.

      • If you have not commenced construction or neither purchaser has lived at the property for the required period then the exemption/concession must be paid back on or prior to settlement of the sale.

  • First Home New Home Grant

    • The guidelines above for the Stamp Duty Exemption/Concession are also applicable to the grant.

If one of you is keeping the property

If one of you is going to keep the property and buy the other out, there is a chance that you will not need to pay back the grant money that you have received.

In order to avoid paying back any stamp duty concession or grant received on your Property you must meet the eligibility and residence requirements, which are set out below:

  • New Home Grant

    • If you purchased a home complete and ready for occupation or an off the plan purchase you are not required to pay back the property grant.

    • If you purchased vacant land with the intention to build a dwelling:

      • But did not commence construction within 26 weeks of settlement then you must repay the grant or request an extension to meet the requirements of the grant which would avoid the need to pay back the grant; or

      • If you completed construction then you will not be required to pay back the grant.

  • First Home New Home Stamp Duty Exemption/Concession and Grant

    • Either purchaser must have lived at the Property for a continuous period of 6 months within the first 12 months after settlement or completion of the dwelling.

What should be done from a Family Law point of view?

If you have separated and have property together, you should be entering into a formal family law settlement. To read more about why, please click here.

In addition to providing you with protection and certainty in the future, a formal family law property settlement will also help the party who is going to keep the property avoid having to pay stamp duty on the transfer into their sole name.

A family law property settlement is also important if you have previously received property grants. Any settlement should cover who, out of the two of you, will be responsible for paying back the grants in the event that the conditions set out above are not complied with. If you are not keeping the house, and you are selling your share to your former partner, you may want any settlement to say that you will not be responsible for paying back the grants in the event that your former partner does not comply.

This will help both of you move forward into the next chapter of your lives with certainty.

If you would like more information about this, please contact our office to make an appointment.

Stamp duty exemptions for couples

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Stamp duty exemptions for couples may apply when a person in a marriage or de facto relationship owns a property and wants to put their partner on the title. 

There are also exemptions that apply when separation takes place and you want to transfer the title back into the sole name of one of the parties.

Stamp duty exemptions during the relationship

When you decide to add your spouse to the Certificate of Title you may be eligible for a stamp duty exemption. This will depend on your individual circumstances.

Firstly, in order to receive stamp duty exemptions in this circumstance the property must be residential land:

  • on which your principal place of residence is located;
  • that you intend to construct your principal place of residence;
  • on which you are constructing your principal place of residence; or
  • in which you have shares that allow you the right to occupy the property as your principal place of residence.

Once you have established that the property meets the ‘principal place of residence’ requirements then the following apply:

  • if you are married, then a full exemption will be received when adding your spouse to the Certificate of Title; and
  • if you are in a de facto relationship, then: - you must have been in the relationship for two years or more to receive a full exemption; or - if you have been in the relationship for less than two years then no exemption will apply.

If you would like to know more about adding your spouse to the Certificate of Title please contact one of our Licensed Conveyancers.

Stamp duty exemptions after the relationship

In the event that separation has taken place, one party may want to keep the house and ‘buy’ the other person out. When doing this, you will need to transfer the property into the sole name of the person who is retaining it. This transfer will incur a stamp duty liability on the value of the share that is being transferred to the person who is keeping the property (which is different to the amount that they are ‘paying out’ to the other person).

There are stamp duty exemptions available in this scenario, but only if there is a formal family law property settlement in place. Once the formal settlement is done, the transfer can be effected without stamp duty liabilities occurring.

To find out more about why doing a family law property settlement is important, click here.

Selling Rural Property

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Is the property you are selling considered residential under the Conveyancing Act 1919 (NSW) or is it rural property?

You have been approached by a land owner to sell a large parcel of land which has a residential dwelling on it. So you proceed as though this is the sale of a residential property without considering the sale on its individual facts.

Residential property under section 66Q of the Conveyancing Act 1919 (NSW) is defined as anything non residential, or with a land area of less than 2.5 hectares (6.2 acres).  As such, property in excess of 2.5 hectares (whether it be solely residential or farmland) is considered rural.  Now we know this, what size if the property you have been approached to sell?  Does it exceed 2.5 hectares?

If it does exceed this land area or is non-residential (used solely for farming purposes or otherwise), the details below will apply.

Marketing rural property

Under section 63 of the Property, Stock and Business Agents Act 2002 (NSW) the requirement for an agent to hold a copy of the proposed Contract for Sale states this only necessary in relation to residential property.  As such, marketing of a property deemed rural under the above definition can be marketed prior to the agent holding a copy of the proposed Contract for Sale.

Cooling off periods and Rural Property

Section 66X of the Conveyancing Act 1919 (NSW) requires every contract for the sale of residential property to contain a clause which provides for a 5 business day cooling off period.  This, as you can appreciate, causes confusion because the standard clauses in a Contract for Sale contain this cooling off provision.  However, if you look closely once again it only applies to residential property.

Therefore, if you have established the property is not a residential property under s66Q of the Conveyancing Act 1919 (NSW), then there is no legal obligation for the Contract for Sale of a rural property to contain a cooling off period.

If you have any questions about this topic or other conveyancing related enquiries, please contact Kylie Fuentes.

What is in a name? - Contract for Sale of Land

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What is in a name? 

Getting your name right on a Contract for Sale of Land is important.

When buying property it is important to know who the buyers will be.  Sounds obvious right?  What buyers do not often realise is that exchanging contracts under their personal names and then changing that later to a company name will incur double the stamp duty.  Now that is a large sum of money!

Sale of Land

For personal names, check that the correct name, including any middle name, is on the contract. If you are purchasing in a company name, make sure that the company exists and is incorporated at the time of purchase.  This will prevent you from having to pay extra stamp duty later.

In addition, if you are thinking of purchasing a property in your Self Managed Super Fund, you would generally have a Trustee for the Super Fund. If the Trustee is a Company, it is very important that it has been created and incorporated as a Company prior to the purchase of the property.

Before signing a contract, always make sure the entity exists.

Investors guide to Capital Gains and Land Tax

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If you have an investment property or are looking to buy an investment property you may have heard about Capital Gains Tax and Land Tax. As an investor it is important to know the difference between Capital Gains Tax and Land Tax and account for all costs associated with both taxes.

To help you assess your costs for these taxes please read the following Q & A guide:

Investors Q&A

Explaining a Settlement Adjustment Sheet - Purchasers

A Settlement Adjustment Sheet is used by your Conveyancer or Lawyer when working out council and water rate proportions.

When settlement fall due your conveyancer or Lawyer will have to adjust on current Council and Water Rates as well as any allowances which will need to be made by the vendor to you.

Below is an explanation of how each adjustment is made to ensure that you pay your share and the vendor pays his share.

As you can see from the below example, there are two columns. One “Payable by Purchaser” and one “Payable by Vendor”. For the purpose of this example the settlement date is 22 June 2016.

Payable by Purchaser Column

Up first is your purchase price, less your deposit (normally 10%) which you paid to the agent which gives you a balance. In this example the price is $690,000.00 less $69,000.00 which was paid to the agent, leaving a balance of $621,000.00 due on settlement.

Council Rates – Council Rates are for the period 1 July to 30 June each year. From this example you can see that the council rate for the year are $1,407.08. In the current council year, i.e. from 1.7.2016 to 30.06.2016 there are 366 days in the year. As settlement is on 22 June 2016, that only leave us 8 days in the current council year, therefore we take the yearly amount of the rates $1,407.08 divide it by 366 days in a year and multiply it by 8 days left – which equals $30.76. This amount is the amount you allow to the vendor as the new owner.

Water Rates - Water Rates are for the current quarter. The quarters are as follows:

  • 1 July - 30 September
  • 30 October - 31 December
  • 1 January - 31 March
  • 1 April - 30 June

In this example the current quarter is 1/4/2016 to 30/06/2016 where there is 91 days in the quarter. As settlement is on 22 June 2016 that only leaves 8 days in the current water rate quarter, these 8 days are the 8 days in which you will own the property until the next water rate for the next quarter is struck. Therefore, we take the quarterly rate of $177.91, then divide it by 91 days and then multiply it by 8 – which will equal $15.64. This amount is the amount you allow to the vendor for water rates as the new owner.

Water Usage – As the vendor will no longer own the property from 22 June 2016 and water reads are only done every quarter (3 months) the vendor has used water in his time that he has owned the property, therefore, the vendor must give you, the purchaser, an allowance towards water so that when the final quartlery bill is issued to you, you are able to pay the previous water usage. Your Conveyancer or Lawyer will order a special certificate which provides us with details on:

  1. When the meter was last read;
  2. The vendors daily average in kilolitres; and
  3. The dollar amount per kilolitre – which Sydney Water charge $2.276 per kL

Therefore, to work out the water usage if the last reading was done on 02/06/2016 we calculate the usage to the settlement date of 22 June 2016, there is 20 days. We take the 20 days, multiply is by 0.068 kL (daily average) then multiply it by the daily amount that Sydney Water charge which is $2.276 which will equal $3.10 – this amount is payable by the vendor to you.

Vendor allowance for Discharge of Mortgage

If the vendor has a mortgage it will need to be discharged (taken off) on settlement. Normally, your bank that is lending you the money will charge you this fee as they have to pay this fee to the titles office. Therefore, the vendor is allowing you the amount of $136.30 so when your bank lodges your loan documents at the titles office they will have the vendors mortgage taken off at the same time.

Finalisation of funds due to be paid

To finalise the funds we have to add both columns up.

Payable by the purchaser – balance of funds due $621,000, plus council rates $30.76, plus water rates $15.64 = $621,046.40

Payable by vendor -  Water usage $3.10 plus discharge of mortgage fee $136.30 = $139.40

Then to finalise we take the amount payable by purchase which is $621,046.40 take away amount payable by vendor $139.40 = $620,907.00 – which then becomes the amount due on settlement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

5 tips to having funds ready on your settlement date

As a licensed Conveyancer I work with hundreds of properties (and people) with the exchange of ownership and transferring of funds. I have seen the pitfalls that can occur when purchasers are not diligent with their funds and do not ensure they have the correct amount in their account upon settlement. Your conveyancer can guide you, but in the end it is up to you to make sure you plan your finances correctly and have the correct funds in your account. To help you plan for that day here are my 5 tips to having funds ready on your settlement date, ensuring that you are not short of funds.

  1. Make sure that when you are borrowing money that your broker/banker includes the following in your loan amount or ensure that you have these funds available in your savings account on top of the purchase price:
    1. Stamp duty;
    2. Legal fees:
    3. Pest & Building fees;
    4. Strata Report fees;
    5. Title Insurance;
    6. Council/Water (approximately $2,000.00 + ); and
    7. Bank registration fees (approximately $500.00 +)
  2. Ask your broker/banker to sign an authority to debit shortfall account. This means that the bank will be able to debit from your nominated bank account (provided that it is with the same bank). This will save you from running around the day before settlement to try and get cheques for settlement.
  3. If you are a cash purchaser you can transfer approximate funds into your solicitors/conveyancers trust account well ahead of time and in stages. This will also save you time and money in running around the day before settlement to obtain cheques.
  4. Ensure that you do not overspend – set yourself a budget. When at an auction and the bidding price keeps going up and up, don’t make emotional decisions. Make sure you have a budget. Over spending could mean that you will have to contribute more of your own savings into the property or if you have lack of savings then borrowing off family or friends.
  5. If you are buying and selling and you are doing your budget, ensure that you add break costs for your discharging bank. If you have recently fixed your interest rate break costs can be quiet expensive and people forget about break costs. Calling your existing bank ahead of time and questioning the break costs could be very beneficial for you. They may even have a deal if you buy and sell and use them as the incoming bank.

If you would like advice on your property matter be sure to contact Coutts today.