Insurance

The A to Z of Property Law

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Selling or purchasing a property can be an extremely stressful process for both the vendor and purchaser. On top of that, the language used by industry professionals without any further explanation can at times make the process more convoluted and confusing.

Coutts understands this, and also understands that at times you may not want, or have the time to, request further clarification of the words being thrown around by industry professionals. To assist in these situations, we have prepared ‘the A to Z of Property Law’ which provides a short description of words most commonly used in the conveyancing transaction.

A is for…

 

Adverse possession - the exclusive, continual use of someone else’s property without their permission which after a period set down by law, will legally become yours.

 

Agent – conveyancers and property lawyers will commonly use the word ‘agent’ to describe the real estate agent involved in the conveyancing process. This is the real estate agent appointed by property owners to market and negotiate a sale on the vendor’s behalf.

 

B is for…

 

Building Restrictions – these are limits imposed by developers in off-the-plan contracts or vacant land contracts, which enforce certain aesthetic and functional restrictions on the construction of residences. These restrictions can range from the colour of the building, the type of fencing permitted, the materials permitted and the size of the driveway.

 

Broker – an organisation, or individual, who is hired by others to arrange mortgage contracts between lenders and borrowers. Brokers can financially advise purchasers on potential incoming mortgagees and the loan agreements. Their role is separate to the role of a conveyancer, with a broker being the individual responsible for assisting in obtaining final loan approval.

 

C is for…

 

Caveat - A document which can be lodged on the title of a property, with the person who lodged the caveat claiming an interest in the land. Caveats commonly prevent the selling of a property, unless the person who lodged the caveat (the “caveator”) agrees to remove the caveat – this usually occurs when the caveator is paid the sum of money being claimed in the caveat.

 

Chattels - tangible goods in a property which are capable of being removed. Chattels are not automatically included with properties when they are sold, and as such, vendors or purchasers are required to specifically list them as an “inclusion” (for example, pot plants or furniture).

 

Cooling off period – when buying residential property in NSW, there is a five business-day cooling off period after the exchange of contracts. The cooling off period starts as soon as contracts are exchanged and finishes at 5:00pm on the fifth business day after exchange. The cooling off period allows purchasers to withdraw from a contract if they do not receive finance or are not happy with the results of pest and building reports. Only purchasers are entitled to withdraw from the contract in the cooling off period and if they do so, they forfeit 0.25% of the purchase price to the vendor.

 

D is for…

 

Deed - a legal document which formalises an agreement between two or more parties and can at times relate to a property. A deed can be entered into at the same time as a Contract of Sale. For properties in new developments (such as Bingara George or Harrington Grove), a Deed of Covenant is usually entered into between the purchaser’s and the developer, which creates a legal promise to the developer (by the purchaser) that they will meet the building restrictions that apply to the land.

 

Development approval – written approval from the relevant council that grants council consent to commence the development of the property. Development approval is required for certain sized decks, renovations, construction of residences and knock-down and rebuilds.

 

Discharge of mortgage – this is the document provided by the bank once the mortgage listed on the title is completely paid back. Once the discharge of mortgage is registered on title, the mortgage is removed from the title and the property will be owned “unencumbered”. 

 

E is for…

 

Easement – these are legal rights that can be listed on the title and plans of properties, which give one person the legal right to the easement (the “benefit” of the easement), with the other having to abide by the easement (the “burden” of the easement). Easements are lodged on title and are commonly lodged on properties where the legal ownership of land would affect the access to another’s e.g. if you owned an alleyway attached to your house and your neighbour could only access their property through the alleyway, an easement may be lodged on the property for “access”. Other common easements are easements for drainage or easement for sewer.

 

Exchange – this is the date that the contract is dated and is when a legally binding relationship is formed. In order for exchange to occur, both parties have to agree on the contract terms and sign a copy of the contract. 

 

F is for…

 

Fixtures - tangible goods in a property which are permanently attached to the property and cannot be removed. These will automatically be included in a sale, for example an oven, rangehood, or air conditioner.

 

G is for…

 

Guarantor – a nominated person who is legally responsible for paying back the entire loan if the borrower cannot (or will not) make the repayments. The guarantor guarantees the payment of the loan and is often required when lenders are not willing to give a loan to a person on their own. This is most commonly used for first home buyers and for company borrowers.  

 

H is for…

 

Home Owners Warranty – home owners warranty insurance (now known as home building compensation cover) is compulsory insurance that has been regulated in order to protect homeowners from incompetent builders. Home building compensation is required for any building contract that is $20,000.00 or more. Future owners of property are covered for six years in the case of major defects, and two years in the case of other losses. This insurance can only be claimed if the building is unable to complete the works because they are insolvent, have died or disappeared, or had their licence suspended.

 

I is for…

 

Indemnity – contracts for sale or loan documents may contain ‘indemnities’ from the purchaser or the borrower to the other party to the contract. An indemnity is a legal word that creates a contractual promise to compensate the other for any loss suffered or damage incurred.

 

Insurance – lenders will often require evidence of insurance taken out over a property before they will allow the settlement to occur. In NSW, insurance is required to be effective from the settlement date.

 

J is for…

 

Joint tenants - when buying property with two or more people, you can nominate whether you would like to purchase the property as joint tenants, or, as tenants in common. Joint tenant ownership means that the property is owned jointly with the other purchaser, with both owning 100% of the property together (and not 50% each). In the event that one owner passes away, the other owners will automatically obtain the deceased share of the property, regardless of what is in the deceased will.

 

K is for…

 

Keys – keys to the property will be available to the purchaser’s once settlement has occurred. As a vendor, you should ensure that the keys are delivered to the marketing agent’s office prior to settlement. As a purchaser, keys can be collected from the agent’s office once settlement has occurred.

 

L is for…

 

Land tax – this is an extra tax that is levied by the government and applies to properties owned that are not a primary place of residence. Land tax is charged if the combined value of land owned (not including any buildings on the land) is over the threshold of $629,000.00 (this is the NSW threshold for 2018). You do not have to pay land tax on your principle place of residence (see P).

 

Lessee – this is the tenant of a property, who is leasing it from a lessor.

 

Lessor – this is the owner of a property who leases it to a tenant. This is also known as a landlord.

 

Licence agreement – this is a legal agreement that can be arranged between a purchaser and a vendor which allows the purchaser to move into the property before settlement. Under a licence agreement, the purchaser may be required to pay a weekly fee to the seller, similar to rent, and is usually responsible for the legal fees in preparing the document of the seller.

 

M is for…

 

Mortgagee – this is the financial lender who has agreed to provide you funds to purchase property.

 

Mortgagor – this is the property owner who has agreed to mortgage the property as security for a loan.  

 

N is for…

 

Notice to complete - In NSW, many contracts for sale include a provision that allows for a “notice to complete” to be issued if a party to the contract is in default (e.g. they are late in settling). Notice to completes’ are issued by the non-defaulting party’s representative and gives the defaulting party 14 days to rectify the default. If the default has not been rectified by the due date, the non-defaulting party then has the option to terminate the contract and keep the deposit paid.

 

O is for…

 

Occupation certificate - A certificate arranged by the builders of a property, which allows a person to occupy the building. This certificate verifies that the certifying authority (whether it is the relevant council or a private certifier) is satisfied that the building is suitable for occupation as it meets the requirements of the Building Code of Australia and relevant development consent. For off the plan purchases, settlement usually occurs 14 days from the date the purchaser received the occupation certificate.

 

Off-the-plan purchase – this is when a purchaser enters into a contract to purchase a property that has not yet been built. Off-the-plan purchases encompass the land and the building in one contract, and as a result of this, the contract length can be several years.

 

This differs greatly from house and land packages, where there are two separate contracts for the land purchase and the build. In these situations, the land purchase is required to be settled before the build commences.

 

P is for…

 

Proprietor – the legal owner of a property e.g. if you are the proprietor of the land, you are the owner on title.

 

Principal place of residence – this is your main residence. Your principal place of residence is exempt from capital gains tax and from land tax.

 

Plans – these are the plans of subdivision that demonstrate the size of the land, whether the land is benefited or burdened by easements or the like, and displays the other lots included in that plan of subdivision. In NSW, plans can be a deposited plan, strata plan, or community title plan.

 

Q is for…

 

Quid Pro Quo – in order for a contract to be valid, there must be quid pro quo or consideration exchanging hands. This means that you do something in order to receive something. In terms of property law, the paying of money to receive the property satisfies the Latin principle of quid pro quo.

 

Quite enjoyment – when you own or lease a property, you have a right to the quite enjoyment of the property, to the exclusion of all others.

 

 

R is for…

 

Rescission – this occurs when purchasers wish to withdraw from the contract during the cooling off period. The effect of a rescission is that the contract is revoked and is no longer enforceable.  A purchaser must rescind a contract prior to the expiration of the cooling off period for the rescission to be valid.

 

S is for…

 

Settlement – this is the word that is used by industry professionals to describe the date and time that ownership passes from the vendor to the purchaser. In order for this to occur, the purchase monies, ownership documentation and transfer of ownership documentation are all required to be at the same place, at the same time. This signifies the end of the contract and is where the property is officially sold/purchased.

 

Section 66W certificate – a section 66W certificate is a certificate prepared and signed by the purchaser’s conveyancer or lawyer and waives the benefit of a cooling off period. This means that, once the contracts are exchanged, both the purchaser and vendor are locked into the contract. If contracts are being exchanged this way, it is important that purchasers have obtained their formal loan approval and satisfactory pest and building reports prior to the exchange.

 

Stamp Duty – stamp duty (which is now known as transfer duty in NSW) is a tax levied by all states on the purchase of properties (or the transfer of land). This tax is regulated by state government and some concessions and exemptions apply to particular circumstances (e.g. first home buyers). Stamp duty must be paid on or prior to settlement in NSW.

 

T is for…

 

Tenants in common - when buying property with two or more people, you can nominate whether you would like to purchase the property as joint tenants, or, as tenants in common. Tenants in common means that each purchaser would own a portion of the property that is specified in the transfer of land e.g. 50/50 split, 99/1 split etc. In the event that one owner passes away, the deceased share of the property will form part of their estate, which is then passed down in accordance with their will.

 

Transfer of land – this is the legal document that is lodged at the land titles office to formally transfer the ownership of the land from the vendor to the purchase. This document is required to be signed by the vendors prior to settlement.

 

U is for…

 

Unconditional – this is a word that is often used by industry professionals to describe a contract that is no longer subject to any conditions. An example of this is once the cooling off period has expired, or, an exchange occurred on a section 66W certificate. This means that both parties are locked into the contract and will be proceeding with the purchase/sale.

 

V is for…

 

Vacant Possession – if this is marked on the contract for sale, the vendor is promising to sell the property with no one living in it at the time of settlement. This means that the vendor is required to vacate the premises by the settlement date, enabling the purchasers to move in once settlement has occurred. The alternative to this is selling with an existing tenant, meaning, the property is being sold with a lease agreement attached to the contract for sale.

 

Vendor – this is the seller of a property. This is the person who is legally entitled to the sell the property and is usually listed on the title as the owner.

 

W is for…

 

Waive - If there is a condition in the contract that has been included for your advantage, you may wish to waive the benefit of that condition. In this instance the condition will no longer stand, and the contract may become unconditional. This is common in contracts that are subject to finance approval, or due diligence deadlines.

 

X is for…

 

eXtra careful – if you have any doubts or concerns about your property sale or purchase, it is vital that you consult the relevant industry profession to obtain expert advice. 

 

Y is for…

 

Yard – as a vendor, if you have specified that you will be selling the property with vacant possession, it is important that all rubbish and items are removed from the yard prior to settlement. If this does not occur, the purchaser may argue that vacant possession has not been provided and as a result may also attempt to delay settlement until it is provided. 

 

Z is for…

 

Zoning – this refers to the rules and regulations that are dictated by local or municipal levels of government. The zoning of a property specifies what type of development can and can’t be done on that property, and, what type of development requires developmental consent.

If you have any questions or for further information contact:

Allyce Silm
Lawyer
allyce@couttslegal.com.au
02 4607 2119

 

 

 

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.