Buying a property involves many overwhelming considerations, such as where you want to live, how much finance you can get, the type of property you want, not to mention complex conveyancing laws!
Appointing an experienced lawyer at an early stage is important in ensuring you understand all contracts and agreements required for the purchase of your new property.
Know your rights
Before you place a holding deposit (usually 10%) on a property, you should ensure you understand your legal rights and obligations. The first being your right to a cooling off period.
Cooling off period
Generally, a cooling-off period of three business days applies to private sales of residential and small rural property sales in Victoria. The purpose of the cooling off period is to give you time to consider the purchase and change your mind if you no longer believe the property is suitable. It begins from the date you sign the contract of sale.
The only usual consequence for cancelling the purchase during the cooling off period is that $100 or 0.2% of the purchase price (whichever is greater) will be deducted from your deposit.
There are a few situations in which the cooling off period does not apply, for example, if the property is sold at or within three business days of a public auction.
Understand the contract of sale
Do not rush into purchasing a property, take the time to ensure you have made an informed decision before signing on the dotted line!
While reading the contract of sale, you should look for things such as;
- details of the property,
- vendor’s name,
- details of the vendors lawyer/conveyancer;
- agreed purchase price;
- special conditions.
To ensure you understand the terms and conditions in the contract of sale and that it complies with all legal requirements, we recommend you speak to one of our experienced property lawyers.
A contract of sale becomes legally binding once the vendor and purchaser have both signed it. The purchaser will need to pay a deposit of 10% of the purchase price to the vendor on signing the contract of sale. You should be aware that the amount of deposit (amongst other terms and conditions in a contract) is negotiable. Any terms or conditions verbally agreed to should be written into the contract, so both parties know exactly what they are committing to.
Make sure you read and understand the Section 32 (vendor statement)
The vendor statement is an essential part of the conveyancing process and discloses all information that isn’t on hand during an inspection. It must include all relevant details which may affect the state of the property, such as, Certificate of title search, council planning and information certificates, contaminated land, amongst other things.
This information helps a purchaser make an informed decision as to whether they want to proceed with the purchase of the property.
What happens if I incorrectly terminate the contract of sale?
If you decide to not go ahead with purchasing the property outside of the cooling off period, you may forfeit your deposit and be liable to pay:
- Compensation to the vendor for any reasonably foreseeable loss from termination of the contract of sale
- Interest
There are other remedies available to the vendor through courts, such as an award of damages where the property is re-sold for a lower purchase price.
Terminating a contract of sale can place a vendor in a financially unfavourable situation. If you have decided that you will not or cannot proceed with the contract of sale for whatever reason, we strongly recommend you speak with one of our experienced property lawyers before notifying the vendor. Our lawyers can ensure you minimise any damages payable as a purchaser.
What happens after I have officially purchased a property?
The period between exchange and settlement of a property is usually between thirty to ninety days, however, you can try to negotiate a longer or shorter period if required.
During settlement of the property, all rates and other recurrent outgoings will be adjusted between the vendor and yourself. You will need to pay the balance of the purchase price in exchange for the transfer documents and the certificate of title.
When the change of ownership occurs, your lawyer or conveyancer will notify all relevant authorities on your behalf.
Conclusion
It is clear from the above that buying a residential property in Victoria can be a complicated task!
If you fail to meet all your obligations as a purchaser, you are possibly exposing yourself to legal action. You should also ensure you understand all legal documentation and contracts involved in purchasing a property before committing to such a significant purchase. For these reasons, we strongly recommend you speak to one of our experienced property lawyers.
If you or someone you know wants more information or needs help or advice, please contact us on 03 9823 1412 or email [email protected].