FAQ

Every contract for the sale of residential property (2.5 hectares or less and used for residential purposes) has a cooling off period of five working days (the cooling off period ends at 5.00pm on the fifth working day). This means that after entering into the contract, the purchaser has five working days in which to “cool off”. The seller is locked into the contract and cannot withdraw from the sale. If the purchaser finds that for any reason he or she does not want to proceed with the purchase, they can rescind the contract within the five-day period. If they do rescind the contract, they forfeit to the vendor 0.25% of the sale price. The contract is then at an end, and neither party has any further claim against the other.

The purchaser can waive the cooling off period by having the contract explained by a conveyancer and a certificate signed by that conveyancer and the certificate handed to the seller’s conveyancer. The certificate is drawn under Section 66W of the Conveyancing Act and is commonly called a “Section 66W Certificate”

The cooling off period may be extended by agreement with the vendor if the purchaser finds that they need more time, but this can only be done with the vendor’s consent. It is quite common to request for an extension of time, because the five-day period is very often not long enough to organise an unconditional loan approval.

The cooling off period can be shortened by the use of the S66W Certificate whereby it will be stated that the purchaser has agreed to shorten the period to whatever number of days has been agreed.

There is no cooling off period if the property is sold at public auction OR on the same day as the property was listed for auction sale.

Contracts are exchanged when the seller and purchaser have both agreed on a price and have signed a copy of the contract (each party to the transaction signs a separate but identical copy of the contract) the contracts are dated and the deposit has been paid by the purchaser. The signed contracts are handed to the other party or their conveyancer, so that the sellers signed contract is held by the purchaser’s conveyancer and vice versa. The contract can be exchanged in one of two ways;

1. By the estate agent. In this case the contracts would be signed and exchanged shortly after the sale price has been agreed. The agent would send the appropriate contract to the party’s conveyancers and the purchaser would have a 5-day cooling off period in which to obtain any reports, the contract legally explained and have finance approved.
2. By the conveyancers. In this case it would be normal for the purchaser to have all reports completed, contract explained and finance approved before the exchange of contracts. It is normal practice in these instances to have the purchaser waive their cooling off rights so that the contract is binding on both parties as and from the date of exchange of contracts. Many conveyancers, when acting for the purchaser, prefer this method of exchanging contracts which provides for an opportunity of obtaining legal advice, making enquiries and inspections/reports and obtaining finance approval, before entering into the contract

It is an essential term of a contract that the deposit is paid on or before the date of the contract (exchange of contracts). The deposit paid is usually 10% of the sale price. It is normally paid to the estate agent who holds it in trust pending completion as stakeholder.

If a holding deposit has been paid before the contracts are exchanged, then it becomes part of the 10% deposit and it is the 10% less the holding deposit that is paid at exchange of contracts.

The agent holds the deposit in trust for both the seller and purchaser and cannot release it without consent from both parties. It is normal practice for that consent to be handed over at completion so that the agent can account to the seller. The agent will deduct his commission from the deposit.

The risk of damage to the property is the seller’s up until completion or until the purchaser takes possession of the property, if that happens prior to completion.

The seller is liable to take care of the property up until completion and the property should be handed over at completion in the same condition, subject to fair wear and tear, as it was at the date of exchange.

However, if the purchaser takes early possession of the property, then the risk passes to the purchaser and the purchaser needs to ensure they have an insurance policy in place before taking possession.

It is advisable for a purchaser to obtain a pest and building report. These should be completed before the contracts are exchanged or before the cooling off period expires.

It is a good idea to organise the finance in principal before you find a house or land to purchase. This will shorten the time between making the offer to purchase, obtaining unconditional loan approval and exchanging Contracts. If the contract has been exchanged by the agent, you only have the five-day cooling off period in which to organise the finance. If the five days is not sufficient you will need to ask for an extension of the cooling off period. If the vendor does not agree, then you would probably have no option but to rescind the contract under your cooling off rights.

If the Contract has not been exchanged by the agent, you will need unconditional loan approval, in writing, before you enter Into the Contract.

Buying or Selling Residential Property in NSW 14 / 20

After exchange and loan approval mortgage documents will need to be signed and explained to you, if you are borrowing money to purchase the property. These documents will either be sent to you, your conveyancer, bank or mortgage broker, who will contact you for signing the mortgage and associated documentation.

Property can be held in one of two ways, either as joint tenants or tenants in common.

It is common practice for couples to own property as joint tenants as each person owns the whole of the property jointly and if one dies, the surviving tenant automatically becomes the owner of the property. Tenants in common is usually used by people buying investment property or if they want to own the property in equal or unequal shares. If any of the owners should die, their share goes to whoever inherits their estate. Joint tenants and tenants in common can be combined. For example, if there are two couples wanting to buy an investment property and in unequal shares, then the following could apply:

• Couple A can buy as joint tenants as to one quarter share and couple B as joint tenants as to three quarters share.

Stamp duty is payable on the contract.

The duty payable is calculated on the sale price, the higher the price the higher the duty. It is the purchaser’s responsibility to pay the stamp duty and this must be done, before completion if you are borrowing money and in any event, within three months of the date of the contract or Interest is payable for late payment.

Stamp duty is usually by far the largest cost of a conveyance and purchasers should know the cost of the duty payable as a part of the transaction. You can calculate your stamp duty on the contract by going onto Revenue NSW website; www.revenue.nsw.gov.au and clicking on the duty calculator. Your conveyancer will also advise you as to your obligations for payment of stamp duty.

Purchasers should also consider obtaining an Identification Survey when buying property. A survey would show any encroachments on or by the property being purchased, that the building next door does not encroach onto your property and vice versa. You will want to know that the fences are on or close to the boundaries and the buildings are set back the correct distance from the front boundary etc.

Information provided by BUYING OR SELLING RESIDENTIAL PROPERTY IN NSW Australian Institute of Conveyancers NSW Division.