FAQs

FAQs

1What is Conveyancing?
Conveyancing is the term given to the act of transferring the legal title in a property from one person to another, i.e. the title is conveyed from one party (the Vendor) to another (the Purchaser).
2How does the 3 day cooling off period work?
The Sale of Land Act 1962 (Vic) provides that the purchaser may terminate a contract for the sale of real estate which is located in Victoria within 3 days of the date that the purchaser signed the contract, unless:
  • the purchaser bought the property at or within 3 clear business days before or after a publicly advertised auction (this includes where a bidder negotiates a sale after the conclusion of the auction); or
  • the property is used primarily for industrial or commercial purposes; or
  • the property is more than 20 hectares in size and is used primarily for farming; or
  • the purchaser and the vendor have previously signed a contract for the sale of the same land in substantially the same terms; or
  • the purchaser is an estate agent or a corporate body.
If the cooling off period applies, and the purchaser wishes to terminate the contract, then the purchaser must give notice to the vendor or their agent or leave such notice at the address of the vendor or their agent as specified in the contract within three clear business days after the purchaser signed the contract.  Within the cooling off period, the purchaser may terminate the contract for any reason, and does not need to give a reason for doing so.  Where a contract is validly terminated within the cooling off period the purchaser is entitled to the return of all moneys paid under that contract except for the sum of $100 or 0·2 % of the purchase price (whichever is the greater), which may be retained by the vendor.
3I bought my property at auction. Does the cooling off period apply to my contract?
No. If you sign a contract within the 3 business days before a publicly advertised auction, on the day that the auction is held (either as the successful bidder or by negotiation after the property is passed in) or within 3 days after a public auction, the cooling off period does not apply to your contract. You should therefore obtain advice on the contract and the vendor’s statement prior to signing any contract in these circumstances.
4I just signed a contract to buy a property. When should I contact my conveyancer or lawyer?
Immediately. If you have the benefit of a cooling off period, you need to give your advisor as much time as possible to review your documentation in case they find something which may make you want to terminate the contract. You should not rely on the real estate agent to send the contract to your advisor – send it yourself, by email if possible.
5Does the purchaser have to release the deposit to the Vendor?
Section 27 of the Sale of Land Act 1962 (Vic) allows the purchaser to authorise the release of the deposit monies to the vendor prior to settlement.  If the deposit monies are released, the vendor may use the funds for whatever purpose they wish, but often the funds are used to provide a deposit on a purchase of another property by the vendor. Early release of the deposit may be made where the contract is not subject to any condition enuring for the benefit of the purchaser (for example, the contract is not subject to finance, or the registration of a plan of subdivision), and the purchaser has accepted title or is deemed to have accepted title.  The vendor is required to provide a signed notice containing specified information about the title, whether there are any mortgages or caveats on the title, and details of the mortgages such as the required repayments and amount owing under any mortgages.   If the purchaser is satisfied that the particulars provided in the notice from the vendor are accurate and that the balance of the price will be sufficient to pay out all mortgages (or is deemed to be satisfied under the Act by the passage of time without objection), then the monies may be released.  As this requires the purchaser to be satisfied, it is possible that a purchaser will object despite the amount owing under any mortgages being less than the balance of the price. Therefore, the vendor should not rely on the deposit monies being released, despite the wording of the contract implying that they will do so. In addition, most conveyancers and lawyers will request that the information contained in the statement signed by the vendor be confirmed in writing by their bank.  It can take a number of weeks to obtain this information from some banks.
6I just bought a property. Should I lodge a Caveat?
A caveat is a document that is recorded on a title and gives notice to others that the caveator has an interest in the land. Generally, a purchaser can lodge a caveat on the title of land once a contract has been exchanged, unless that contract prohibits them from doing so. The caveat will prevent the registration of some dealings (such as a transfer to another party) without the caveator’s consent and therefore provides some protection to the purchaser. We recommend that a caveat be lodged by every purchaser as soon as the contract is exchanged, unless the contract prohibits this. It should be noted that if a caveat is lodged by a party who does not have a caveatable interest, penalties may apply to that party. Therefore, legal advice should be sought prior to lodging a caveat.
7Does a deposit have to be 10% of the price?
No. A deposit should be an amount that is high enough to motivate the purchaser to complete the transaction (since it may be retained by the vendor if the purchaser fails to settle in breach of the contract), but does not need to be 10%. The purchaser’s bank may require them to have 10% of the price available to them because they will only lend them enough to cover 90% of the price, however, the bank will generally not be concerned as to whether this whole amount is paid to the vendor or their agent as a deposit, or some paid as deposit and the rest left in the purchaser’s bank account to be paid at settlement.
8What is a Vendor’s Statement?
Section 32 of the Sale of Land Act 1962 (Vic) requires a vendor to provide certain information regarding a property to a purchaser prior to the purchaser signing a contract to buy that property.  If a vendor’s statement (also referred to as a “Section 32 Statement”) is not provided prior to the purchaser signing the contract, or does not contain all of the information required, or contains incorrect information, the purchaser may be able to terminate the contract at any time before they are entitled to possession and title (usually settlement).
9Will GST apply to my sale or purchase?
The sale of established residential property is not usually subject to GST. However, if the vendor is registered for GST or required to be registered for GST, is carrying on an enterprise, and the sale is made in the course of that enterprise, then the sale of any property, including homes, vacant land and commercial and industrial property, may attract GST.  New residential property and residential property that has been substantially renovated may also attract GST if the vendor is registered for GST or required to be registered for GST.

If a sale does attract GST, it is the vendor’s responsibility to pay it to the ATO.  However, the contract may require the purchaser to reimburse this amount to the vendor in addition to the purchase price.  Therefore, both vendors and purchasers need to be careful when signing contracts to ensure that they understand their obligations.

If the sale does attract GST, the Vendor may wish to apply the margin scheme to the sale.  This is a different method of calculation of the amount of GST payable which will usually result in a lower amount of tax being payable on the sale of the land.  Rather than the GST being calculated as one-eleventh of the GST inclusive sale price, the amount of GST payable under the margin scheme is one-eleventh of the amount equal to the sale price less the purchase price paid by the Vendor, or the value of the land as at 30 June 2000, if the vendor held the land at that time.  So if the Vendor paid $500,000 for a property before June 30, 2000 and sold it later for $800,000, the amount of GST under the Margin scheme would be one-eleventh of $300,000 ($27,272.72), rather than one-eleventh of $800,000 ($72,727.27). This is obviously a significant advantage to the vendor if they are selling on a GST inclusive price, however it can be a significant disadvantage to the purchaser if they are registered for GST, as they are not entitled to claim an input tax credit for the GST which they pay if it is calculated on the margin scheme.

The parties must agree in writing if the margin scheme is to apply.  Such agreement must be made prior to the supply (usually settlement). Other conditions must also be met prior to a property being able to be sold on the margin scheme, and not all properties are able to be sold on the margin scheme.

GST is a complicated issue and can have significant impact on either party to a sale of property. Legal advice should be sought on this issue prior to signing any contracts.
10What is a restrictive covenant?
A restrictive covenant is an agreement between two or more land owners which restricts the use of land (“the burdened land”).  For example, Mary agrees with her neighbours that she will not build a house of more than two storeys.  The agreement is registered on the title of Mary’s land, which is the burdened land.  The covenant is made in favour of the land owned by Mary’s neighbours, and therefore when they sell their land, the new owners will take the benefit of Mary’s promise not to build higher than two storeys.  This restriction will also bind anyone who owns Mary’s land in the future, unless it is removed.

To be enforceable a covenant must be negative (i.e. it must restrict the owner from doing something, rather than requiring the owner to do something), it must be given for the benefit of another’s land (e.g. neighbouring land or land within close proximity), and touch and concern that land, and must be intended to run with the land.

If the property you wish to purchase has a restrictive covenant registered on its title, legal advice should be sought as to whether you will be able to put the land to the use you wish.  It may be possible to remove or vary the covenant, however this can be costly and time consuming.
11What is a restriction on a plan of subdivision?
A restriction on a plan is essentially a restrictive covenant (see above) which is created on a plan of subdivision, rather than in a transfer of land or other document. Modern plans of subdivision often contain quite complex restrictions that restrict things such as the type and position of fencing that may be constructed, where a residence may be constructed on the land, the number, size and construction materials of dwellings and the use of the land for things such as mechanical repairs of vehicles. Generally, restrictions will need to comply with the same requirements as restrictive covenants in order to be enforceable.
12What happens if I can’t settle on the due date?
If a party is unable to settle on time, the other party is entitled to claim from them the costs incurred as a result of that failure, and compensation for any loss or damage suffered. If a purchaser defaults on the settlement date, that may mean that the vendor is unable to settle on their new purchase, and therefore unable to move into their new home.  This may mean that they incur additional moving costs, for example.

In addition, under most contracts in Victoria if a purchaser is unable to settle on the due date the vendor may charge penalty interest until settlement does occur.  The rate payable is often the rate set under the Penalty Interest Rates Act 1983 (Vic), plus 2%.

If either party fails to settle on time, the other party is usually entitled to issue a notice requiring that party to complete the contract within 14 days (together with paying any penalty interest and costs), and if the defaulting party fails to do so, then the innocent party may terminate the contract.  If the innocent party is the vendor, the will be entitled to retain the deposit in these circumstances.  The Purchaser may also be liable for other damage suffered by the Vendor as a result of the breach of contract.
13Owner Builders and renovations
If an owner of a property wishes to carry out domestic building work on a building on the land, and the work is estimated to cost more than $12,000, the owner must have a certificate of consent, or be a registered builder or architect, the Director of Housing or be carrying out work required by an emergency order, or a building order or notice, prior to commencement of the work.

In addition, if an owner-builder wishes to sell a residence within 6 years and 6 months after the completion date of those building works, he/she must obtain insurance.  If an owner builder sells the residence within this period without having obtained the insurance, the purchaser may be able to avoid the contract before settlement. In addition, the owner builder may be guilty of a criminal offence and liable for fines.

An owner-builder must provide certain warranties regarding the quality of the work and the materials used in the contract of sale. Unless the owner-builder is a registered builder, he/she must also include a copy of a report listing any building defects in the contract or vendor’s statement. The insurance does not usually cover the specified defects. If the owner builder does not meet these requirements, the purchaser may be able to avoid the contract before settlement.

If an owner-builder has performed building works on a commercial building and wishes to sell it within 6 years and 6 months after the completion of the works, he/she must also obtain a defects report, unless he/she is a registered builder. Where domestic building works valued at more than $12,000.00 are carried out on a commercial building, insurance will also be required.
14What are “Adjustments”?
The purchaser under a standard contract of sale takes responsibility for all the usual council rates, water charges and land tax from the date of settlement. Because these assessments will relate to a period that spans the settlement date, it is necessary to calculate the proportion of the current bill for each of those outgoings for which the vendor and the purchaser are each responsible. For example, if settlement is due to occur on the 1st of August, then the vendor will be responsible for 1 month of rates (July) and the purchaser will be responsible for the other 11 months (August to June). We call this process an “adjustment” because the amount of money which the purchaser pays to the vendor at settlement is adjusted to take his/her liability into account.
15What is an Owners Corporation and what does it mean for my settlement?
Owners Corporations are often set up where there is common property (such as pools, gyms and stairways) however common property is not required.  Owners Corporations manage the common property, and were referred to as Bodies Corporate in the past.

If you are buying or selling a property that is affected by one or more Owners Corporations, it is important to ensure that you are aware of all current charges and levies,  and who is responsible to pay them under the contract.  Annual Owners Corporation fees and insurance costs are normally adjustable at settlement.  In addition, significant one-off levies may be struck for maintenance and/or repairs, and it will be essential for both the vendor and the purchaser to know whether they are responsible for these costs prior to signing the contract.  An Owners Corporation certificate is required to be attached to the Vendor’s Statement, and this should identify any levy which has been struck prior to the issue of the certificate.  Special care needs to be taken in respect of levies which are being considered but have not yet been struck prior to the day of sale.  We therefore recommend that you seek advice in this regard prior to signing the contract.