Our Conveyancing Glossary contains numerous terminology used in the conveyancing process and understanding them will help you throughout each stage.
For most people, purchasing a property is a large commitment and at Classic Conveyancing Company we like to ensure our clients are well placed in taking control of their future.
Terms you should know:
Caveat
A Caveat (Latin for beware) indicates the rights or interests of a third party (not the owner) in a particular instance (property in this case).
When lodged with the Land Registry Office, it provides the Caveator the opportunity of protecting an existing right or establishing a claim to the property.
While a Caveat is in place, any registered dealings with the associated property is forbidden and accordingly, any Caveat will be indicated on the Certificate of Title.
Certificate of Title
A Certificate of Title is a legal document detailing a particular property and all relevant information pertaining to the ownership and any Encumbrances effecting the property.
It should be provided by the vendor prior to the sale of any property and can normally be held by the lender as security for a loan.
Cooling Off Period
By Law Purchasers have a 5 business day cooling off period after exchange of contracts. If an agent exchanged contracts today your cooling off period would commence on the next business day (Monday) and finish at 5 p.m. on the fifth business day (next Friday) that follows.
A purchaser can rescind the contract for any reason in this cooling off period, however, they would forfeit to the Vendor 0.25% of the purchase price. This is the initial minimum deposit paid at exchange. Say for a $400,000 house it would be $1,000.
It is in this cooling off period that I would obtain your Pest and Building Reports if you wanted them and make sure you had written loan approval.
In the real world, however, 5 days is not enough time for the lenders in particular and quite often the cooling off period is extended to 10 business days by mutual consent.
There is no cooling off period if the contract is explained to a purchaser by a conveyancer and the conveyancer gives what’s called a 66W Certificate to the Vendor’s conveyancer.
This being the case, contracts would not be exchanged until the purchaser had written loan approval and were happy with their pest and building reports.
There is also no cooling off period if the property is purchased at auction.
Deposit
A deposit is normally paid by the purchaser at the time of exchange of contracts; normally 10% of the sale price and includes any amount paid as a part deposit or holding deposit.
A lesser amount can be paid if agreed by the Vendor.
Deposit Bond
A Deposit Bond is used in lieu of a cash deposit when the purchaser does not have the cash to pay as a deposit (such as they are borrowing 95 or 100% of the price) or for any reason that the purchaser does not want to pay a cash deposit. This could be that the purchaser is also selling a property and all their assets are tied up in their sale.
A deposit Bond is a guarantee that the 10% deposit will be available at settlement or to the Vendor if the purchaser defaults under the contract.
Deposit Bonds are becoming more common practice these days.
Easement
An Easement is an Encumbrance that attaches a right to a property that allows the owner to utilise or restrict the property of another (usually adjoined) in a particular manner.
A common list of registered Easement types can include:
- water wells/bores
- building walls
- thoroughfares
- operation of drains and drainage works
- installation and maintenance of plumbing
- installation and maintenance of cabling and any supporting infrastructure
Easements will always create an environment of benefit for one property and a burden to the other.
Encumbrance
An Encumbrance is a burden or charge that affects the use or enjoyment of the land. It can include a Caveat, Easement or Restrictive Covenant.
It is registered on the Certificate of Title of a parcel of land.
Exchange of Contracts
This is the making of the contract between the parties.
The quickest and easiest way to see if a contract has exchanged is if it’s dated. There are two identical contracts, one signed by each party and the contracts are exchanged so that each party holds the contract signed by the other party.
The deposit is paid at this time and the contracts are dated. It is at this point that the parties are bound to the transaction and the contract contains all the conditions of the sale.
Final Inspection
This must be organized before you commit yourself to the contract to purchase. If you are unable to complete the purchase you stand to lose to the Vendor 10% of the purchase price and can also be sued for any loss or damages the Vendor may incur.
Finance or Home Loan
This must be organized before you commit yourself to the contract to purchase. If you are unable to complete the purchase you stand to lose to the Vendor 10% of the purchase price and can also be sued for any loss or damages the Vendor may incur.
First Home Owners Stamp Duty Concessions
If you are buying your first home and the sale price is $500,000 or less you can have the stamp duty payment waived altogether. If the price is between $500,000 and $600,000 you pay a discounted amount. The discount is reduced as the price increases until at $600,000 the full duty of $22,490.00 would be payable.
If you are purchasing vacant land the duty is only waived up to $300,000.
This waiver of duty payable also applies to the stamp duty on mortgage documents.
Fittings
Goods or articles that can be removed from the property without causing damage (which could include appliances, furniture and decor).
Fixtures
Goods or articles that can not be removed from the property without causing damage (which usually includes any wall or floor mounted items, as well any appliances within the items).
Insurance
Insurance risk passes on settlement day. All building insurance should be put in place before the purchase is settled. Your lender will usually require a copy of the policy before they agree to settle so this will need to be done a couple of weeks before settlement, however, the policy can start from the actual settlement date.
Joint Ownership
Title to property is held in one of two ways:
Joint Tenants
This means that each person owns the property jointly and on the death of one of them the property automatically passes to the surviving person or persons. By automatically, I mean with a copy of the Death Certificate, Notice of Death, Notice of Transfer and Title Deed lodged at the Land Titles Office with the relevant fee which at the moment is $79.00.
Tenants in Common
This means that each person owns a share in the property and on the death of one party that share passes according to their will.
Land Tax
A State Government levy based on the value of a property (exemptions include principal place of residence) that is paid by the owner.
Restrictive Covenant
An agreement requiring the property owner to adhere to certain terms, conditions or restrictions regarding their property.
We recommend the scope of any covenant over a property should be established before you enter into the process of acquiring a property.
A restrictive covenant is an Encumbrance that that is attached to the land. It may have an expiry date or it may state that some of the covenants are not to expire and consequently, you should be aware of the effect it may have on your use (including future development plans) of the property.
Right of Way
An Easement on property, where the property owner gives another person the right to pass over his land.
Settlement
This is the day on which all monies are handed over in exchange for the title deeds and the day on which possession of the property is given to the purchaser; i.e. they can collect the keys from usually the real estate agent.
Stamp Duty
The amount of stamp duty payable on the contract is determined by the purchase price of the property. The higher the price the higher the stamp duty. Stamp duty is paid after exchange of contracts and usually before settlement.
You actually have three months to pay stamp duty on a contract without penalty. Having said that though, the banks will not settle unless the stamp duty has been paid because they cannot register their documents without the duty having been paid.
If you are paying cash you can take the benefit of the waiting the 3 months but once again the transfer cannot be registered at the Land Titles Office until the duty is paid.
Strata Title
A Strata Title is associated with a single parcel of land that contains numerous dwellings either detached or attached.
Property owners have the sole right to their individual dwelling (possibly including airspace) and an undivided share of common areas with other owners.
Within this title, membership to the Owners’ Corporation (Body Corporate) provides the inclusion to decide on maintenance and development issues.
Strata titles are registered under the Torrens Title system.
Torrens Title
This is the name given to a system of recording ownership of land. It is the most common form of land title and the cheapest to convey. When you are registered on title you are guaranteed ownership by the state government.
Valuation
A Valuation Report is a written document setting forth the opinion of registered valuer of a property’s value as of a specified date, supported by the presentation and analysis of relevant data.
Often required by a lender to assess the market value of a property and for stamp-duty assessment of inter-family transfers.