Orren Topolansky - Ray White Robina - Real Estate Agent - Gold Coast

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THE 13 MOST ASKED QUESTIONS OF A SOLICITOR DURING A PROPERTY SALE OR PURCHASE - answered by a specialist solicitor

1. Why do you need a lawyer when buying/selling a home?

 When buying or selling a home, you must sign a Contract. Frankly, whenever signing a Contract of any kind you should seek legal advice, especially when it comes to buying an asset that, for most people, will be the biggest assets of their lives. There are a number of pitfalls that, unless you are familiar with property law and conveyancing, you just could not know. For example, if a buyer terminates a Contract during the 5 business day cooling-off period, the Contract simply says “A termination penalty of 0.25% of the purchase price applies if the Buyer terminates the contract during the statutory cooling-off period.” Sounds black and white? Not quite. Section 168 of the Property Occupations Act 2014 (Qld) outlines that the seller may only deduct this penalty from any deposit paid under the contract. So, for example, if a buyer terminates a Contract during the cooling-off period with a purchase price of $700,000, the termination penalty would be $1,750. However if the Buyer had not yet paid a deposit, then the penalty would be $0.

2. What is the difference between a conveyancer and a solicitor?

In Queensland, you must be a solicitor to offer legal services. Solicitors have law degrees, have undertaken further tertiary study, have been admitted to the Supreme Court of Queensland and are required to undertake ongoing professional training. A conveyancer is a person who has been trained in an office to do some types of legal work (for example, conveyancing) but has no formal legal training. All conveyancers must be overseen by a solicitor. If your sale or purchase goes smoothly, you may not notice much of a difference between the two. However, when things start going wrong, or you come across a specific, uncommon issue, you are going to very quickly notice the difference. Conveyancers are not trained in the law, they are not familiar with researching legal issues, do not have experience in drafting specific, tailored legal advice (and, in fact, are not allowed to do so without their supervising solicitor’s sign-off) and often it can feel like they are simply out of their depth.  

 3. Can I use any law firm or should I go to a specialist?

 Whenever hiring a solicitor, always use a specialist. Like any person in any industry, you want someone who specialises in the particular area and does it day in, day out. As the saying goes “a jack of all trades is a master of none”. Similar to the answer to Question 1 above, if your solicitor does not regularly undertake conveyancing work then they are just not going to be equipped to deal with uncommon issues when they arise. Conveyancing is a complex area of law - in addition to the Contract of Sale, there are over 20 pieces of legislation, an extensive body of case law and a number practice guidelines that apply to conveyancing transactions. You need someone who regularly practices in this area, keeps up-to-date with industry changes and has enough experience that they have dealt with your issue before, rather than the first time.

4. When should I engage a lawyer?

 When negotiations start or, at the very least, before you sign the Contract. If you are selling your home, once the Contract is signed, you are effectively locked in (with very limited termination rights) unless the Buyer breaches the Contract. Therefore, legal advice is critical to ensure what you are signing is in your best interests and reflects what was agreed verbally. So too with buying – while you may have termination rights during the cooling-off period, as we have discovered above, there are penalties for exercising these rights. Not only will a solicitor conduct a pre-signing review of the Contract for you (which is very often complementary), they can also give advice on standard conditions being agreed on other contracts and recommend changes to the standard terms via special conditions to meet your needs.

5. What does “fixed fee” mean?

Fixed fee means exactly that – the fee you are quoted is all you will pay. Or it should. In Queensland, almost all law firms will quote a fixed fee; you are unlikely to come across a law firm which doesn’t. However, many law firms will offer a fixed fee for a “standard conveyance”. This means, so long as everything goes smoothly, you will only pay the quoted legal fee. However, as soon as things start going wrong, the firm starts adding on costs for work performed “beyond scope”. Look for a law firm that offers a fixed fee for the “total conveyance” – this will ensure there are no nasty surprises.  

6. Is it true buyers have to insure the property before settlement (i.e. before they own it)?

 Essentially, yes. Clause 8.1 of the Standard REIQ Contract of Sale provides that “The Property is at the Buyer’s risk from 5pm on the first Business Day after the Contract Date”. So, if you sign a Contract on 8 September 2020 then, at 5pm on 9 September 2020 the risk in the property passes to you. What does this mean? If there is any damage to the property you as the buyer are responsible for repairing it. Even though you don’t own the property, even though your Contract is still conditional on finance and building & pest, even though you only signed the Contract yesterday – you are responsible for repairing the damage. The most obvious situation here would be hail during the Queensland Summer. Should hail damage the property, you as the buyer must repair it, even if your contract terminates. So, yes, you should insure the property before settlement (well, in fact, before the risk passes to you).

7. Are there any consequences for terminating under cooling off?

Every Contract is subject to a 5 Business Day cooling-off period where the Buyer can elect to terminate the Contract for any reason, including a change of mind. However, if a buyer terminates a Contract during the cooling-off period, the Contract provides that a termination penalty of 0.25% of the purchase price applies. So, for example, if a buyer terminates a Contract during the cooling-off period with a purchase price of $700,000, the termination penalty would be $1,750. So, is it that simple? Not quite. Section 168 of the Property Occupations Act 2014 (Qld) outlines that the seller may only deduct this penalty from any deposit paid under the contract. So, if you have only paid a $1,000 deposit, then that is all you will have to pay, even though the penalty is $1,750. Or, if you haven’t even paid a deposit yet, then there will be no penalty.

8. What is PEXA? Is there a difference to settling electronically v paper?

PEXA is a secure, online platform that allows for property settlements to be conducted electronically, rather than the traditional paper and bank cheque method. PEXA is simply easier for clients. Some benefits include:

1.     For a seller, there is no longer the need to travel to your solicitor or a Justice of the Peace to sign registry documents (as you can authorise your solicitor to sign these for you electronically) and your sale proceeds clear in your account instantly (whereas in the traditional method, your solicitor needs to collect the bank cheque with your sale proceeds, travel to your bank and physically bank your cheque which can take 3 – 5 business days to clear).

2.     For a buyer, titles registry documents are lodged instantly, meaning you will be recorded on the title immediately, rather than having to wait up to 30 days. All documents, including identification checks (but excluding Office of State Revenue documents) can be signed and completed electronically – saving you time and making things easier. No more trips to your solicitor or JP to get documents witnessed is necessary.

 Finally, PEXA is a national platform. This means that you can now sell a property in Victoria and buy a property in Queensland at exactly the same time and use the sale proceeds from the Victorian sale to fund the Queensland purchase. Without PEXA, this would be next to impossible as all parties would need to meet in the same room at the same time with physical cheques and paperwork.

9. Why should a buyer conduct searches on a property?

The Contract of Sale does not contain all the matters which may affect the Property, it only obliges the Seller to disclose certain information and notices about the Property. The only way to check whether there are defects in the Property, and to verify the disclosures made by the Seller, is to conduct searches and enquiries. If the Property is negatively affected by the results of a particular search, or the Seller’s disclosures are inaccurate and you are prejudiced, there are termination or compensation rights available to you. You cannot access these without conducting the searches.

Further, under the Contract of Sale, after Settlement, you as the new owner of the Property take over payment of Outgoings (rates, water, charges, fire service levies etc.). The Seller has no obligation to disclose any debts to you. The only way to discover it is to do a search and, if the debt is discovered, you can compel the seller to discharge the debt from the sale proceeds.

10. If the building and pest inspection shows issues with the property, can I terminate?

Depends. The Contract of Sale gives a Buyer a termination right if the results of the Building and Pest inspection reports are not satisfactory. However, the Buyer must act reasonably. What is reasonable? That’s where it can get complicated. In short, if there are structural defects to the Property or live termite (or other pest) infestations, then there is a very strong argument that the Buyer is acting reasonably when terminating. If the issue is cosmetic (i.e. doors not closing properly, owner painted the walls and they’re not to a professional standard) or the issues are non-structural (i.e. hair line cracking on the side of the house, drummy tiles on the back patio), there is a much weaker argument that the Buyer is acting reasonably when terminating.

11. What is settlement? Do I have to do anything?

 Settlement is where the buyer actually pays the seller and the seller transfers the property to the buyer. If you are a Seller, you must ensure that you have moved out of the property by the time the property settles (as, generally, you must provide vacant possession of the property). If you are a Buyer, you must make arrangements for the collection of the keys following settlement. Other than that, your solicitor should handle everything for you on the settlement day and deliver you the good news once all is completed.

12. What if I can’t settle on time?

It is vitally important that both parties (Buyer and Seller) be “ready, willing and able” to settle on the Settlement Date. The legal and financial consequences for failing to settle can be significant including losing the deposit, being sued for damages and interest and being “forced” to settle (via a legal remedy called Specific Performance), among other consequences.

With the significant increase in property settlements in 2021, parties were finding themselves ready to settle, but unable to do so because their bank had not processed the necessary paperwork. This lead to contractually valid, but nevertheless “unjust,” legal consequences to parties, particularly buyers. A highly publicised case of a young couple losing their $75,000.00 deposit after their bank missed the settlement deadline lead to an amendment of the standard REIQ Contract to include a new clause 6.2. Under this clause, either party, for any reason, up until 4pm on the Settlement Date, can unilaterally extend the Settlement Date by up to 5 Business Days. This can be a crucial lifeline to parties who need a little extra time to avoid falling into breach.

13. Does the seller have to provide a Pool Safety Certificate?

Under the standard REIQ Contract, a seller is required to hand over a Pool Compliance Certificate for a non-shared pool on the Land prior to settlement. If they fail to do so, the Buyer will have the right to terminate the Contract. However, if a seller has provided the Buyer with a Notice of No pool Safety Certificate prior to contract, then the seller is not obliged to obtain or provide a Pool Safety Certificate. It is then the Buyer’s obligation to obtain a Pool Safety Certificate following the Settlement.

This information has been compiled by Tom Blackhurst of Blackhurst Law - www.blackhurstlaw.com.au