The legal formalities of selling a house in Canberra involve some strict protocols. This article is a general guide for understanding the process.
Before a home is listed for sale there must be a marketing contract in the hands of the agent containing title searches, Crown lease conditions, a building report, a pest report, a Crown lease compliance report, and energy rating report and details of any non compliance matters that will pass with the property to the buyer. Your solicitors, elringtons, will prepare the marketing contract which contains the property details and any other special conditions that are required.
Building & Pest Inspections
A licensed Building Consultant must be engaged to carry out the Building, Pest and Energy Rating inspections. Your selling agent will usually arrange these inspections. Where there is no selling agent, elringtons can provide contact details of Building Consultants in the area. Following those inspections, the Building Consultant will prepare reports documenting their findings to be placed in the Contract for Sale.
The ultimate Buyer of the home will reimburse the cost of the reports at the time of settlement (excluding the Energy Efficiency Rating – if obtained separately).
It may take a few days for the building report to be prepared. The Building Consultant will advise the turn around time for the report.
The title searches, reports and other documents required for the Contract are inserted in the Marketing Contract by elringtons and it is provided to marketing Agent. At that time, the Agent will be in a position to advertise the property for sale.
It is illegal to market a property for sale without a Marketing Contract.
When ‘offer and acceptance’ has been achieved between the Seller and a Buyer, the Agent will forward Sales Instructions to the Seller’s solicitor. Sales Instructions contain details of the Buyer, the Buyer’s solicitor, the purchase price, property inclusions (such as carpets, window treatments, light fittings etc), settlement time frame etc. The Seller’s Solicitor then prepares a formal Contract for Sale (in duplicate) based on the marketing contract with the negotiated terms inserted. A copy of the Contract is sent to Buyer’s solicitor for the Buyer’s review and signature.
Commitment to Sell
The Seller and the Buyer separately consult their solicitors, fine tune any aspects of the contract that require amendment and then the solicitors exchange the copies separately signed by the Seller and the Buyer. During the exchange process, both Contracts (one signed by the Buyer, the other signed by the Seller) are checked to ensure that their contents are identical. The documents are then dated and physically exchanged (swapped). On exchange the contract becomes binding on the parties. The date of the contract is the date of the exchange. The agreed deposit (usually 10% of the price – but it can be a different amount or percentage) is paid on exchange. Usually the deposit is paid to the Real Estate Agent’s Trust Account. On exchange, also, the Buyer’s lawyer will provide the Seller’s lawyer with a Section 17 Certificate waiving the Buyer’s right to any ‘cooling off’ period.
If the parties are keen to commit to an agreement, perhaps because the home is sought after by several buyers, the marketing contract can be completed with the necessary details and be signed and exchanged in the agent’s office. In that case a cooling off period will apply and the Buyer may withdraw from the agreement if the Buyer changes their mind within 5 working days.
Exchange will not usually take place until the Buyer’s finance has been approved in writing.
After exchange the Seller must make arrangements with any lender who has a mortgage on the property to pay it out on settlement. Your elringtons solicitor will liaise with your lender to discharge the mortgage on settlement.
In the ACT the insurance risk passes to the Buyer at exchange. It is however a good idea that the Seller keeps all insurances in place until settlement has been effected.
As the settlement date draws near, the Buyer’s lawyer will obtain and provide to the Seller’s lawyer copies of up-to-date rates notices received from ACT Revenue and ActewAGL.
The Seller’s solicitor prepares a detailed Settlement Statement setting out adjustments for rates, deposit paid, allowances for pest & building reports, payout figures, legal fees etc. During this period leading up to settlement, arrangements are made by the Buyer to pay stamp duty on the contract and a Transfer document is prepared, signed and stamped also in readiness for settlement.
Discharge of Mortgage
The Discharging Mortgagee bank must be to ‘booked in’ for settlement. A day or two prior to settlement, the Mortgagee will provide a precise payout figure to discharge the mortgage.
Prior to the settlement date, the Buyer has the right to carry out a pre-settlement inspection of the property. This inspection is usually coordinated with the Agent and is done either the day before settlement or on the morning of settlement. When a Seller vacates the property it should be left in a clean and tidy state and in the same state as at the time of the exchange of contracts.
There is a possibility that settlement will be delayed by the Buyer if the pre-settlement inspection is unsatisfactory (or funds may be retained from the deposit pending resolution).
Settlement usually takes place in Canberra between 2.30pm-4.00pm Monday to Thursday and 1.00pm-4.00pm on Friday at a commonly used settlements room.
On settlement a Transfer is provided to the Buyer’s solicitors by the Seller’s solicitor and that is used to register the change of ownership at the ACT Office of Regulatory Services.
Before settlement, keys must be provided for handing over at the settlement. Alternatively the agent can hand over the keys to the buyer.
Proceeds of the sale will on settlement be distributed to the outgoing lender and the Seller. The Seller can elect to pay all of the sale proceeds to the lender so that they can pay out the mortgage and place the balance onto one of the Seller’s nominated bank accounts.
On settlement, the Buyer’s lawyer will provide an ‘Order on the Agent’ addressed to the Agent confirming that settlement has occurred and authorising the Agent to release the deposit held in its trust account. The Agent will deduct the agreed commission from the deposit held and will pay the balance of deposit to the Seller.
Electricity, gas and telephone connections
The cancellation of these services is the Seller’s responsibility.
Rates and Water
ACT Revenue Office (rates & land tax) and ACTEWAGL (water & sewerage) are notified of the change in ownership of the property by the Office of Regulatory Services following registration of the Transfer. Once this occurs, rates notices will issue directly to the new owner.