Trusts and Increased Taxes in NSW

by Rod AnthesRod Anthes

“You might be Australian but is your Trust a deemed foreign person?”

– If it is you may have to pay a lot more state tax than you thought.

Potentially, a foreign person is liable for double stamp duty at the time of purchase.  In addition, the foreign person is then liable for much more land tax for each year that they own the property.  There is no threshold value applied when the tax is calculated so it becomes higher than usual from the start.  But then there is also a surcharge payable annually.  This fluctuates but at the moment if a foreign owner owns residential property worth $1mil the current land tax bill is $36,000 per annum.  A non- foreign owner (where it is not principal residence) would be liable for $6,500 per annum.

So who is a foreign person?

The definition of ‘foreign person’ is such that if any actual or potential beneficiary of a trust is a foreign person then the trust is deemed to be a foreign person!

If that trust owns property, land tax ($36,000 p.a. on a property worth $1mil) becomes payable each year.

You may be familiar with the wording in trusts which provides for almost everybody ever in a person’s family to be a potential beneficiary-even if they are not yet born.  A person is foreign if they are not:

  • an Australian or New Zealand citizen;
  • a permanent-resident;
  • on a permanent (Spouse) Visa AND having spent more than 200 of 365 days overseas in the last 12 months.

This means that if one of the actual or potential beneficiaries marries or partners with a foreign person then the extra taxes are payable.  For example; this may be a marriage by one of your grandchildren to a foreign person!  Possibly even more remote.

Risks if foreign companies are beneficiaries

If a trust deed permits another trust or company to be a potential beneficiary, where that other trust or company is a foreign person under these rules then the trust also becomes foreign. Also if another company or trust (even if it is an unrelated third party) owns shares in a corporate beneficiary, then that corporate beneficiary could become a foreign person and then by extension the trust could again be considered a foreign person.

 It doesn’t take much for a company to be considered “foreign”.  Under these rules – 20% or more share ownership by one foreign shareholder, or a combined 40% or more ownership by multiple shareholders is sufficient to render a company a foreign person – and that is sufficient to render a discretionary trust to be a foreign person.

Of course if the trust is deemed to be foreign then the extra (double) stamp duty would also be payable when buying property.

The possibilities are very real and the consequences very expensive.

What can you do?

The risk can be overcome by a variation of the trust deed to exclude the possibility of a foreign person (as defined in the legislation) from ever being eligible to be a beneficiary of the trust.

If you think you need to vary your trust deed, get in touch with us.  We will assess your situation and make a recommendation free of charge.  If we advise that a variation to the trust deed is necessary, we will give you a clear indication of what it will cost before you are obligated.

p: +61 2 62061300   | e: ranthes@elringtons.com.au

Selling a House in NSW

Contract Preparation

When you instruct us to act for you on the sale of your property, we will open a file and write to you to confirm that we are acting on your behalf.

Applying for searches

We will request the sum of $550.00 from you to be deposited in our trust account.  We will use these funds to obtain the property searches and enquiries which are mandatory inclusions in a NSW Contract for Sale. These include  title search plus the deposited plan and any other relevant title documents, Section 149 Certificate, Sewerage Diagram, Land Tax Certificate.

When the funds have cleared through our trust account, we will apply for the requisite property searches.
Depending on the particular local council involved, it can take between 5-10 working days for us to receive the property searches, specifically the Council documents

We cannot predict the exact cost of these searches and enquiries as the cost is dependent on the number of documents that we need to obtain.  If there is a balance remaining from the $550.00 it will be used as a credit towards part of our professional fees.

Survey, Building Certificate etc

We ask that you provide us with copies of any building certificates, survey documents etc you may have in your possession.  If you do not have these documents, copies can be obtained by any prospective Purchaser (at their expense) from the local council.

Tenanted Property

If your property is sold subject to an existing tenancy agreement, we will require a copy of the Tenancy Agreement as it must be attached to the Contract for Sale.

Marketing Contract

When we receive the searches and any other documents required for the Contract, we will prepare a Marketing Contract which will be sent to your Agent.  We will also send you a copy for your records.  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.

Building and Pest Inspections

These are not mandatory inclusions in NSW Contracts for Sale.  If a prospective Purchaser wishes to do so, they can arrange these at their own expense.

Sales Instructions

When “offer and acceptance” has been achieved between you and a Purchaser, the Agent will fax to us Sales Instructions.  Sales Instructions contain details of the Purchaser, the Purchaser’s lawyer, the sale price, property inclusions (such as carpets, curtains, light fittings), settlement time frame etc.  When we receive the Sales Instructions, we will prepare a formal Contract for Sale.  The Contract is prepared in duplicate; we retain one copy for your signature and the duplicate Contract is sent to the Purchaser’s lawyer for the Purchaser’s signature.

Appointment

We will contact you to arrange an appointment to:
Review and sign the Contract for Sale
Sign the Transfer.  This document is required on settlement and is lodged after settlement with the NSW Land Titles Office (formerly the Registrar General’s Office).  It notes the change of ownership on the title deeds.
Complete and sign a Discharge of Mortgage Authority (if applicable)
Hand the title deed to us (if there is no mortgage).
Once the Contract is signed, we will contact the Purchaser’s solicitors and let them know we are ready to “exchange”.

Exchange

Exchange of Contracts takes place when you and the Purchaser are satisfied with the terms of the Contract, when you have both signed your respective copies of the Contract and when the Purchaser’s finance has been approved in writing.
The Purchaser then pays the agreed deposit (usually a cheque payable to the Real Estate Agent’s Trust Account).  The deposit cheque is usually handed to us on exchange and we forward it to the Agent following exchange.  It is then held in the Agent’s Trust Account until settlement has occurred.  If there is no Agent, the deposit will be held in our Trust Account.
During the exchange process, both Contracts (one signed by the Purchaser, the other signed by you) are checked to ensure that their contents are identical.  The documents are then dated and physically exchanged (swapped) – we receive the Contract signed by the Purchaser and the Purchaser’s lawyer receives the Contract signed by you.  Once Contracts are exchanged, the Vendor and Purchaser are both locked into the transaction.  On exchange, the Purchaser’s lawyer will provide us with a Section 66W Certificate waiving the Purchaser’s right to any ‘cooling off’ period.
We will phone you following exchange to advise that exchange has occurred, and we will then confirm exchange in writing.  We will also write to your  Discharging Mortgagee (if applicable) to notify them of the date for settlement and request preparation of discharge documents and a payout figure in readiness for settlement.

Insurance

PLEASE NOTE:  In NSW the insurance risk remains with the Vendor until completion.  Therefore, you must keep all insurances in place until settlement has been confirmed.

Leading up to settlement

  • As the settlement date draws near, the Purchaser’s lawyer will provide us with copies of up-to-date rates notices. (If you receive rates notices following exchange, please notify us and provide us with a copy.  We suggest that you do not make any instalments on your rates accounts after exchange without contacting us first.)
  • You should advise  us if you make any changes to your financial arrangements, such as using the sale property as security for borrowings over another property, or if you refinance your loan.
  • We will prepare and provide you with a detailed Settlement Statement setting out adjustments for rates, deposit paid, payout figures, legal fees etc.
  • If the property is sold subject to existing tenancy, adjustments for rent are usually attended to by the Managing Agent.

Discharge of Mortgage

We will contact your Discharging Mortgagee to ‘book in’ settlement.  A day or two prior to settlement, the Mortgagee will provide us with a payout figure sufficient to discharge the mortgage.  Once we receive that figure, we can finalise details and payees of the settlement cheques in accordance with your instructions.  You may decide to instruct your Mortgagee to receive all sale proceeds on settlement, and have the Mortgagee deposit the balance owing to you into your nominated account.  Such deposits usually occur overnight.

Pre-settlement inspection

Prior to the settlement date, the Purchaser has the right to carry out a pre-settlement inspection of the property with the Agent.  This inspection is usually done on the morning of settlement.  When you vacate your property, it should be left in a clean and tidy state and in the same state as at the time of the exchange.  There is a possibility that settlement will be delayed by the Purchaser if the pre-settlement inspection is unsatisfactory (or funds may be withheld from the deposit pending resolution).

Settlement

Settlements usually take place in Canberra between 2:30 pm – 4:00 pm Monday to Thursday and 1:00 pm – 4:00 pm on Friday.

Keys

Before settlement, we ask that you provide us or the agent with the keys to hand to the Purchaser’s lawyer on settlement.  Keys should be delivered to our office before 12 noon on the day of settlement.

Your sale proceeds
  • We will phone you when the settlement has taken place.
    If you would like us to bank your sale proceeds following settlement, please provide written instructions, including the name of your Bank, the BSB and account numbers, account name and account  type.  While every effort is made by us to bank settlement cheques on the same day as the settlement, please understand that we cannot guarantee this will happen.  In some circumstances, we may not be able to deposit sale proceeds until the next working day following settlement.
  • You may elect to collect your cheque/s from our office on the afternoon of settlement.
  • Release of Deposit:  On settlement, we will receive a letter from the Purchaser’s lawyer addressed to the Agent confirming that settlement has occurred and authorising the Agent to release the deposit held in its trust account to you.  This letter is called an ‘Order on the Agent’.  It is standard procedure for us to fax or email the Order on the Agent when we return to our office after settlement.  The Agent will deduct the agreed commission from the deposit held and pay the balance of deposit to you, usually by sending you a cheque.  If you wish to collect the cheque from the Agent, please make your own arrangements with the Agent for collection.  If you wish the Agent to place the balance of the deposit into your nominated bank account, you must provide that information directly to the Agent, preferably in writing.

If the deposit is held in our trust account, the letter of authority to release the deposit will be addressed to us.  We cannot release the deposit without the Purchaser’s Lawyers’ written authority, which will be received by us on settlement.  We will obtain your instructions prior to settlement in relation to how you wish the deposit to be paid to you (eg. Collect a cheque from our office, direct deposit into your nominated bank account etc).

Electricity, gas and telephone connections

The cancellation of these services is your responsibility.

Rates and Water

The local council will be notified of the change in ownership of the property by the NSW Land Titles Office following registration of the Transfer into the Purchaser’s name.  Once this occurs, rates notices will issue directly to the new owner.

Important Note:  Sales or value over $2,000,000.00

Australian residents who are selling a taxable Australian property with a market value of $2,000,000.00 or more need to obtain a clearance certificate from the ATO to confirm that a 10% withholding amount does not need to be withheld.  The vendor needs to provide a clearance certificate to the purchaser at settlement or the purchaser will be required to withhold 10% of the price and pass it to the ATO.

After settlement

Following settlement, we will write to you to confirm that the sale has been finalised and we will provide you with a detailed Settlement Statement, our Tax invoice, the original Contract and any other relevant documentation.

Please contact one of our experienced property lawyers or conveyancers to make an appointment on +61 2 6206 1300, or by email on info@elringtons.com.au

Buyer Beware at Auction

The New South Wales Supreme Court has confirmed that sellers are well protected when they decide to put their property between a gavel and a rostrum in its recent decision of David Anthony Burnet & Anor v Lily Maria Gubbay [2011] NSWSC 977.

On 29 August this year the buyer, Ms Gubbay, was successfully sued after she placed a winning bid of $2.3 million on a Sydney property, only to leave a dud deposit cheque for $230,000.00 after signing the Contract for Sale. In evidence it was found that the buyer later said she couldn’t afford the deposit despite owning a gross property portfolio worth close to $2 million.).

The contract with Ms Gubbay was terminated by the sellers pursuant to a clause of the contract which stated that If any of the deposit is not paid on time or a cheque for any of the deposit is not honoured on presentation, the vendor can terminate. This right to terminate is lost as soon as the deposit is paid in full.”

The property was relisted and sold a few months later for $1.93million, a difference of $370,000.00 to what Ms Gubbay had bid at the earlier auction. The decision was passed down by Bergin CJ that Ms Gubbay is required to come up with $447,000 – the difference between the sale prices with interest plus costs. Prior to this decision it was common for the seller to absorb the cost of relisting the auction and any difference in price.

Several cases were cited as the judgment was made before the New South Wales Supreme Court, including McDermott v Black dating back to 1940 but with strong relevance. They suggest that judgments should be made by considering all aspects of a contract in writing and that the “buyer” should have a full understanding of their responsibilities, as both parties are right to assume that a contract will be fulfilled when entering it.

With the current property market pushing many more owners to use the hammer to sell their properties it is vital that all parties have a full understanding of their rights and responsibilities at an auction site. As soon as the highest bid is made, above the reserve, the seller must be willing to accept it and the buyer must be willing to pay that amount, with a ten percent deposit made on the day of auction. Once the Contract of Sale of Land is signed it will be legally binding by the courts unless some defect in the contract can be identified.

Here at elringtons we pride ourselves on staying up to date with developments in the law so that we can inform our clients of their rights and responsibilities to ensure the best outcome.

For more information please contact one of our experienced property lawyers or conveyancers to make an appointment on 6206 1300, or by email on info@elringtons.com.au

Selling a Unit in the ACT

If you choose elringtons as your conveyancing lawyers for the sale of your apartment/townhouse in Canberra, we will safely guide you through the formalities of this legal process.  This article is a general guide to help you understand the conveyancing process.

Unit classifications in the ACT

In the ACT, two unit classifications exist:

  • ‘A’ class units are best described as apartments, having other apartments or units in the complex immediately next to, above and below each other.
  • ‘B’ class units are usually classified as townhouses or villas.

Dual Occupancy dwellings are two residences on a single block which may or may not have a Body Corporate.

Contract Preparation

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. We will request the sum of $500.00 from you, which will be deposited into our trust account.  From this sum we will pay disbursements (out-of-pocket expenses) for the property searches and enquiries, including Body Corporate reports.  The $500 will also cover part of our professional fees.

Building & Pest Inspections

At law, when a Seller is selling a property, they are required to obtain a Building Report and a Pest Report.

For ‘A Class’ units, Building and Pest reports are not required.

For ‘B Class’ units, 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 turnaround time for the report.

Body Corporate Minutes + Section 75 Certificate

‘A Class’ units only: Copies of Body Corporate Minutes together with a Section 75 Certificate must form part of the Contract for Sale. We will obtain these documents from the Owners Corporation.  The fixed fee for the Section 75 Certificate is $88.00.  (Please note that a Section 75 Certificate is valid for 90 days from the date on the Certificate.  If the property is not sold within that period, an updated Section 75 Certificate may be required.)

There is no fixed fee for copies of Minutes.   Different Owners Corporations/Body Corporate Managers charge varying amounts for this service.  If we have sufficient funds in our trust account, we will pay for both the Section 75 Certificate and copies of the Minutes from trust.  If we have insufficient funds, we will contact you and request a separate cheque for the shortfall.

Marketing Contract

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.

Sales Instructions

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.

Finance

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.

Insurance

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 you would be aware, the building is insured by the Owners Corporation/Body Corporate.

Settlement

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.

Pre-settlement inspection

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

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.

Keys

Before settlement, keys must be provided for handing over at the settlement. Alternatively the agent can hand over the keys to the buyer

Sale proceeds

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 then place the balance into 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 your responsibility.

Rates and Water

ACT Revenue Office (rates & land tax) and ACTEWAGL (water & sewerage) will be notified of the change in ownership of the property by the Department of Regulatory Services (formerly ACT Land Titles Office) following registration of the Transfer.  Once this occurs, rates notices will issue directly to the new owner.

Body Corporate Levies

We will notify the Body Corporate Manager of the change in ownership of the property so that future notices will issue to the new owner.

Tenanted Property

If you have sold the property subject to existing tenancy, letters will be sent after settlement to the tenant and the Managing Agent advising of the change in ownership and providing the Buyer’s contact details.

Please contact one of our experienced property lawyers or conveyancers to make an appointment on 6206 1300, or by email on info@elringtons.com.au

Purchasing a House in NSW

If you choose elringtons as your conveyancing lawyers for the purchase of your house in NSW, we will safely guide you through the formalities of this legal process.  This article is a general guide to help you understand the conveyancing process.

Sales Instructions:

If there is an Agent involved, often the first communication elringtons will receive is the Sales Instructions from the Real Estate AgentSales Instructions is a document prepared by the Agent after ‘offer and acceptance’ between a Buyer and Seller has been reached.   It contains details of the Buyer and Seller, their respective lawyers, the purchase price, property details, settlement time frame and any special conditions.

The Contract for Sale is prepared by the Seller’s solicitor using information contained in the Sales Instructions.  When elringtons are instructed to represent you in the purchase, we will request the initial sum of $500.00 from you, which will be deposited into our trust account.  From this sum we will pay disbursements (out-of-pocket expenses) for property searches and enquiries.  The $500.00 also covers part of our professional fees.

Building & Pest Inspections:

These are not mandatory documents in NSW Contracts for Sale, however we recommend that you have these inspections carried out by a licensed Building & Pest Consultant.  The inspections will detail a review of the:

  • building structure
  • interior and exterior, including fences and trees that might promote termites, borers or fungal decay due to poor ventilation or damp conditions
  • location of asbestos materials

The Agent will coordinate access to the premises for these inspections. The costs for these reports will be borne by you as the Buyer and are not recoupable from the Seller.

Contract for Sale:

The Seller’s lawyer prepares the Contract for Sale and forwards the document to us.  The Contract is prepared in duplicate, with one copy provided to us for your review and signature, and the other copy retained by the Seller’s lawyer for the Seller’s review and signature.  It may take up to a week for us to receive the Contract from the Seller’s lawyer.

Building File Inspection:

This is an inspection of the Council’s building file for the property and it is undertaken at the office of the relevant Council. We strongly recommend that an inspection of Council’s building file be carried out prior to exchange of Contracts.   We can carry out the inspection on your behalf for an additional fee.   The purpose of the inspection is to ascertain whether:

  • the dwelling and any improvements or extensions have been approved in accordance with building regulations
  • a Survey Certificate is held on the file
  • any notices have been issued by Council for work to be carried out to the property.

Due to copyright law, we are unable to obtain copies of plans or documents held on the building file. We are able to inspect the file and make detailed notes of all relevant information, which we then pass onto you.

To avoid delays with exchange, we suggest that the Building File inspection to be carried out prior to your first appointment with us.

Most Councils do not charge for this service.

Appointment:

When we receive the Contract for Sale, we will contact you to arrange an appointment to:

  • Discuss the results of the Building File inspection
  • Review the Contract for Sale
  • Discuss your finance arrangements (if applicable)
  • Discuss your entitlements as a first home owner (if applicable)
  • Generally discuss and explain the conveyancing procedure, time frames etc
  • Sign the Contract
  • Advise of the stamp duty amount payable, and when it must be paid by, and any available concessions
  • If not previously paid, obtain from you a cheque for $500.00 for disbursements/out of pocket expenses for searches and enquiries
  • Obtain from you a cheque for the deposit

Following your appointment, we will communicate with the Seller’s lawyer in relation to any changes you require to the Contract.

Exchange of Contracts and payment of deposit:

Exchange of Contracts takes place when both parties are satisfied with the terms of the Contract, when both parties have signed their respective copy of the Contract, and when your finance (if applicable) has been approved in writing.

We recommend that you arrange a pre-exchange inspection the property with the Agent to check the working order of appliances (stove, oven, cook-top, air-conditioning, heating etc).  Any problems should be communicated to us immediately following the inspection, and before the exchange is carried out.

You will then provide a cheque for the agreed deposit (usually payable to the Real Estate Agent’s Trust Account) and that cheque is handed to the Seller’s lawyer on exchange.  They forward the cheque to the Agent following exchange.  The deposit is held in the Agent’s Trust Account until settlement has occurred.  If there is no Agent, the deposit will be held in the Seller’s lawyer’s Trust Account. This money cannot be released to either the Seller or the Buyer without agreement from both parties.

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).  We receive the Contract signed by the Seller and the Seller’s lawyer receives the Contract signed by you.  Once Contracts are exchanged, they are binding and both parties are locked into the transaction.

On exchange, we will provide a Section 66W Certificate signed by you to the Seller’s lawyer, which waives your right to any ‘cooling off’ period. After exchange, we will apply for the relevant searches and enquiries such as rates amounts and money owing to the NSW Office of State Revenue.

Insurance:

Technically, insurance liability for the dwelling remains with the Seller until settlement, however we recommend that you take out your own insurance once exchange has occurred. The body corporate of a unit will have insurance in place regarding the structure, your insurance will need to cover everything else.

Stamp Duty:

Stamp duty in NSW is calculated based on the purchase price of the property.  We will advise you of the amount of stamp duty payable when you attend your first appointment with us.  We will also advise when the stamp duty is to be paid (must be paid prior to settlement and within three months from exchange).  Hefty penalties are imposed by Office of State Revenue for late payments of stamp duty, therefore it is important that stamp duty is paid on time.

Stamp duty payments must be by BANK CHEQUE payable to the Office of State Revenue.  At the appropriate time, we will ask you to deliver the bank cheque for the stamp duty to our office and we arrange payment of the duty on your behalf.

Settlement:

As the settlement date draws near, we will communicate with the Seller’s lawyer and obtain settlement figures and details of the cheques they require on settlement.

We will prepare and provide you with a detailed Settlement Statement setting out adjustments for rates,  deposit paid, allowances for registration fees, legal fees etc.

Settlements take place in Canberra between 2.30pm-4.00pm Monday to Thursday, and 1.00pm-4.00pm on Friday.

The location for settlements occurring in NSW is at the discretion of the Seller and often dependent on the location of Seller’s discharging mortgagee and/or the Seller’s lawyer.  This information will be communicated to us by the Seller’s lawyer following exchange and prior to the settlement date.

Once we have this information we will let you know as it is likely that pre-settlement arrangements may need to be expedited if documents and funds need to be forwarded outside the Canberra region for settlement.  Settlements occurring outside the Canberra region require the appointment of a settlement agent to attend settlement on our behalf.  This may incur a fee in addition to our legal fees.

Mortgage (if applicable):

We will write to your Mortgagee after exchange, provide the details they need to prepare mortgage documents and notify them of the date for settlement.

You should expect to hear from your mortgagee shortly after exchange as they will need to arrange for you to sign the mortgage paperwork in time for settlement.  You should let us know if you have any concerns, or if you do not hear from your mortgagee after exchange.

In the weeks leading up to settlement, we will contact your Mortgagee to ‘book in’ settlement.  A day or two prior to settlement, the Mortgagee will provide us with the exact amount of money available for settlement.  Once we receive that figure, we will finalise details of the settlement cheques and let you know if you will be required to provide us with additional cheques for settlement.

Please note that any additional cheques provided by you for settlement must be BANK CHEQUES and these will need to be delivered to our office no later than 12:00 midday on the day of settlement if the settlement is in the Canberra region, or earlier if the settlement is to occur elsewhere.

Pre-settlement inspection:

You should book a pre-settlement inspection of the house with the Agent either the day before settlement or on the morning of settlement.  When the 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.

During the inspection, you should check that the inclusions documented in the Contract (carpets, curtains, light fittings etc) remain, that appliances are in working order and that the property is in a clean and tidy condition.

If the pre-settlement inspection is unsatisfactory, you should notify us immediately so we can try to resolve any problems prior to settlement.  You have the right to delay settlement if resolution cannot be achieved in time.

We emphasise the importance of a pre-settlement inspection as your right to object to the condition of the dwelling, the removal by the Seller of any inclusions, or the working order of appliances etc expires once settlement has occurred.

Keys:

Keys will be available to you after settlement.  You can usually collect keys from the Agent or from our office.  We will notify you before settlement of the location of keys so you can arrange to collect them after settlement.

After settlement:

We will phone you when the settlement has taken place.

Following settlement, we will write to you to confirm that the purchase is complete and we will provide you with a detailed Settlement Statement, our Tax Invoice, the original Contract and any other relevant documentation.

Electricity, gas and telephone connections:

The cancellation of these services is the Seller’s responsibility.  Reconnection is your responsibility.

Rates and Water:

The NSW Land Titles Office will notify the local council of the change in ownership of the property following registration of the Transfer into your name.  Once this occurs, rates notices will issue directly to you as the new owner.

Tenanted Property:

If you have purchased the property subject to existing tenancy, letters will be sent after settlement to the tenant and the Managing Agent advising of the change in ownership and providing your contact details.  Please contact the Managing Agent yourself in relation to ongoing management of the property, or otherwise.

Please contact one of our experienced property lawyers or conveyancers to make an appointment on +61 2 6206 1300, or by email on info@elringtons.com.au