What you need know when selling
Disclosure
Any Vendor selling property in Victoria is required by the Sale of Land Act to provide a Disclosure Statement to a Purchaser.
The Disclosure Statement provides the Purchaser with information on the legal and practical circumstances of the Property.
The Disclosure Statement is not necessarily all encompassing in terms of information a Purchaser may wish to know, but a failure to provide a valid Disclosure Statement or providing a Disclosure Statement which is incomplete or inaccurate may give a Purchaser a way to avoid settlement of a Contract (wasting you both time and likely money).
When in doubt about whether something needs to be disclosed ensure that you speak to your lawyer about it. For further information on contracts and disclosure statements, visit Consumer Affairs Victoria.
Your Agent
A good agent can be of real assistance in maximising the sale prospects of your Property.
However, in selecting your agent, you need to understand your legal relationship with them.
Beyond the cost of agent’s commission and advertising, note that a standard Agent’s Authority does not mandate service standards but does give the agent a legal entitlement to payment of commission once an unconditional Contract of Sale is signed even if the sale does not actually reach settlement for any reason.
Accordingly, make sure you have a clear agreement on how the agent is to undertake the sale or auction process on your behalf and know when the agreed Purchaser has paid the deposit (noting that an agent does not have a legal obligation to collect the deposit for you – even though most agents will try to do so).
Representations
Any statement or representation or promise made to a Purchaser or prospective Purchaser by your Agent is, for the most part, legally binding on you.
You should know what is being said or advertised on your behalf and be careful of anything which may be inaccurate.
If you are using any diagrams or drawings, you should ensure that you know where they come from and if necessary include suitable disclaimers and Contract Special Conditions. Any misrepresentation in a sale may give the Purchaser a right to end a Contract.
Foreign Capital Gains Withholding
If you are selling Property worth more than $750,000.00, note that, irrespective of your actual citizenship or residency status, you will be classed as a ‘foreign’ Vendor with the Purchaser required to pay 12.5% of the sale price to the Australian Taxation Office (‘ATO’) at settlement.
To avoid being classified as ‘foreign’ (if you are not actually a foreign citizen or resident), it will be necessary to obtain a Clearance Certificate from the ATO to confirm your non-foreign status. Further, note that this also applies to companies and trusts, which are subject to separate control and interest rules to define whether or not they are foreign.
Contract of Sale
In Victoria, almost all Contracts are based on standard conditions included in the Estate Agents Act. However, a lawyer is entitled to vary these conditions to grant further protections for a Vendor and to address any specific issues on the sale of the Property. We would always recommend including additional special conditions to increase Vendor’s rights in the event of any delays in settlement and to limit the Purchaser’s rights on any defects that may be discovered after the Contract is signed.
Settlement
As you reach completion of your sale, you will no doubt be focused on packing up, clearing and vacating the Property.
Your lawyer will attend to all the arrangements for settlement with the Purchaser’s representative and your bank/lender. Remember to give notice to your power and gas company to avoid getting any unexpected bills.
Your lawyer will notify Council and the Water Authority once settlement is complete. Note that you are obliged to deliver the Property to the Purchaser in the same condition it was in on the date the Contract was signed (fair wear and tear exempted).
Delay in Settlement
If the Purchaser delays settlement, then you will be entitled to charge penalty interest (at the rate specified in your Contract) on the funds outstanding until settlement is actually completed.
The delay is a breach of the Contract and you will be entitled to issue a Notice of Default against the Purchaser (at the Purchaser’s cost) to express your rights resulting from the breach, including your right to end the Contract (and retain the deposit) if the Purchaser does not complete settlement within a minimum of 14 days from the date the Notice is served.
If you delay settlement as Vendor, the Purchaser cannot claim penalty interest from you, but the Purchaser can also issue a Notice of Default (at your cost) to end the Contract (and obtain a full refund of their deposit) if you cannot complete the settlement of the sale of the Property within a minimum of 14 days from the date the Notice is served.
Post Settlement
Once settlement is complete all rights under the Contract cease. Accordingly, unless there has been some form of misrepresentation or settlement has occurred under protest, the Purchaser should have no further rights against a Vendor for any later issues or defects they may discover. Likewise, you will have no further rights to have the Purchaser adjust any expenses which were not properly adjusted at settlement.
What you need to know when buying
Buyer Beware
Although a Vendor has certain mandatory disclosures they must make in selling a Property, for the most part, a Purchaser buys a Property on the basis of their own inspections in terms of the physical measurements of the Property, the standard and condition of the Property and the legal and planning issues which may impact the Property or its title.
To avoid incurring any unexpected liabilities, a Purchaser should complete thorough enquiries to ensure that they are satisfied with the Property being sold. This can include surveys on measurements, professional building inspections, as well as legal checks on the status of the Property.
The Agent
Understand that the Agent is not your agent, but is working for the Vendor.
They are in the business of selling a product and you need to be aware that what they are telling you should be separately checked by you as much as possible.
You need to be buying the Property based on your own inspections and be satisfied with all aspects of the Property and the transaction.
Representations
If you wish to rely on any representation being made by the Vendor or their agent, you should ensure that these are wholly incorporated (in detail) in the Contract of Sale. Without this, you do not have a clear legal entitlement to rely on such representations in completing a purchase.
Further, it will also be harder for you to evidence your reliance if there is no clear record of the representation made and the Contract is the best place for such a record.
Stamp Duty and Other Costs
There are a number of additional expenses to be aware of when purchasing property.
The State Revenue Office has a number of calculators available on their website. Sharrock Pitman Legal has an app which includes information on Commercial Property and Conveyancing. This free app is available for download from the App Store or Google Play. Search SPL Biz Guide.
Mortgagee/Bank Issues
You should ensure that you leave adequate time for your bank, lender or mortgage broker to do their work leading into settlement of your purchase.
The valuation, preparation of documents, checking processes, etc do take time and it is important to both ensure that the settlement period agreed allows sufficient time, but also that you and your representative are in regular contact with your bank, lender or mortgage broker to ensure that your matter is being progressed to settlement.
This is especially important if you are purchasing with Company, Trust or Superannuation vehicles as these add requirements to a lenders processes.
Pre-Settlement Inspection
We recommend that you inspect the Property between 5-3 days prior to settlement.
You need to ensure that the Property is in the same condition it was in on the Contract Date (fair wear and tear exempted). If you do discover any issues, then it is important to allow time for your legal representative to take up these issues with the Vendor’s representatives prior to settlement.
Clear Title
At settlement of any purchase, it is important to ensure that all encumbrances (ie. legal interests that impact the ownership and control of the Property) that are the Vendor’s liability are cleared and that you only accept any restrictions which are legally obliged to accept and which have been mandatorily disclosed to you by the Vendor (eg. any easements or Leases that may be operative on the Property).
If any encumbrances on Title are not cleared at settlement, then note that they will become your liability as the new owner of the Property.
Settlement
As you reach completion of your purchase, you will no doubt be focused on your move and/or the handover of the Property.
Your lawyer will attend to all the arrangements for settlement with the Vendor’s representative and your bank/lender.
Remember to connect your power and gas company to avoid any gaps in service.
Your lawyer will notify Council and the Water Authority once settlement is complete. Note that you are entitled to receive the Property from the Vendor in the same condition it was in on the date the Contract was signed (fair wear and tear exempted).
Delays in Settlement
If you need to delay settlement unilaterally, note that this is a breach of the Contract and the Vendor will be entitled to charge you penalty interest (at the rate specified in your Contract) on the funds outstanding until settlement is actually completed.
The Vendor is further entitled to issue a Notice of Default against you (at your cost) to express the Vendor’s rights resulting from the breach, including the right to end the Contract (and retain the deposit) if you do not proceed with settlement within a minimum of 14 days from the date the Notice is served.
If the Vendor delays settlement, then you cannot claim penalty interest from the Vendor, but you can issue a Notice of Default to end the Contract (and obtain a full refund of the deposit) if the Vendor cannot complete the settlement of your purchase of the Property within a minimum of 14 days from the date the Notice is served.
Post Settlement
Once settlement is complete all rights under the Contract cease. Accordingly, unless there has been some form of misrepresentation or settlement has occurred under protest, the Purchaser should have no further rights against a Vendor for any later issues or defects they may discover. Likewise, the Vendor will have no further rights to have you adjust any expenses which were not properly adjusted at settlement.
Can we assist you with issues relating to selling or buying property?
Contact our Property Law Team.
