Property contracts can be hard to decipher by yourself, which is why it makes good sense to hire a conveyancer to help you navigate the path forward.
Still, it doesn’t hurt to educate yourself about the common terms that you might find in your contract of sale, so following are a dozen of the most common:
Certificate of Title
The Certificate of Title is a document that shows the location and current ownership of a given property. It also shows easements, covenants, mortgages, and other third party interests in the land. Every time the property is sold to another owner, the name of the new owner is registered on the Certificate of Title.
As the owner or mortgagee of a property, you are given an official duplicate of the Certificate of Title, while the original is held at the Land Titles Office. However, as the conveyancing process is now moving towards becoming paperless, the issuance of paper Certificates of Title is slowly phasing out and the Land Titles Office is working with most major banks to convert paper Certificates of Title to electronic Certificates of Title.
Contract of sale
A contract of sale is a legal contract that outlines the exchange of property from the seller, also known as a vendor, to the buyer. It outlines information such as the purchase price, special conditions, and finance arrangements.
Conveyancing is the legal process of transferring the title of a property from one person to another. Where this is pursuant to a sale and purchase transaction, it involves drawing up and carrying out a written contract that includes the agreed purchase price, date of transfer, and obligations of both parties.
Conveyancing also needs to be undertaken for mere transfers where there is no ‘buyer’ or ‘seller’ per se (e.g. transfer between spouses, ex-spouses or family members without any purchase price).
Cooling off period
As a consumer, you may (subject to certain conditions being met) have the right to change your mind during the cooling off period following your agreement (via signing a written contract of sale) to purchase a property. Depending on the state or territory you’re in, the cooling off period varies and you also may be required to pay a fee to walk away from your contract during the cooling off period. For instance, in Queensland the cooling off period is five business days, and the fee is 0.25% of the purchase price.
However, there are circumstances where you may not be entitled to a cooling off period. A common example of this is where the property is bought under auction or where the buyer is a company.
An easement is the right of a person to use part of another person’s property for a specific purpose, usually for an agreed fee. It also refers to the right to prevent the property owner from using a part of their property in a particular manner.
Easements, like a right of way or utility and sewer lines access, can affect the value of a property and restrict the manner in which the property is used, so it should be duly consulted with a conveyancer.
An encumbrance is a claim against a property by a party who is not the owner. It refers to any obstacle that may become known during a transfer of land, like easements, mortgages, leases, covenants and caveats.
If a loan borrower defaults in payment under the loan contract, the mortgage gives the creditor the legal right to sell the borrower’s property in order to reclaim the amount owing to them. The buyer’s conveyancer should always ensure that the seller’s mortgage is discharged at settlement so the new owner does not take on the previous owner’s mortgage.
The settlement date is the date on which the property title is legally and officially transferred to the buyer. The balance of the purchase price and any financial adjustments and payments, like land taxes and council rates, will be made on the settlement date. Once a settlement is confirmed to have successfully occurred, the buyer may arrange with the agent to pick up the keys.
Strata title is a form of ownership created for multi-level apartment blocks and horizontal subdivisions with shared areas like swimming pools and car parks. In other words, these properties consist of individual properties – like apartments and garages – and common areas – like driveways and gardens. When you purchase strata titled property, your conveyancer will review extra documentation such as the Owners Corporation’s Certificate in the disclosure statements, to check for potential risks such as large upcoming expenses i.e. Repainting the complex, replacing the roof, etc.