How does a solicitor help when you are selling a property in New South Wales?
It’s important to carefully consider who you will choose as your solicitor when deciding to sell your property. This article is intended to provide a general overview only, and it is important that you obtain legal advice specific to your individual circumstances.
Understandably, when selling a property many people want to choose the lowest cost solicitor, or even a conveyancer, in order to reduce costs and maximise their net sale proceeds. Unfortunately,this is not the best approach as expert advice goes a long way, and there are many things that can go wrong in a property transaction.
1. Preparation of your contract
It is a legal requirement for a contract for the sale of land to be available before your real estate agent can begin marketing your property for sale. The contract for sale of land is prepared by your solicitor. After taking your instructions and understanding what it is you are selling, they will prepare a contract so that your real estate agent can commence the sale process. In New South Wales, the contract must include a variety of different prescribed documents in order to be legally binding. At a minimum, this includes things such as:
- Title information – what appears on the title deeds to the land, and whether the property is affected by any restrictions or obligations that run with the land.
- Plans of the land – where the property is located and how big it is.
- Strata or community information – if the property forms part of a strata or community scheme, a copy of the by-laws and the title information for the scheme will also need to be included.
- Zoning and planning requirements – a section 10.7 certificate from the local council will disclose certain details about the area in which the property is situated. This can include things such as minimum lot sizes, whether the property is affected by bushfires or flooding, and whether the land is contaminated.
- Sewerage and drainage diagrams – These show the location of the water board’s sewer main, as well as the connection point to your property.
Your solicitor will usually also prepare contract terms and conditions which are designed to protect you in case something goes wrong during the transaction.
2. Negotiating with potential buyers
Usually negotiations regarding price will be conducted by your real estate agent, however potential buyers will have their own solicitors review the contract that has been prepared, and it is common for them to negotiate amendments to the contract.Potential amendments can include things such as the timing of settlement, the obligations of each party, any conditions of settlement, and what happens in case of a death, insolvency, or dispute before the transaction is completed.
A contract is a legally binding document which can have significant consequences. It is essential that you have a solicitor who is experienced in property transactions to negotiate these terms for you.
3. What if the contract is incorrectly prepared?
An incorrectly prepared contract can have terrible consequences. These are just some of the things that can go wrong:
- Missing prescribed documents – if a vendor fails to attach all of the documents to a contract which are prescribed by law, the purchaser may be able to terminate the contract and recover their deposit. This means that your sale will fall through. If a sale falls through because a purchaser validly terminates the contract, you may lose substantial costs such as legal expenses, marketing expenses, and in most cases you will also still be liable to pay your real estate agent a commission for the sale. Add to that the costs of re-marketing the property and the additional holding costs arising out of the delay, and the cost of such a mistake can easily be tens or even hundreds of thousands of dollars.
- Inadequate disclosure – sometimes it is advisable to disclose certain things in a contract, to eliminate the risk of purchasers making legal claims against you. For example, if there are building encroachments or illegal renovations that have been carried out to the property, failing to disclose it in the contract can allow a purchaser to claim compensation from you, or to terminate a contract, recover their deposit, and take you to court to recover any further losses from you.
- Tax consequences – the sale of a property is a significant financial transaction and accordingly it can have tremendous tax implications. In particular, liabilities regarding Land Tax, GST, and Capital Gains Tax are dealt with in the contract for sale of land, and the costs of an incorrectly prepared contract can cause you to incur tax liabilities in the hundreds of thousands or even millions of dollars.
4. Arranging execution of the contract
Once the contract and the terms have been negotiated, the contract is usually signed in counterparts. This means that there will be one contract signed by the purchaser, and another identical contract signed by the vendor.
The purchaser will usually pay a 10% deposit into the real estate agent’s trust account, which is to be held as security for their performance of the contract. The parties will then date the contracts and exchange their copies. This process is called an ‘exchange of contracts’ and is the point at which the contracts become binding.
Your solicitor will check that the contracts and any amendments have been signed properly and in accordance with any applicable laws, in order to make sure that the contract is legally binding and enforceable.
5. Completing the settlement process
Once contracts have been successfully exchanged, the solicitors for both the purchaser and vendor will arrange for the terms of the contract to be carried out. This will include things such as:
- Verifying and making adjustments for outstanding rates and taxes.
- Answering requisitions or questions raised by the purchaser’s solicitors.
- Arranging for any existing mortgage on the property to be discharged.
- Transferring title of the land to the purchaser.
- Ensuring that the net sale proceeds are paid to you.
Unless your transaction meets a limited number of exempt transactions, your settlement will need to take place electronically using an online conveyancing platform such as PEXA, and your solicitor will need to be a subscriber to such a platform.
6. How do I choose the right solicitor?
Selling a property is an important legal transaction. Often it can be one of the largest financial transactions you enter in to over the course of your life. With a median housing price of $1.3m in Sydney, it does not make sense to choose a solicitor or conveyancer based on minor differences in pricing. There is no point trying to save a few hundred dollars in fees, when the potential consequences of receiving the wrong advice can be many thousands or even millions of dollars.
Instead, you should choose a solicitor who has extensive experience dealing in property transactions. An approachable solicitor with knowledge and expertise behind them can go a long way in protecting your legal interests.
You can contact an approachable and experienced property solicitor by clicking here
** General Advice Warning
The information provided on this website is general in nature only and it does not take into account your personal needs or circumstances into consideration. Before acting on any advice, you should consider whether the information is appropriate to your needs and where appropriate, seek professional advice in relation to legal, financial, taxation, mortgage or other advice.