Often we hear people say “but I’m just selling my property, why do I need a good lawyer?”. There are many reasons why it pays to have a good, specialised property lawyer on your side when selling your property, and there can be significant financial consequences if you get the wrong advice. If you haven’t already done so, it’s also worth checking out our guide on an overview of the process for selling a property.
Preparing contracts for the sale of land
New South Wales has some of the most complicated property and conveyancing laws in the whole of Australia. There are many documents that are prescribed by the relevant legislation, including:
● The Real Property Act 1900 (NSW)
● The Conveyancing Act 1919 (NSW)
● The Conveyancing (Sale of Land) Regulations 2022 (NSW)
In particular, Schedule 1 of the Conveyancing Sale of Land (Regulation) 2022 sets out the documentation that must be attached to a contract for the sale of land, as well as what must be attached if the property being sold relates to a strata scheme, community plan, precinct plan, or a neighbourhood plan. There are also additional legal requirements when the contract relates to off the plan sales or options to purchase property.
In addition to this, there are certain warranties that vendors provide to purchasers which are implied into all contracts by the legislation, and which override any terms written into the contract by the parties or their conveyancing lawyers. These warranties are set out in Schedule 2 of the Conveyancing Sale of Land (Regulation) 2022 and include promises from the vendor such as:
The land isn’t subject to an adverse affectation.
The land does not contain part of a sewer belonging to a recognised sewerage authority.
The planning certificate attached to the contract specifies the status of the land in relation to the matters set out in the Environmental Planning and Assessment Regulation 2021, Schedule 2.
There is no matter in relation to a building or structure on the land included in the sale of the land that would justify the making of an upgrading or demolition order.
This is list is not exhaustive, and there are additional warranties that also apply to other types of contracts, such as put and call options. It is important your real estate lawyer or conveyancer has a strong understanding of the legal requirements to form a contract, as well as the warranties that apply, to ensure that your contract is prepared in a way that protects you.
A failure to attach the correct documents required to fully meet the vendor’s disclosure obligations, or a breach of one of the prescribed warranties may permit a purchaser to rescind (get out of) the contract.
Unfortunately we often see incorrectly prepared contracts, and it does sometimes result in purchasers rescinding their contracts. If that isn’t bad enough, in most cases where a deal falls through due to a deficient contract, the vendor will still be liable to pay marketing costs and a commission to their selling agent. This is because the real estate agent still did their job and successfully sold the property, however due to the vendor’s failure to meet their legislative requirements, the deal fell through. An issue like this can have a significant financial impact on you, as commissions these days tend to be in the tens of thousands, or hundreds of thousands of dollars.
Where a prescribed warranty is breached, in addition to potentially being able to get out of a contract, under some circumstances, a purchaser may be able to make a claim for financial compensation against a vendor, which can further compound the losses associated with a poorly prepared contract. It’s much cheaper to simply get an experienced real estate lawyer to deal with the sale of your property.
Negotiating real estate contracts in NSW – your conveyancer makes all the difference
Unfortunately, we’ve seen countless situations where deals have fallen through in the contract negotiation phase, because a party hasn’t received the right advice, or because a party’s conveyancer or legal representative has acted too aggressively, resulting in a prospective purchaser losing trust and the deal falling through. What’s worse, when this happens several times in a row because the vendor has the wrong legal advisor, the property can remain on the market for a long time and can start to be seen by potential buyers as ‘having something wrong with it’.
Having just one less bidder on your property can make a difference of tens of thousands, or even hundreds of thousands of dollars to your sale price, and it’s important to have a property law specialist on your side who can help cut through the complexities of negotiating a sale by not just providing you with legal advice, but also advising you on the commercial realities of your real estate sale. As a seller, just like it is important to understand what market value and potential sale price is for your property, it is also important to know what type of contractual terms are standard practice, what things will scare buyers away, and what is absolutely necessary to protect your interests.
Conveyancing deadlines when selling a property in NSW
Due to the conveyancing legislation constantly changing, the obligations of parties during the settlement period are also constantly changing. The standardised components of property sale contracts have also been rapidly and consistently updated over recent years, meaning that if you haven’t picked up a contract in a while, you may not be up to speed on the latest changes. It’s therefore more important than ever to ensure that your conveyancing solicitor is a specialist who is up to date on the law.
While under contract, vendors have numerous obligations which include the provision of Land Tax Clearance Certificates, the provision of certificates pursuant to section 184 of the Strata Schemes Management Act 2015 (NSW), and the provision of Foreign Residents Capital Gains Withholding Certificates, and other items which may be required on a case by case basis. They may also be required to answer lengthy lists of questions raised by the purchaser prior to settlement, known as requisitions on title.
Where these items are not provided to the purchaser in the form and timing required by law, or as required by the terms of the contract, a purchaser may have rights to delay settlement, which can result in increased legal and holding costs for you, and in serious cases may lead to a buyer having rights to make a claim against you for compensation, or even get out of the property sale contract.
Tax considerations on the sale of a property in NSW
Selling real estate is a big transaction and so it often comes with big tax considerations. Depending on your circumstances, the tax considerations on the sale of property might include land tax, surcharge land tax, capital gains tax, and goods and services tax. Some of these items are considered and included in the contract of sale, while others are not discussed in the contract, and so it is essential that you get an understanding of your tax obligations and have the contract appropriately drafted to give you the best tax outcome. Once the contract is signed, it’s often too late to make any changes, and you may lock yourself in to certain tax consequences.
Speak to an experienced property lawyer
As you can see from this article, it’s incredibly important to have a specialist property lawyer on your side when selling real estate, as there can be significant financial consequences if done incorrectly. At Thornton + King our expert property lawyers and conveyancers have decades of experience dealing with all types of property sales. Our team includes multiple Law Society Accredited Specialists in property law. If you’re thinking of selling a property, we’d love to hear from you. Give us a call or submit an enquiry now.
