Are verbal agreements binding?

The Property Law Act states that all agreements to sell land in Queensland must be in writing. This includes any amendment to the contract; therefore, if you wish to change the finance or settlement date, this needs to be in writing. Normally the solicitors for the buyer and seller simply swap letters. Notwithstanding, these people can still be held liable for verbal representations if the other person acted in reliance upon that representation. We generally recommend that all amendments and representations be confirmed in writing.

Can I have a survey?

The buyer of a property under an REIQ contract is entitled to have the land surveyed. This will normally involve a surveyor going onto the property, ascertaining where the corner pegs are located and drawing a map showing the location of the boundaries and the buildings on the property in relation to those boundaries.

If a neighbour's building extends onto the property being purchased, or a building on the property being purchased extends onto the neighbour's property, then you may terminate the contract. You may also terminate the contract if the area of the property is substantially different to what was represented to you. Due to the large costs of conducting surveys, most buyers will only obtain a survey when they are concerned about a building crossing the boundary.

Do contracts for the sale of land need to be in writing?

In the absence of a real estate agent, private negotiations are usually conducted verbally, with offers and counter-offers going back and forth between the buyer and seller. The question often arises as to whether a verbal agreement will create a legally enforceable contract. Unfortunately, if you reach a verbal agreement, you rely wholly on another's word, leaving the temptation open for them to accept a better offer, commonly referred to as gazumping.

Do I have to pay land tax?

You often see in contracts where you are buying land from a developer, a clause stating that the developer will not pay any land tax outstanding at the date of settlement but instead will give an undertaking to pay the land tax at a future date. The reason these clauses are inserted is due to the problems developers have had with the Department of Land Tax and getting refunds for overpayment of land tax.

While this presents a risk for the buyer, if the developer goes into liquidation, very few developers will delete the clause due to the problems they have had with the Department of Land Tax. Rather than attempt to get the developer to delete the clause, we suggest you check the financial viability of the developer.

Does it cost anything if I terminate the contract during the cooling off period?

If you terminate a contact to buy a property during the five day cooling off period and you have paid a deposit, then you incur a penalty fee equal to a quarter of a percent of the purchase price. Half of this fee is paid to the seller and the other half is paid to the real estate agent.

If you have not paid a deposit, then there is no penalty fee. In this situation, the seller does not receive anything and is entitled to claim the penalty fee from you or the real estate agent for failing to obtain a deposit. We therefore recommend that sellers not sign a contract until a deposit has been paid, unless there are exceptional circumstances.

Does the stove, dishwasher and any other fixture left on the property need to be in working order?

There is no warranty given under the standard REIQ contract for the sale of land that any fixtures or chattels remaining on the property need to be in working order. Therefore, you have no claim against the seller if you find the stove does not work when you move into the property. If you are concerned about whether a stove or hot water system works, you should check this out before signing the contract.

Is there a cooling off period?

Under the Property Agents and Motor Dealers Act, when a person signs a contract to buy residential property that person will have a cooling off period of five business days. The cooling off period commences from the day (or the next business day if it is a holiday) the buyer or his solicitor receives a copy of the contract. The buyer does not need a reason to terminate the contract during this period. The only penalty if the contract is terminated is .25% of the purchase price ($250 on $100,000) is deducted from the deposit.

What about safety switches?

Recent changes to electricity regulations now require the seller to notify the buyer whether the property has a safety switch or not. The safety switch only relates to the circuit covering the power points and not the lights or any of the other circuits.

If there is not a safety switch installed, then the buyer must - within ninety (90) days after settlement - install a safety switch. The seller must indicate on the transfer documents whether there is a safety switch installed or not, and this information will be passed onto the relevant government department.

What do I check before signing a contract to buy a unit?

While it is always recommended you have a solicitor to check a contract before you sign it, we suggest you pay close attention to the following:

The annual body corporate levies to see if they are reasonable. If they are too high or too low, this may cause problems in the complex. If they are too high this will devalue the unit. If they are too low then the complex may not be well maintained. Check the bylaws as these might interfere with your use of the property and in particular whether you want to have animals staying with you. How much money there is in the sinking fund. The older the unit, the more money you want in the sinking fund to cover building repairs. As a general rule, smaller complexes such as duplexes or three unit complexes will be privately run so the body corporate records may not be as well-kept as they are with a large complex. However, in return the costs of running the body corporate will be substantially less.

What happens if I find out that part of the house has not been approved by council?

If this is discovered after the contract was signed, then the buyer is responsible for obtaining the necessary council approval. If council became aware of this prior to the contract being signed and had previously issued a notice, then the seller must obtain the council approval. If the seller does not, then the buyer may pull out of the contract.

If, as a buyer, you are concerned that part of the house or any other structure on the property does not have council approval, we recommend that you insert a special condition into the contract requiring the seller to obtain council approval even if discovered after the contract was signed.

If, as a seller, you know that part of the building does not have council approval and the buyers are not concerned, then we recommend you insert a special condition into the contract whereby the buyer acknowledges that council approval has not been obtained for that part of the house.

What happens to furniture left behind?

Any furniture, equipment or other belongings that are not physically attached to the property which are left on the property after settlement are transferred to the buyers automatically.

The buyer does not have to accept these items and can instead insist that the seller remove them or pay the cost of removing them. Therefore, if you do not intend to remove all your belongings out of the house prior to settlement, then you need a written agreement with the buyer permitting you to store some of your furniture on the property - otherwise ownership will transfer to the buyers.

What happens to the alarm system when you sell your home?

The alarm system is normally considered to be a fixture and remains with the property. If the sellers wish to take the alarm system with them, they must specifically state this in the contract. No express warranty is given in the standard form of contract that the alarm system works. At settlement, the sellers must hand over all keys, coded or devices in the sellers' possession or control for all locks and security systems on the property.

What happens to the rental bond?

If you are buying a property that has a tenant in it and the tenant will be staying on after settlement, at settlement, your solicitor should receive a transfer of the bond held by the Rental bond Authority. The Rental Bond Authority will still hold the bond; however, it will now be recorded in your name rather than in the seller's name. If the bond was paid directly to the seller and not to the Rental Bond Authority, then the seller should pay that money to you at settlement and you should arrange for it to be deposited with the Rental Bond Authority.

If you are a tenant buying from your landlord, you should request that your solicitor collect at settlement a release of bond form so that you can lodge this with the Rental Bond Authority and collect your bond after settlement.

What is a body corporate?

A body corporate is a special type of company set up to manage the common property in a complex for a set of units. There is a community management statement which outlines how the body corporate is to be managed. Each unit owner pays fees to the body corporate for the ongoing maintenance of the complex.

From the body corporate fees paid by the unit holders, the body corporate must maintain, manage and control the common property, while also establishing rules and maintaining building and public liability insurance for the common property. The common property will usually include driveways and often the building containing the units.

The unit holders are also required to pay yearly fees into a sinking fund. These fees are retained by the body corporate management committee to fund large cost maintenance and capital works when needed.

What is a building covenant?

A building covenant is a restriction or requirement set out by the developer of a subdivision on the type of house/shed/fence that may be built on blocks contained within the subdivision. The building covenants form part of an agreement between the developer and the buyer of the block of land. It is important that when the buyer sells the land, even if a house has been constructed in accordance with the building covenants that they include in the contract, a clause requiring the new buyer to also be bound by the building covenants is included.

Building covenants are generally accepted as a good idea as they increase the value of the area and ensure that no substandard homes are built in that area.

What is a rates adjustment?

This is where the solicitors for the seller and buyer work out what proportion of the rates each of the parties pay. The normal procedure is that if a rates notice has been issued, then the rates will be paid using the purchase monies with the purchase price increasing by the buyer's share of the rates. If the rates have already been paid, then you will simply increase the purchase price by the buyer's share of the rates. If a rates notice has not been issued, then the purchase price will decrease by the amount of the seller's share of the rates. For example, if the rates were $600.00 and settlement occurred on 30 September, then the purchase price would increase by $300.00. This is assuming that the rates are paid half yearly.

What is an adjustment?

Solicitors often talk about a rates adjustment, rent adjustment and body corporate adjustment. What they are really saying is the purchase price has either increased or decreased depending on whether rates have been paid or not and the same with the rent or body corporate fees.

Because rates and body corporate fees are paid for a period of time and are usually paid half-yearly, then the seller (if the rates are paid) or the buyer (if the rates aren't paid) needs to be reimbursed, because that person will be paying the rates for the other party. The way they reimburse the seller or the buyer is to either increase or decrease the purchase price. This is why, even though the contract says you paid $120,000.00, you won't actually be paying $120,000.00 - it will be a figure slightly different to the purchase price.

What is an encumbrance?

An encumbrance is quite simply a legal claim on an estate. The most common types are mortgages, easements, warrants of execution and caveats. On the standard REIQ contract, there is a section in the schedule for the seller to insert the details of any encumbrances which will remain on the property after the property is transferred to the buyer. Consequently, the mortgage over the property should never be inserted as this will be released at settlement. If an easement is inserted, you should find out the details about the easement before signing the contract.

What is land tax?

Land tax is a tax levied on landowners by the State Government. There is a tax threshold which changes from year to year and is usually in excess of $400,000. The tax is levied on the value of your property, not taking into account any improvements on the property. The threshold for companies however, is usually only about $40,000 and therefore, when you purchase land from a company, there will usually be some outstanding land tax. The reason that solicitors do a land tax search is to ensure that there is no land tax outstanding, as the land tax attaches to the property and the current owner is liable to pay the land tax even though it may have been incurred by a previous owner.

What is stamp duty?

Stamp duty is effectively a tax levied by the State Government on the transfer of assets. Every time you buy a car, shares in a company and property you must pay an amount of money to the State Government based on the market value of the property. The State Government ensures that you pay stamp duty by refusing to register the transfer of property into your name before the stamp duty is paid and endorsed on the transfer. This is why solicitors require you to pay the amount of stamp duty to them prior to the settlement date so that they can ensure that at settlement the transfer is stamped.

Some of the larger conveyancing firms have the ability to receive stamp duty money at their office, thus allowing them to receive the legal expenses at settlement. It was intended that the GST would allow stamp duty to be abolished, but this is yet to happen.

What is the difference between a flat and a unit?

People often use these terms to describe apartments which form part of a complex. In Queensland, there is a special meaning given to these terms by solicitors. A unit is a property which forms part of a complex and is government by a "community titles scheme". Units will have their own separate certificate of title and may even have their own yard.

Flats, on the other hand, while forming a part of a complex, do not have a separate certificate of title and all the flats in the complex must have the same owner.

Flats are often an old building which has been converted from one residence into a number of residences. To do this, you need the council's consent. There are also a number of regulations with which you must comply on an annual basis. Because of the extra regulations applying to flats, it is strongly recommended that you consult a solicitor before signing a contract to purchase flats.

When can I get a reduction in stamp duty?

The buyer is generally entitled to a reduction in the amount of stamp duty payable on the purchase of a property where the buyer is going to reside in the property after settlement. The buyer must reside in the property within twelve months from the date of settlement to be entitled to the reduction. If the buyer has not previously purchased a residential property, then they may be entitled to a further discount if the purchase price is $500,000.00 or less.

If the property is vacant land, then the buyer must pay the full amount of the stamp duty even if they intend to build a house on the property within twelve months after settlement. If the buyer has never owned residential property before, then they may be entitled to a discount.

The buyer must reside in the property for a minimum period of twelve months. If the buyer claims the deduction but does not reside in the property, then they will be required to pay the full amount of the stamp duty plus a penalty, being the full amount of stamp duty again, if they fail to notify the Office of State Revenue that they are unable to reside in the property.

When do I need insurance?

Under the standard REIQ contract, the property is at the buyer's risk from 5:00pm on the first business day after the contract is signed by both parties. This means that if the contract was signed on Monday and the house burnt down on Tuesday night, then the buyer would still have to proceed with the purchase of the property. This is why most solicitors and real estate agents will advise you to take out insurance as soon as you have signed the contract. This is particularly so where you have a cash contract or finance has been pre-approved. If a contract is subject to finance, it is often recommended that the buyer obtain a cover note until finance is formally approved.

When does the cooling off period start?

The cooling off period starts when the buyer or the buyer's agent receives a copy of the contract signed by both the seller and the buyer. The buyer's agent will include a solicitor and a real estate agent employed by the buyer and paid by the buyer to find a property for them. It will not include a real estate agent who is involved in a conjunction sale with the listing agent.

A copy of the contract can be given to the buyer or his/her solicitor by facsimile. When a copy of the contract is delivered personally to the buyer, the real estate agent or seller should, as a matter of caution, require the buyer to sign an acknowledgement.

When should buyers tell their solicitor to notify the seller that finance has been approved?

Strictly speaking, buyers can tell their solicitor that finance is approved at any stage and do not need to wait for any type of confirmation from their bank. Prudent buyers will always wait until they have received a letter from their bank saying that finance is approved or an offer to provide finance without any conditions.

It is not unusual for a bank to confirm over the phone that finance is okay but then later on say that finance has not been approved. Likewise, if the letter from the bank says that it is subject to a valuation or mortgage insurance you should wait until the valuation or mortgage insurance has been approved. Remember that once you tell your solicitor that finance has been approved, you cannot pull out of the contract even if your bank will not loan you the necessary money.

Who can witness documents?

There is provision in a standard REIQ contract for both the sellers and buyers signatures to be witnessed. There is no strict legal requirement for the signatures to be witnessed; however, it is recommended that the signatures be witnessed by an independent party.

Unlike the transfer documents, the person witnessing the documents does not need to be a Justice of the Peace or Commissioner for Declarations.

The purpose of the witness is to stop parties denying they signed the contract at a later date.

Who is responsible for installing safety switches?

If no safety switch is installed, then the electricity regulations require the buyer to install the safety switch within ninety (90) days from the date of settlement. It is important to note that a lot of building inspectors are noting the lack of a safety switch as a building defect and this may allow the buyer to pull out of the contract.

If no safety switch is installed, it should be resolved prior to signing the contract who will install the safety switch - the buyer or the seller. As it is a building defect, we recommend the seller install a safety switch prior to settlement.

Who is Responsible for Maintaining the Outside of Units?

If you own a unit which is part of a body corporate you may wonder who is responsible for maintaining the outside of the unit. For example who must clean the gutters, repaint the outside and generally keep it in good condition. The answer depends on the type of unit complex. If it is a Building Format Plan (normally where the units seem to be part of one building) then it is the body corporate’s responsibility. If it is a Standard Format Plan (normally town houses) then it is the owner of the unit’s responsibility. This is notwithstanding that the body corporate pays for the insurance. Your solicitor will be able to tell you whether the unit you own is part of building or standard format plan.

Who pays the penalty fee?

Where a buyer terminates the contract during the cooling off period, the buyer may have to pay a penalty fee (25% of the purchase price) if a deposit has been paid. If no deposit has been paid, then there is no penalty fee payable and neither the buyer nor the real estate agent is required to pay any money to the seller. Where a deposit has been paid and a penalty fee is deducted from the deposit, the penalty fee is half paid to the seller with the other half being paid to the real estate agent.

Why use a conveyancer?

Buying a property can be a very easy process, as long as no issues arise and the seller's conveyancer is very helpful. In our experience, that almost never happens.

For example, even extending the finance approval date, if done incorrectly, can result in a buyer being penalised hundreds of dollars. Conveyancers, in addition to doing all the standard work necessary to ensure you become the registered owner of the property, also give you instant advice on what to do if any changes need to be made to the contract or a problem arises.

We have found that people who act for themselves often have problems in the following areas:

Changing the finance/pest and building inspection/settlement dates - Simply agreeing to change these dates over the phone is not sufficient or valid. Undertaking and checking the necessary searches - One person even handed over the purchase money to the seller without realising that the seller was no longer the registered owner of the property. Calculating adjustments that need to be made to the purchase price as a result of searches undertaken on the property. When acting for a buyer of a property, a conveyancer ensures your interests are looked after and will generally:

Check the contract and resolve any problems created by a mistake on the contract. Advise the buyer of any relevant dates such as building and pest inspections and contact the client on the relevant dates to ensure the buyer complies with all obligations. Undertake all necessary searches, checking the searches and advising the buyer on any issues that may arise as a result of the searches. Calculate adjustments that need to be made to the purchase price and correspond with the buyer's bank to ensure all requirements have been met and there are sufficient funds available at settlement. Using professional conveyancers provides the buyer with the added reassurance that all of their rights and obligations under the contract are attended to and the buyer is protected from any losses which could occur as a result of not doing so.