You’ll come across lots of unfamiliar words during the conveyancing process. To make things easier, here is a list of words that you might want to understand the meaning of…
Auction: A public sale of a property that is sold to the highest bidder. When buying at auction or on the same day as auction, there is no cooling off period.
Building Report: A report by a licensed builder inspector that details the general condition of a building and highlights any significant structural defects. It is very important that a buyer obtains a Building Report prior to exchange, because when you commit to buy a property, you are buying it in its present condition.
Caveat: A notation placed on a Certificate of Title by a third person who claims to have another interest or right in that property.
Certificate of Title (Title Deed): The legal document issued by the Department of Lands that identifies the owner of the land and anything else that may affect it – such as a mortgage, a covenant, a restriction or an easement.
Commercial property: Property used mainly for commercial, retail or industrial purposes.
Community plan: A plan that divides a parcel of land into community lots and common property. Within the community plan can be areas set aside for such things as a swimming pool or gym.
Community title: Title to land within a community plan.
Contract of Sale (contract): This is the written agreement between the buyer and the seller that sets out the main terms and conditions of what has been agreed – such as the property, the price and the names of the parties.
Conveyance: The legal process required to transfer ownership of real estate
Conveyancer: A person licensed by Government to advise on and prepare documents to transfer or convey ownership of real estate.
Cooling off period: Purchasers of a residential property sometimes have a period of 5 working days after exchange in which to “cool off” and withdraw from the contract. However, if they do so, they forfeit 0.25% of the purchase price (so on a $400,000 property, this would be $1000). There is no cooling off period if the property is purchased at an auction or on the same day as an auction. Also, sometimes a purchaser is allowed to provide a Section 66W Certificate which is signed by a conveyancer and has the effect of waiving any cooling off period. This would normally be done only once the purchaser is completely satisfied that everything is in order with the contract, finance and the property itself.
Covenant: A notation on a title which would place restrictions on what can and cannot be done with the property. For example, a property might have a covenant that states that no fence can be erected or that a house cannot be more than one storey in height. It is important to get very clear advice on covenants, as some may have been on title for over 100 years and may not be relevant anymore.
Department of Lands: The Government department that administers the title system of NSW and retains records of who owns the land. Previously known as the Land Titles Office (LTO) and Land & Property Information (LPI).
Deposit: It is normal for a deposit to be paid by the purchaser upon exchange. Generally this is 10% of the purchase price, but can sometimes be negotiated to be a lower amount. The deposit can be paid by cash, a deposit bond or a deposit guarantee from a bank or insurance company.
Disbursements: These are the additional costs incurred during the conveyancing process that are passed on to the buyer or seller. These include things like building and pest inspections, strata reports and survey reports.
Easement: A legal right granted to a person to use the land belonging to another for a particular purpose, e.g. a neighbour may have an easement to drain water across an adjoining property.
Encumbrance: A burden or charge registered on the title to the property such as a mortgage.
Exchange of Contracts: This is the moment the sale becomes binding. There are two identical contracts, one signed by each party to the transaction and the contracts are “exchanged” so that each party holds the contract signed by the other party, the deposit is paid at this time and the contracts are dated on the day of exchange.
Fee Simple: The property is owned as freehold (absolute ownership).
Final Inspection: A purchaser is entitled to, and should always have, a final inspection of the property prior to settlement to make sure that the property is in the same condition as when first inspected and to see that all inclusions are left in the property.
Finance: Finance must be organised before you commit yourself to purchase a property. The contract is not normally conditional on finance approval and once you are committed to buy you must complete the contract regardless of whether you have finance to do so or not. If you are unable to complete the purchase you stand to lose the deposit paid and also to be sued for any loss that the seller may incur.
Fittings & Fixtures: Certain parts of the property that may or may not be removed upon sale. These should always be specifically nominated as an inclusion or exclusion in the contract to avoid any misunderstandings when the property is handed over. These include items such as blinds, curtains, light fittings, carpets, ovens, dishwashers, security systems, air conditioners.
Freehold: The highest level of ownership of property (which means you actually own the property, rather than lease it).
Home Loan: The funds a buyer will borrow (usually from a bank or other financial institution) to assist in the purchase of a property, generally secured by a registered mortgage to the bank over the property being purchased.
Inclusions and Exclusions: This is a list of the items at the property that are either included or excluded from the sale. These items are included in the contract so that both parties understand what is included in the selling price.
Land Tax: A state government tax payable by owners of a property (normally not their permanent place of residence) based on the value of the property.
Leasehold: Some property is actually a long-term leasehold. This applies to a lot of property around the Sydney foreshore where a lot of the multi-story buildings are on a 99-year lease. This means that the property is not freehold, and annual rent is payable.
Lease: An exclusive right to occupy land owned by someone else.
License: A non-exclusive right to occupy land owned by someone else.
Loan documents: The documents the lender requires a borrower to sign before the lender will advance loan monies to the borrower.
Mortgage: The security taken by a lender registered over the title to the property as a security for the loan. The property cannot be sold without discharging the mortgage (in other words, repaying the loan).
Mortgage Broker: A person or company who is employed by the borrower to find the best available loan product to buy property.
Mortgage documents: The documents the lender requires a borrower to sign before the lender will advance loan monies to the borrower.
Owners Corporation (previously Body Corporate): The amalgamation of all the owners of units in a strata building.
Off the Plan: Buying a property, usually an apartment, from seeing plans, before it is even built.
Pest Report: A report by a licensed pest inspector detailing whether building is adversely affected by pests such as termites and borers. It should be obtained by the buyer prior to exchange.
PEXA: Property Exchange Australia, a new electronic title and property exchange system being constructed by a cooperation between Banks and various State Government Authorities, including Land Titles and Stamp Duty. PEXA is intended to be operated across Australia.
Pre-approval: The preliminary approval of a home loan issued before the buyer has found a property to purchase. Generally all that is required is a valuation of the property to satisfy the security requirements of the lender. Usually issued for a stated maximum loan amount and conditional on a valuation being obtained for the property.
Refinance: The process of paying off a loan with the proceeds from a new loan using the same property as security.
Registered Proprietor: The person whose name appears registered on the Certificate of Title as owner of land.
Searches: A series of requests to various local government departments and councils to ascertain whether any money is owed or if there any proposals for the land (such as road widening or acquistions for public use).
Settlement: Also called ‘completion’. The event at which the purchase of a property is finalised. All parties attend (the legal representatives and financiers of the buyer and seller), exchange documents and money, and the property is formally handed over to the new purchaser.
Sewer diagram (Drainage diagram): A diagram issued by the local sewarage authority setting out the location of the main sewer line that may pass through the property.
Stamp Duty: A once-only tax charged by the State Government upon the purchase of a property and paid on the contract, usually at settlement. The amount of stamp duty payable is determined by the sale price of the property.
Statutory searches: The searches required by law to be contained in a contract for sale of residential property. The searches include title search, zoning certificate and sewer diagram.
Strata Report: A report written by an expert who has examined the books of the Owners Corporation to assess things like history of building, recent repairs undertaken, any disputes or areas under investigation, monies in the bank to cover repairs and maintenance and the likelihood of any special levies, insurances and by-laws. A strata report gives an overview of what is happening in the building that a buyer should be informed about. These reports are usually obtained by buyers prior to exchange where buying a strata title property.
Strata title: A form of title used for units and townhouses. It gives the owner membership of an Owners’ Corporation, and the ownership of a defined part of a building. Strata titles are registered under the Torrens Title system.
Survey: A diagram prepared by a registered surveyor, setting out the outside boundaries of a property and then plotting the location of any improvements such as the house, garage, swimming pool to ascertain that they are all built within the boundaries.
Title search: A certificate issued by the Department of Lands to someone who may want to enquire about the status of the property – setting out not only the owner of the property, but anything that may be recorded in the Department of Lands that may not be on the Certificate of Title itself.
Torrens Title: The system of title recording used throughout Australia. It is only necessary to look at one document to ascertain the full status of the ownership of the property.
Transfer: The actual document signed by the current owner of the property and the new purchaser, which is registered with the Department of Lands to record the change of ownership and facilitate the issue of a new certificate to the new owner.
Vacant Land: Vacant land on which a dwelling has not been constructed.
Valuation: A written report by a registered valuer showing his opinion of the value of the property. This is usually required by a lender so that they know what the market value of the property is.
Vendor: The seller.
Zoning Certificate: A certificate issued by a local council setting out the zoning of a property and what can be done with that property as far as building is concerned and anything else that may affect it – such as flooding or land slip, heritage issue that the purchaser should know what can be done with the property.