The Contract of Sale
When selling a property, a Contract of Sale must be prepared before a property can be marketed and shown to potential buyers. A Contract of Sale is a legal document setting out details of the property and sale terms, including, the purchase price; details of the vendor (seller); relevant information about the property; the amount of the deposit to secure the property; and any special conditions associated with the sale.
Your lawyer will also discuss with you the fixtures and fittings which are to be included in the sale of the property. A fixture is anything which cannot be easily taken away without doing damage to the property and includes such things as built-in wardrobes, carpeting, baths and stoves.
GST withholding notification requirements
From 1 July 2018 purchasers of new residential premises or potential residential land must withhold any Goods and Services Tax (GST) liability payable by the vendor from the contract purchase price and remit this directly to the Australian Taxation Office (ATO).
These reforms essentially affect all off-the-plan purchases or purchases of vacant land in a new subdivision.
Vendors selling residential property will need to notify purchasers in writing whether or not they will be required to withhold GST at settlement and, if so, provide relevant details including their ABN and GST amount. The notice may form part of the contract or be provided separately.
Exchange of Contracts
Exchange of contracts is a critical part of the process. This is where the vendor and purchaser check, sign, date and swap contracts and the purchaser pays a deposit to the vendor (usually 10%). Your lawyer will attend to the exchange of contracts with a representative of the purchasing party.
Once contracts have been exchanged, the property is no longer on the market, the purchaser has committed to buy the property and the vendor has committed to sell.
In most cases, the purchaser has a period of 5 days after exchange of contracts within which they can pull out of the sale by providing you with written notice. This is known as the “cooling off period”. In some cases the purchaser waives the cooling off period, particularly if all searches and inspections have been completed.
Preparations before settlement
After exchange of contracts, your lawyer will take steps to ensure that settlement can take place, including finalising and reviewing all documents required for settlement; communicating with the purchaser’s lawyers – regarding directions as to the distribution of settlement funds; the mortgagee – to make arrangements to ensure the mortgage is discharged on the date of settlement; and the real estate agent – regarding payment of their commission and release of any deposit held by them.
At settlement, all the relevant parties meet to exchange legal documents and transfer title of the property from the vendor to the purchaser and to arrange final payment of the purchase price. If there is a mortgage on the property, it is discharged at settlement. Settlement commonly takes place 6 weeks after the date of exchange of contracts.
After settlement, your lawyer will notify relevant organisations that you are no longer the owner of the property.
If you need any assistance contact one of our lawyers at firstname.lastname@example.org or call +61 2 9212 2422 for a no-obligation discussion and for expert legal advice.