Don’t stress about your settlement day. With a little knowledge and the right preparation, you’ll be unpacking boxes in your new home before you know it.
What is Settlement?
Property settlement is a legal process of transferring a property from a seller to a buyer which is conducted by the buyer’s legal and financial representatives and those of the seller that sees ownership of a property pass from the seller to the buyer, when the conditions of the standard contract for the sale are fulfilled and the buyer pays the balance of the sale price.
The settlement date is set in the contract of sale. As a general rule, property settlement periods are usually 30 to 90 days, but they can be longer or shorter.
Before a property settlement can occur, both the buyer and the seller must have signed a contract of sale.
In Western Australia, the standard residential sales contract has two sections which are the Contract for Sale of Land or Strata Title by Offer and Acceptance (the O & A) and the Joint Form of General Conditions for the Sale of Land (General Conditions).
The General Conditions are the contractual conditions that apply to the O & A which include such matters as:
• encumbrances – a claim against the property, often impacting its transferability or restricting its use, by someone who is not the owner of the property.
• payment and holding of the deposit;
• settlement, delays in settlement and if penalty interest may apply;
• possession of the property (including vacant possession);
• default and interpretation of terms.
The O & A also covers any special conditions to the contract which may include:
• where and when the buyer will obtain finance from;
• any repairs the seller has to make to the property; and
• whether any inspections are to take place, such as building, plumbing, pool and termite inspections.
Setting a time for settlement
A useful guide in setting a date for settlement is 28 days after either an offer becomes unconditional or the buyer’s finance approval is received.
Under the General Conditions, the seller must give the buyer an opportunity to undertake a final inspection of the property within five business days prior to the settlement date or the possession date.
If you’re buying a new home, make sure all the work is finished and that the appliances are installed and working. You can organise a defects inspection by a building inspector if you don’t feel confident checking these things yourself.
Buyers are encouraged to inspect the property during this time to check that the property is in the same condition as when the property was originally inspected. Items to consider checking during the inspection include:
• the stove and any appliances;
• Hot water system;
• Heating and cooling;
• the taps and lights;
• the pool if the property has one and any associated equipment;
• walls, window and floor coverings are in the same condition as when you first saw the property; and
• locks, keys and automatic garage door controls are supplied and working.
Often tasks associated with a settlement are complex, so many sellers and buyers choose to appoint a settlement agent or solicitor. An experienced Perth lawyer can assist clients, whether they are buyer or selling property, and handle their settlements for them.
At settlement, the settlement agents or solicitors representing the seller and the buyer will meet either at the buyer’s financial institution or at Landgate and the balance of the purchase price will be handed over to the seller’s representative and the buyer’s representative will ensure that documents are registered so that the title reflects a change of ownership. The settlement agents or solicitors will inform the seller, buyer and real estate agents that settlement has been completed. Arrangements will be made for the keys to be handed to the buyer.
At settlement, the buyer’s and seller’s representatives also ensure:
• all conditions of the O & A have been met;
• transfer duty, if applicable, has been paid to the Office of State Revenue;
• the property is free from restrictions on the transfer of the title; and
• all documents presented at settlement are correctly signed and registrable.
Possession at settlement
Once settlement takes place, the property should not be occupied. A seller who has lived in the house that is being sold can remain until noon on the day after settlement. The seller must deliver to the buyer on settlement, or on possession, all access devices such as keys and security codes.
Before the buyer takes possession of the property, the seller must remove all vehicles, rubbish and chattels, other than the chattels sold with the property such as dishwashers or light fittings.
If the property is rented, Buyers should be aware of any tenancy agreement which may legally affect the ability of the seller to deliver vacant possession.