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Buying a home

The purchase of a home is probably the biggest financial transaction most people will make during their lifetime, yet it is usually undertaken without the benefit of legal advice.

Basically there are two types of homes: a dwelling situated on its own block of land or a dwelling that is situated on property shared with others (called a home unit or strata title unit). A person who is about to purchase a home should first think carefully about the type of home wanted, the features required and then make all possible inquiries about the relative costs involved.

For additional information on buying a home unit which may be on a strata or community title, see 'Buying strata or community title'.

Titles

A title is the right to ownership of real property (i.e. land). Prior to the development of the Torrens Title system for registering land interests the old English land law was difficult, time consuming and expensive.

To satisfy themselves that the vendor actually held the title to the land they were selling, under the old English system, a purchaser of land had to inspect all the written records of dealings relating to the land in question going back many years. In England the custom was to limit the search to 60 years, but in Australia the purchaser had to examine all documents in the ‘chain of title’ going back to the original Crown grant. This practice proved very difficult in the new colony of South Australia, particularly in a time when land speculation was rife with land changing ownership frequently.

Even with the most exhaustive and thorough of searches, under the old system, a purchaser still could not be guaranteed they had absolute certainty of title. For example, where a document was forged even the most exhaustive search could fail to detect this and the purchaser would not be protected when the forgery was discovered. In the same way, if a key document was lost then a person’s claim to title would also be destroyed.

The Torrens Title system was created to provide certainty. The innovation of this system was to create a central register of land where all dealings with individual parcels of land are recorded. Title to land, either as the owner, mortgagor, mortgagee, lessor or lessee, is passed upon registration of a transfer, mortgage or lease and the State guarantees the correctness of the register. Each parcel of land is identified by a unique register book volume and folio, so when larger parcels are subdivided into a number of new titles, new volume and folios numbers are created to identify the land.

The Torrens title system is described as a system of title by registration, meaning that the fact of registration of an interest (such as a transfer or mortgage) creates an indefeasible interest in the parcel of land. There are exceptions to this principle, including fraud or forgery. Legal advice should be immediately be sought if an interest in land is created without the registered owner's authority.

The Real Property Act 1886 includes other measures introduced to facilitate electronic conveyancing, and protect against fraud. These measures include:

  1. Verification of identity by a conveyancer or lawyer dealing with the transaction;
  2. Verification of authority to enter into the transaction;
  3. Authority given to the conveyancer or lawyer to sign documents;
  4. Priority Notices;
  5. Title watch service, which is a free online subscription service to alert property owners to activity on a certain parcel of land.

Further information about verification of identity requirements and verification of a person's authority to enter into the transaction can be found at sa.gov.au .

Other Types of Interest

Land can be held under a strata or community title, or it can be subject to a Crown Lease. A Crown lease means that the owner is the Crown, and the lessee (tenant) usually pays a nominal rental for effectively unlimited use of the land, but does not own it.

Another type of interest that is much less common is a moiety title or company title, which typically covered maisonettes or attached cottages, means that the person owns a share of the whole of the land and leases a defined portion of the land for himself or herself from the other owner or owners. Most of these types of title have been converted to strata title or more recently, community titles. Banks are very reluctant to lend on this type of title given the uncertainty of the type of holding.

Lands Titles Office

The Lands Titles Office holds all certificates of title over land electronically. A copy of the certificate of title for a parcel of land can be purchased online from the SA Integrated Land Management System (SAILIS) at www.SAILIS.sa.gov.au or over the counter from the Land Services Group. For further detail about the information that can be found on a certificate of title and other searches see Getting title information.

Duplicate certificates of title are no longer issued in South Australia, as part of the introduction of electronic conveyancing, and are no longer used as unregistered security for real property.

Further information about electronic conveyancing is available from sa.gov.au .

Buying strata or community title

Before signing a contract for the purchase of a home unit that is on a strata or community title, a person should make sure they understand the operations and finances of the strata corporation. On application by an owner or prospective buyer, a corporation must provide information on the following:

  • How much money must be paid for the upkeep, maintenance and management of the common areas, including arrears owing on the unit being purchased.
  • Assets and liabilities of the corporation.
  • Details of any expenses incurred or about to be incurred by the corporation, such as painting or gutter replacement.
  • Copies of minutes of general meetings and management committee meetings for the last two years.
  • Statements of accounts and financial records of the corporation.
  • Articles or by-laws of the corporation currently in force.
  • Current insurance policies.

The corporation may charge a fee for providing copies of this information.

Checklist

Before you buy a unit or lot, ask yourself these questions

Have I sought independent advice on the documents relating to the corporation?

What system does the corporation have for resolving disputes?

What are the rules about having other people visiting and parking?

Are there any unpaid contributions owing on my unit or lot?

How do the contributions and other charges compare with other corporations?

Is there a ‘sinking fund’ or reserve of money held by the corporation for emergency expenses and major maintenance costs such as painting?

Will the unit, building or site be accessible if I am disabled and require a wheelchair or walking aid? If not, can suitable modifications be made easily?

What maintenance services are provided? What are the charges for these?

What are the restrictions on the use of my unit/lot and the common property?

Can I store my caravan/boat/bicycle?

Are pets permitted?

Is the corporation planning any major expenditure that I may be asked to contribute to?

Are there any structural problems in the building?

Have I seen a copy of the plan that defines my unit or lot? Do the boundaries of the unit/lot agree with boundaries shown on the plan?

If a community scheme, what level of the scheme am I buying into? Is it a primary, secondary or tertiary scheme?

For further detailed information about strata titles, including changes to the Strata Titles Act that commenced in 2013, is available here. Additional information about community titles is found here.

Getting title information

All certificates of title for land in South Australia are held electronically. On payment of a fee, anyone can do a search on property details contained on a certificate of title, either online or at the Lands Titles Office. It is possible to obtain a copy of the certificate of title which will including information such as:

  • the owner of the land
  • any registered constraints such as a mortgage or a caveat
  • the legal description of the land
  • survey information

Other separate searches can be done to show information such as:

  • historical transactions
  • the price and date of the last sale of the property
  • the statutory values of the property that are currently used for rating and taxing purposes
  • the actual land use
  • improvements on the property

Duplicate certificates of title are no longer issued in South Australia.

It is possible to suppress certain details about the registered proprietor of a property if there is a risk to someone’s safety as a result of the information being made publicly available. For more information, contact the Lands Titles Office for an application pack.

Caveats

What is a caveat?

A caveat ( from the Latin word for 'beware') is a warning or caution. Where a person has an unregistered interest in real estate a caveat can be lodged to give notice of their interest and to prevent any further dealings with a property until the interest can be registered. In any dealings with land, registered interests are given priority over unregistered interests so a caveat is required to give the person affected notice of any dealings with the land in question and time to formalise their interests.

Only interests connected to the land can be the subject of a caveat

When lodging a caveat the interest claimed must attach to the land. Interests that commonly are the subject of a caveat are unregistered mortgages or leases or equitable interests in the property. An example of an equitable interest is where a couple purchase a property together but the title is in the name of one spouse only.

If a person is seeking to enforce an interest unconnected with the land itself, such as recovery of a debt, a caveat is not the appropriate remedy. An order can be obtained from the Court to charge the property with the judgment debt, known as a charging order, but this is not the same as a caveat. Legal advice needs to be sought regarding preparing an application to the Court for a charging order, and the steps required to register the judgment and then discharge the order once the debt is paid.

Types of caveats

An absolute caveat will not allow any subsequent registrations of interests.

A permissive caveat will allow further registrations if they are made subject to the caveator’s (the person who lodged the caveat) claim. Some permissive caveats require any further dealings to obtain the caveator’s written consent.

Removing a caveat

If the caveatee (the person against whom the caveat is directed) objects to the caveat, an application can be made to the Registrar General for its removal [see Real Property Act 1886 s 191(e)].

The Registrar General will send a notice to the caveator giving 21 days notice of his intention to remove the caveat. If the caveator wants the caveat to remain he or she must make an urgent application to the Supreme Court within 21 days from the date of the notice (so it will be less than 21 days allowing for postage).

If the Court is persuaded that there is an arguable case to keep the caveat, and that there is not some other remedy available to the caveator, the Court can make an order to extend the time for removal of the caveat until such time as any dispute about the caveat can be resolved. This may be by way of negotiation or after a trial. The sealed order of the Court extending the time for removal must be given to the Registrar General before the caveat lapses. There are significant costs involved in this process, and legal advice needs to be sought to ensure that there are proper grounds to keep the caveat. A legal practitioner is best placed to give advice regarding specific situations, and if required, prepare the Court documents.

In certain circumstances, for example, if the caveat has been lodged by a beneficiary under a will or by the Registrar General, an application for removal cannot be made.

Liability for lodging a caveat unnecessarily

Where a caveator has lodged a caveat unnecessarily they may be liable to pay compensation [see s 191(j)].

Lodging a further caveat

No further caveat can be lodged by the same person in relation to an interest previously the subject of a caveat without a Court order [see s 191(k)].

Getting Advice

The Lands Titles Office is unable to assist in preparation of caveats and related documents.

It is very important to get professional advice from a legal practitioner or conveyancer regarding a caveat before acting to ensure that the document is properly worded and completed. In addition, any warning to remove a caveat should be acted on immediately because once it lapses the opportunity may be lost to protect an interest in real property.

Forms and guidance notes are available on the sa.gov.au website.

Priority Notices

The priority notices regime was introduced into South Australia in April 2015, following the commencement of Part 13A of the Real Property Act 1886 (SA).

Priority notices reserve priority for an unregistered interest in land, and give notice to the rest of the world of a proposed registration of an instrument (which is a document such as a transfer or a mortgage). For example, when property is sold, the purchaser may register a priority notice for the transfer. If the purchase is being financed by way of a mortgage over the property, the Bank may also lodge a priority notice.

Priority is a way of establishing who has the first interest in property, and because the Torrens System is a system of title by registration, priority (or “first in time”) is an essential feature.

Lodgement of a priority notice is not mandatory, but may become a matter of good conveyancing practice. Fees for lodgement of a priority notice are quite low, compared to the lodgement of an instrument, and there is no fee to view or amend a notice. This reflects the temporary nature of the priority notice.

A priority notice lapses after 60 days if the instrument (such as a transfer or mortgage) is not lodged, but the notice can be extended a further 30 days. If the instrument is lodged, the priority notice remains in effect until registration is complete. If a priority notice lapses without registration of the instrument, a fresh one can be lodged, but it will not keep its priority if other notices are lodged first.

A self-represented party may only lodge a priority notice in person at the Lands Titles Office. Practitioners have access to an on-line system to allow notices to be easily lodged and amended.

A priority notice prevents registration of instruments that are not identified in the priority notice. However, there are exceptions to the priority rule – so a priority notice does not prevent the registration of a caveat, charging order, warrant of sale, workers liens, statutory charges and other similar instruments. [Real Property Act 1886 (SA) S154B]

If a person lodges a caveat to protect an interest in a family law situation or a deceased estate, assuming that the basis for the caveat is established, the caveat will take priority over the interest in the priority notice. Unlike a caveat, the registered owner of the property is not notified of the lodgement of a priority notice.

A registered proprietor of land may apply to the Registrar-General to have a priority notice cancelled. The Registrar-General also has the power to cancel a priority notice if satisfied that the interest is unlikely to be registered within the 90 day period. [Real Property Act 1886 (SA) S154F]

Electronic Conveyancing

In 2016, South Australia introduced electronic conveyancing as part of a national framework to allow completion of real property transactions by registered practitioners (either lawyers or conveyancers) online.

Certain types of transactions must still be completed on paper. In particular, an Application to Register a Death of a joint registered proprietor (whether as a tenant in common or joint tenant) remains a paper transaction and advice should be sought from a legal practitioner or registered conveyancer to complete the right forms to ensure that the transaction is completed effectively. Further information is found here.

For more information about electronic conveyancing, visit the sa.gov.au website page on National Electronic Conveyancing.

Land agents

Purchasers should always remember that the land agent (also know as the real estate agent) works for the vendor (the seller) and is paid by way of a commission on the sale. Not only is it the agent's duty to obtain the best possible price for the vendor, but the agent's income depends, to a large degree, on doing so. However, the agent is also expected to deal fairly with the buyer.

For further information about the obligations owed by real estate agents in relation to the conduct of the sale of a property, including information about the sales agency agreement, marketing and auctions see Selling a home.

Real estate agents must be licensed under the Land Agents Act 1994 (SA). Consumer and Business Services is responsible for licensing agents and a search may be made of the Register. Consumer and Business Services is also empowered to commence prosecution proceedings (within 5 years of the alleged offence) against a land agent, property manager, sales representative (or their employees) for breaches of the Land Agents Act 1994 (SA), such as those relating to inappropriate use of trust account monies.

Agent Indemnity Fund

The Agents Indemnity Fund was established under the Land Agents Act 1994 (SA) and the Conveyancers Act 1994 (SA) to provide compensation for people who suffer financial loss because of the wrongful actions of a registered land agent, conveyancer, or property manager (or one of their employees).

The fund is managed by Consumer and Business Services and they decide whether claims are paid out and how much can be paid.

Whilst there is no time limit for lodging an application, it is recommended that a claim is made as soon as possible.

A claim can be made for the full amount of the financial loss suffered but any amount a person manages to recover must be deducted from this total. It is also possible to claim any reasonable legal expenses that have been incurred in taking legal action to recover the loss. If intending to claim legal expenses it is best to seek advice from Consumer and Business Services early on to understand exactly what expenses can be claimed.

Examples of the sorts of matters that can be claimed are:

  • where an agent absconds with a deposit
  • where an agent fails to pay a landlord the rent money a tenant has paid them
  • failure to complete work already paid for
  • where a person is left with a GST bill because the land agent has failed to forward the GST to the Australian Tax Office
  • where money being held on trust is stolen

Claims must be in writing and there is a form available online from Consumer and Business Services.

See section 29 of the Land Agents Act 1994 (SA) regarding the indemnity fund.

The contract

By law, any agreement for the sale and purchase of land must be in writing. This is whether the property is bought at auction or by private treaty. More information about the methods of sale and the process is set out in the following sections.

The most often used contract is a standard form contract approved by the Real Estate Institute of South Australia, although some practitioners use a standard form contract prepared by the Law Society of South Australia.

Even this contract should be checked by someone with special knowledge of real estate contracts - especially if any term has been deleted from, or added to, the contract to suit the individual circumstances. If the contract is not a standard form and is one drafted to include special provisions, you should seek independent legal advice about the terms.

The agent must give a copy of the signed contract to the buyer [see Land and Business (Sale and Conveyancing) Act 1994 s 21]. However it is not a binding contract until it is accepted by the vendor and a Form 1 notice has been given to the purchaser. The Form 1 contains some very important information about the property and your cooling off rights. Please refer to the section on the Form 1 and Cooling Off below.

The terms and conditions of the Real Estate Institute's standard form contract are discussed and explained in order in the following pages. The first page of the standard form contract is the contract note, which sets out details (usually filled in by the land agent), such as:

  • the names and addresses of the vendors and the purchasers
  • an exact description of the land being sold (and whether the whole or a part)
  • details of the chattels (that is, the fixtures and fittings) that are included (or not) in the sale
  • the purchase price
  • how it is to be paid
  • the settlement date.

The purchaser

The purchaser is the person buying the property. If property is to be owned by two or more people (or other types of legal entities), it is important to decide before the contract is signed as to how the property will be held once it is transferred. The different types are set out below.

Joint Tenants

Property can be put in the name of the purchasers as joint tenants. In this case, if one dies the other automatically becomes the sole owner and a simple document registering the death of the deceased party results in the survivor obtaining full title to the property. Neither owner can sell the property (without coming to an arrangement with the other) or bequeath his or her share of the property to someone else. However, either owner can still deal with their own interest, for example, they can sell their share to someone else.

Tenants in Common

Property can also be put in the names of the purchasers as tenants in common. Under this arrangement, when one dies the survivor does not automatically become the owner of the property, as the deceased party is entitled to bequeath his or her share to someone else. This type of ownership is of advantage where a number of unassociated people are contributing unequal amounts to the purchase of the property. It is possible to describe the varying proportions which they have contributed and which they will ultimately own in the home.

Sole Ownership

Finally, the property can be put in the name of only one of the parties contributing to its purchase. This can lead to complications in the event of the death of one of the parties or if they separate, therefore legal advice should be sought by the party whose name is not to be placed on the certificate of title, whether that person is contributing in monetary terms or as a spouse or domestic partner of the purchaser.

Fixtures and fittings

Chattels are goods that may be included in or excluded from the sale. Generally, a fixture or a fitting is included in the sale of land, but it is sometimes unclear what is a fixture or fitting. To avoid disputes it is essential to set out in the contract all the items which are included or excluded from the sale.

Some items form an integral part of the home but may not be included in with the sale because they are still being paid off. The additional expense of taking over payments, or the cost of replacing the items, should be taken into account when the purchase price is agreed. The same applies to items that would normally be included with the home but the vendor wants to keep. These are called excluded chattels.

The removal of chattels (for whatever reason) can sometimes lead to expensive repairs, which should also be a consideration when fixing the purchase price.

The purchase price

Marketing Residential Property

Representations in advertisements or made orally by agents as to the likely selling price for land can either be a single figure or a range but cannot include symbols. The lower figure must not be less than the estimate given by the agent as expressed in the sales agency agreement (which is the agreement entered into between the seller, or vendor, and the agent). The upper figure must not be more than 110% of the lower limit of the range. For example, it is acceptable to state the price as "between $420,000 and $440,000" but not to state "mid-$440,000's".

These rules are designed to prevent "underquoting", when consumers may be attracted to a property because of an apparently affordable price, and then outlay money on a building inspection for a property that then sells for a price way over the advertised selling price, or even over-commit themselves to a property that they may not be able to afford.

Penalties apply to agents who breach these rules, and agents are also prevented from demanding or receiving commision or expenses. See S24A of the Land and Business (Sale and Conveyancing) Act 1994.

Communicating an Offer

Once a purchaser has decided on a price they are willing to pay for property, the offer along with any special conditions (such as whether the contract will be subject to finance or the sale of another property or a satisfactory building inspection) needs to be communicated in writing to the vendor via the agent (or sales representative). This can be done in one of two ways:

  1. By having the purchaser sign a contract which complies with the Land and Business (Sale and Conveyancing) Act 1994 regulations - that is the document clearly states that the contract will become binding if accepted by the vendor; OR
  2. By having the purchaser complete a document that clearly states that it is not a contract, and the sale will only become legally binding if both parties sign a contract.

The agent is not permitted to disclose the terms of any offer to other purchasers at any time before the sale. Copies of the offers must be kept by the agent.

Once the Offer is Accepted

If the vendor accepts the offer, depending on how the offer is communicated, a contract needs to be completed. Once signed by both vendor and purchaser, the contract is legally binding. Depending on the conditions of the contract, and the delivery of the Form 1, the purchaser has a number of rights which may bring the contract to an end. These are discussed in more detail below.

The price agreed for the sale is usually expressed on the contract in words and figures. Care should always be taken if there is any suggestion made that some amount other than the agreed purchase price should be shown on the contract - say for the purpose of obtaining a loan or to avoid stamp duty. The purchaser is bound to pay the price shown on the contract, except in the most unusual circumstances.

Rent to Buy Schemes

In South Australia rent-to-buy schemes are prohibited - see S6 of the Land and Business (Sale and Conveyancing) Act 1994. Rent-to-buy schemes are arrangements where the purchase price is paid in instalments and settlement does not take place until the full price has been made. As a consequence the purchaser does not hold the title and therefore has limited rights. Should they or the vendor (who is likely to have borrowed to finance the loan to the purchaser) fall into default they risk losing possession, any possibility of ownership and will be unable to obtain any refund for money already paid. In addition, a purchaser cannot be asked to pay for a property in instalments prior to the settlement date. Any sales contract which requires payment of part of the purchase price prior to settlement, other than a deposit, is void.

The purchase price cannot be paid by more than three installment payments. A payment may be requested after signing the contact and a second payment after the cooling off period and the balance of the purchase price on the day of settlement.

Settlement

The date when the balance of the purchase price is exchanged for the certificate of title is called the settlement date.

The usual time for settlement is 30 days, although it can be longer (up to 3 months) to allow for other events to take place. At settlement, both the purchaser and the vendor are represented by a conveyancer, who prepares all of the necessary documents to transfer the property. In addition, all outstanding rates and taxes are to be paid, as well as collecting the purchase price and discharging any mortgages, caveats or other interests to ensure that the incoming owner gets clear title to the property. Any mortgage to secure the purchase price is also registered at this time. Keys are then made available to the purchaser and possession is handed over.

Land agents cannot decide who does the conveyancing. If either party is uncertain who to use, the agent may suggest two or three names. Whilst using the same solicitor or conveyancer seems to be cost-effective, if there is a dispute, each person will need to appoint someone else to avoid a conflict of interest.

General conditions of the contract

To most people the important part of a contract is the part they sign, which sets out the names of the parties to the contract, the subject of the contract (in this case the property being bought and sold), the price and the date of settlement. However, the terms of the contract are carefully set out in the other part of the contract. It is this part of the contract that requires the most careful attention.

Some of the conditions set out on the second and subsequent pages of the standard form contract are explained under the following headings.

Possession

Usually vacant possession is provided by the vendor on the date of settlement. However, it might be that there is a tenant in the premises, who has the right to remain in those premises for a certain time. If vacant possession is not given full details must be included in the contract. Advice can be obtained from the Tenancies Branch of Consumer and Business Services on 131 882.

Payout or assignment of contracts on chattels

The contracts on chattels (goods in the house such as stoves, airconditioners, etc) that are still under a lease or consumer credit contract but are to be included in the purchase must either be paid out by the vendor (so that a clear title to those chattels can be passed to the purchaser) or assigned to the purchaser. It is unwise to take on the obligations of the vendor in this way, and in any event, the credit provider may refuse to accept an assignment.

Memorandum of transfer and assignment

The purchaser is required to deliver to the vendor all documents that are necessary to effect the transfer of the land.

Whilst a person can prepare their own documents, given the complexity of doing so, it is wise to engage a lawyer or conveyancer to ensure that all documents are correct. The staff at the Land Services Group cannot help members of the public to prepare their documents and long delays can be experienced if the documents are incorrectly prepared.

Deposit

The law in South Australia allows only a token maximum deposit of $100 to be paid on signing a contract to purchase. In practice this is not usually required. If the purchaser 'cools off' the initial deposit (up to $100), if paid, is forfeited to the vendor [Land and Business (Sale and Conveyancing) Act 1994 (SA) s 5].

If the purchaser does not cool off a further deposit will usually be payable once the cooling off period has expired. The total deposit is usually 10% of the purchase price. On completion of the transaction the deposit becomes part of the purchase price. The purchase price can not be paid by more than three instalment payments. The deposit may be used for either the purchase price or to pay the land agent's commission and expenses.

A deposit can be something other than cash - for example, it can be a car or a caravan, if the vendor agrees.

Misdescription of land

An omission or error in the description of the land (a misdescription) does not invalidate the contract. However, both the vendor and the purchaser are entitled to compensation from their opposite party if that party is responsible for the misdescription.

If any doubt exists about exactly what land is being purchased, a survey should be undertaken. This applies especially to rural blocks. A purchaser should always make sure that the description of the land is correct.

Insurance risk

Once the contract is signed by both parties, a purchaser assumes the risk for any damage to the property and must take out insurance against damage to the house or buildings on the land, or even destruction. A cover note can be obtained to put insurance in place immediately. The vendor is required to take reasonable care of the property and keep it in the state it was in at the time of sale.

Default by purchaser

This clause sets out in some detail all the various rights and obligations when a purchaser cannot meet the terms of the contract. It is very risky to sign an unconditional contract when there are matters that have not been properly addressed, given the risks of losing the deposit or even being sued for losses suffered if the property cannot be re-sold at the same price.

Seek the advice of a lawyer or conveyancer before signing an unconditional contract to ensure that you understand all the risks associated with the failure to complete a contract.

Default by vendor

This clause sets out what happens when a vendor fails to meet the settlement. Once the contract is signed, the vendor is committed and has no cooling off period. If the vendor wishes to impose conditions on the contract which are unreasonable, a purchaser should re-consider whether buying the land is a wise decision.

A purchaser who is in a position to settle may be greatly inconvenienced if the vendor is not able to settle on the agreed date, for example there may be costs associated with storage of furniture and effects, and alternative accomodation. As a general rule, these costs can be claimed from the vendor.

The schedule

The schedule to the contract provides space for listing information concerning any encumbrances, tenancies, notices and encroachments affecting the property.

For example, if the house is tenanted, the schedule should set out the details of the lease agreement and its expiry date. Both the vendor and purchaser should ensure that the schedule is clearly set out and should satisfy themselves that all matters have been listed.

Special conditions

A contract for the sale of residential land sold by private treaty (that is, not at an auction) that has no special conditions is said to be unconditional. A property purchased at auction is generally unconditional, although it may be possible to negotiate terms such as the amount of the deposit or the date for payment of a deposit. It is very important to understand the conditions of the contract.

If a contract includes special conditions, and any of those conditions are not fulfilled the contract will lapse and the vendor must put the property back on the market, or re-negotiate the terms of the contract with the purchaser.

Common examples of special conditions are:

Purchaser obtaining finance for the purchase: This condition should be quite specific, and will give details of the credit provider, the interest rate and when the finance should be finalised. It is prudent to ensure that finance is arranged before signing a contract to make the contract more attractive to a vendor.

Sale of the purchaser’s home: Depending on the state of the housing market, a vendor may not want to take the risk that the purchaser’s property will sell within the time specified. The condition should specify a date for a contract to be signed, and every effort should be made to ensure that settlement of both properties occurs on the same date to avoid additional costs.

Satisfactory building inspection: Usually a building inspection can be arranged at short notice, and most vendors are happy to allow an inspection to take place prior to an auction or the making of an offer, or during the two day cooling off period. It is therefore somewhat unusual for a vendor to accept a contract subject to a satisfactory building inspection.

Repairs or removal of rubbish: Any assurances by the vendor regarding the state of the property should be very clearly set out. Depending on the type of work (if it is significant or simply tidying) it may not be sufficient to justify rescission of the contract, but rather a claim for the cost of performing the works.

A purchaser must make 'every reasonable endeavour' to fulfil any special condition. If the special conditions are not met, the contract lapses and becomes unenforceable, that is the vendor cannot insist that the purchaser buys the property (special performance) or sue for damages for breach of contract.

The agent has no authority to refund the deposit, as the agent is not a party to the contract. Any refund must be authorised by the vendor. A purchaser can be asked to provide evidence that reasonable efforts were made to fulfil a special condition.

If a property is being purchased from a mortgagee in possession, there will often be complex special conditions to protect the mortgagee. If you do not understand any of the special conditions in any circumstances, it is wise to seek legal advice or speak to a conveyancer.

Advice before signing the contract

Many people do not realise that a contract to buy real estate is usually for the purchase of the land, not the house. Obtaining a building inspection prior to signing a contract is highly recommended, although if a contract is signed the purchaser can also use the 2 day cooling off period to arrange an inspection.

If there is anything wrong with the house there is not likely to be any remedy against the vendor (seller) unless there was a specific representation about the condition of the property either made by the real estate agent or the vendor prior to the entry into the contract, and it can be shown that the representation influenced the purchaser’s decision to buy the property.

Form R3 Buyer’s Information Notice (see S13A of the Land and Business (Sale and Conveyancing) Act 1994) must be made available to prospective purchasers when attending an open inspection or an auction. The Notice is a very useful checklist of matters that may affect the enjoyment or value of the land (for example, checking if any renovations have council approval or if any of the trees are significant) or the safety of anyone going onto the land (for example, the safe fencing of swimming pools or any asbestos that may be on the land).

Purchasers of recently built or renovated houses are protected against faulty construction for five years from the date of the work by the Building Work Contractors Act 1995 (SA). Advice regarding dealing with these types of problems should be sought from Consumer and Business Services in the first instance.

The boundaries can be surveyed by a registered surveyor to be sure that the land has been fenced in accordance with the certificate of title. If there is any encroachment onto adjoining land, or if a fence has been built inside the proper boundary line, this is the time to remedy the mistake. If there is any dispute it is the boundaries shown on the certificate of title that will be upheld, not those marked by the position of the fence.

A licensed conveyancer will be able to give pre-contract advice to prospective purchasers, although obtaining a quote for the cost of the advice is recommended first.

After signing the contract

After the contract is signed by both the vendor and the purchaser, the vendor (usually via the agent) is required to give the purchaser a Form 1 under S7 of the Land and Business (Sale and Conveyancing) Act 1994. This is also known as the Vendor’s Statement, and it contains important information about the land, and the purchaser’s right to cool off.

The Form 1 is prepared by the agent (if there is one representing the vendor) and the agent must also certify that all the right inquiries have been made, and that the particulars are accurate and complete. A defective Form 1 can have an effect on when the cooling-off period begins to run, although purchasers should not be expected to double-check all the information.

Information contained on the Form 1

The Form 1 is in a number of parts and includes:

· Details of the parties to the contract (Part A);

· Information about cooling off (Part B) (NB for further detail regarding cooling off, see below); and

· Certification by the vendor or the agent that the Form 1 contains all the required particulars (Part C) and that the particulars are accurate (Part D).

The Schedule then sets out all prescribed particulars in relation to the land, including mortgages, charges or prescribed encumbrances affecting the property and specifies which will be discharged on or before settlement. These should be discussed with the land agent and any suggestion that a particular item need not be of concern (such as a road widening plan or a zoning requirement) should be independently checked.

S10 of the Land and Business Sale and Conveyancing Act 1994 requires that the Form 1 is accurate at the time of service on the purchaser, and if it is not, the Form 1 is considered to be defective and may extend the time for cooling off. If there is any doubt about the information contained in this part of the Form 1, a purchaser should seek advice immediately.

Any transactions involving transfers of the property that have taken place in the past twelve months are also shown on the Form 1, as it gives an indication of whether the home is being resold after a facelift or has actually been a long standing family home. If the former, full inquiries should be made as to the reason for the resale. A more thorough examination of the property can be made (for example, to look for hidden salt damp) as the previous owner may have discovered something that will seriously affect the home in the future and is reselling to avoid it.

With strata title units and community titles certain information must be given when requested such as extracts from meetings detailing rules and guidelines for the operation of the group, see strata and community titles.

Information not contained on the Form 1

While a Form 1 sets out various matters that a vendor is required to reveal, other matters may not be so easily discovered, as many factors that may seriously affect a purchaser's enjoyment of a home are not required by law to be disclosed, and therefore will not be in the Form 1. The Form R3, made available to prospective purchasers during the marketing period serves as a useful checklist for purchasers to make their own inquiries about such matters.

The vendor does not have to reveal information beyond the boundaries of the property. Ask the neighbours and the local council to ascertain whether or not there are any proposals relating to neighbouring land that could affect the peaceful occupation of the property.

Cooling-off period

The purchaser's rights to 'cool off' are set out in Part B of the Form 1 [Land and Business (Sale and Conveyancing) Regulations 2010 Schedule 1].

The cooling off period expires at the end of the second clear business day from the day on which the Form 1 is served on the purchaser. The two business days does not include weekends or public holidays, nor the day on which the Form 1 is served.

The purchaser has the right to cancel the contract during the cooling off period by serving notice on the vendor by writing to the vendor or agent stating that he or she does not wish to be bound by the contract. No reason has to be given. The notice can be given to the vendor or their land agent in person, or by leaving it for the land agent at their place of business. Notice can also be given by posting it to the vendor's address via registered mail, or by faxing it to either the vendor or their agent. The time at which the notice was sent is taken to be the time at which the notice is given when determining if it was given within the 2 day limit.

From 1 January 2014, a cooling off notice may also be given by email. It is very important to keep a copy of the cooling off notice and evidence that it was sent. In the event of a dispute about whether notice was given, the purchaser has the onus of proof.

This right should always be exercised if, at any time after signing the contract, the purchaser has any doubts about the purchase.

There is no cooling off period if the property is bought at auction. Care should be taken to view the Form 1 prior to auction to ensure that there is nothing unexpected about the property.

If a purchaser does cancel the contract within the 2 day cooling off period, any deposit paid of more than $100 must be refunded.

From 1 January 2014, bodies corporate (companies) that purchase residential land will be able to exercise the right to cool off. Residential land confined to land where there are up to 2 places of residence, or vacant land on which a residence can be lawfully constructed, or a single community lot or strata unit for residential purposes, but not land greater than 2.5 hectares. The provision is designed to protect small companies who purchase property for investment purposes.

During the cooling off period

The cooling off period is designed to give a purchaser an opportunity to get any building inspections or other assessments done on the property, as well as given some time to rationally and calmly consider the location and suitability of the property for the purchaser’s needs.

However, the cooling off period is insufficient time to obtain finance for the purchase, and it is always wise to carry out any investigations before making an offer, or if there is any doubt, make the contract subject to a satisfactory building inspection or obtaining finance. See above Special Conditions.

Waiving cooling off rights

Sometimes the vendor or their agent will want a purchaser to waive their cooling off rights as a condition of the sale. This will usually be the case where an offer is made prior to auction for a property scheduled for auction. As a purchaser it is important to understand that waiving the right to cool off will mean that the purchaser will not have a chance to conduct a building inspection or arrange finance for the purchase during the cooling off period. A purchaser will also not be able to rescind or cancel the contract simply because of a change of mind.

To waive cooling off rights a purchaser needs to obtain a certificate from a solicitor which states that they have advised the purchaser about the ramifications of waiving the cooling off period. Therefore, if the purchaser is asked to waive cooling off rights, a purchaser will need to arrange to see a solicitor in order to meet this requirement.

After settlement

Settlement is the date on which the property is transferred, and payment is made to the vendor to complete the sale. All mortgages supporting any money borrowed to pay for the property are registered and the keys are handed to the purchaser, who then becomes the registered proprietor.

After the settlement date there should not have to be any further dealings between the vendor and purchaser. However, for a number of reasons there may be problems.

Condition of the property

On moving into the home a purchaser may find that certain items do not work or are in an unexpected condition. The item may not have worked when the purchaser first inspected the property.

Provided the vendor (or agent) did not misrepresent its condition (see the contract) the purchaser will have no claim against the vendor. This emphasises the importance of fully inspecting the property before agreeing to buy or during the cooling off period. This includes testing the taps, electrical systems, stove, heater and so on. Ideally, the property should be inspected by someone such as a builder. If it is proved that the agent or vendor misrepresented the condition of the property prior to the entry into the contract, the purchaser may have an action in damages to recover the difference in value. Legal advice should be sought.

Even if the property is fully inspected things can happen before settlement. For example, the hot water service might break down. Usually, a contract states that the risk (of any damage) passes to the purchaser once the contract is accepted.

So if things break down with normal usage, or if the house burns down accidentally, the purchaser has no claim against the vendor. To be able to claim from the vendor, the purchaser will have to prove that it is most likely that the vendor negligently caused the damage after the sale was entered into.

Items removed

The contract will say what is included in the sale and what is not, see fixtures and fittings. Yet despite this, vendors sometimes remove items such as curtains or light fittings.

If fittings and fixtures are included, this means those that the purchaser saw when first inspecting the property. It is not possible for the vendor to replace an item (for example, the curtains) unless the purchaser agrees. It is much safer for a vendor to replace the fixtures prior to putting the house on the market, rather than removing items after the contract has been signed.

If items are removed, the purchaser can make a claim for the return of the items. Depending on the value of the items, a claim could be made in Court for the return of the items. Legal advice should be sought before proceeding.

Abandoned goods

For a variety of reasons, items that clearly are not included in the contract (such as a car or personal items), may be left behind. The purchaser cannot obtain legal ownership of these items and should contact the vendor and insist that the items be removed. If this proves difficult it may be easiest to take the item and leave it with the vendor although advice should be first obtained.

If the vendor's address is unknown or there is no other way of forcing the vendor to collect the items it may be necessary to proceed using the provisions under the Unclaimed Goods Act 1987 (SA). Provided the goods should have been taken on the date of settlement, the purchaser must hold onto the items for three months. After this date, the goods may be sold, but if the cost of selling the goods would be more than their value, the goods may be disposed of by other means.

Depending on the value of the items, they may be sold or disposed of in one of the following ways:

  • value under $500 - sold or disposed of by any method
  • value $500 to $2 000 - sold by public auction or with the authority of the Court
  • value over $2000 - sold with the authority of the Court

Before conducting an auction to sell the goods, the person holding the goods must send a notice to both the owner and the Commissioner of Police . The owner must be given the opportunity to collect the goods although the purchaser can demand payment of any cost incurred and reasonable storage costs before releasing the goods. Any application to court is made to the Magistrates Court which can give permission for the goods to be disposed of as ordered by the Court. If the owner's whereabouts are unknown it will be necessary to advertise the auction and the court hearing date.

Once the goods have been disposed of any reasonable costs can be deducted from the proceeds and the balance will have to be paid to the owner or if that person's whereabouts are unknown, to the State Treasury.

If the goods are disposed of without following the procedures under the Act, the owner may have a claim against the purchaser. It is therefore important that people only proceed following the correct procedure. The Legal Services Commission has a free information sheet on Unclaimed Goods including copies of all the necessary forms.

This same procedure applies for any abandoned or unclaimed goods.

House and land packages

One way to acquire a home is to have one built. Usually the land is purchased first and a contract is entered into with a builder. Most of the finance will probably be obtained from a lending institution, which will pay over the money in stages during the building of the home. In most cases this ensures that the home is properly built.

Care should be taken about arrangements - sometimes called house and land packages - that offer a home to be built on land chosen by the purchaser, usually on low deposit with low initial payments. Any arrangement that calls for less than the usual deposit and less than the usual repayment figure inevitably means that the money has to be repaid at some future date. These arrangements should be looked into carefully and independent advice as to the liability and amounts of repayment in the future should be sought.

Auctions

Auctions are a popular means of selling real estate, particularly when demand is high. As a result of the boom in real estate commencing in the 1990s and the strong sellers market this reflected, a range of practices arose which were detrimental to consumers. These included practices such as ‘dummy bidding’ at auctions (which is now prohibited), over quoting by agents to secure listings and under quoting of properties well below the actual selling price (‘bait’ advertising).

Measures have been introduced to address ‘bait’ advertising, including additional measures commencing in January 2014 prohibiting representations as to the likely selling price that must not exceed 110% of the price agreed with the vendor. In addition, an agent must not represent the likely selling price using words or symbols - for example, expressions such as "$400,000+" or "mid-$400,000's" are prohibited from 1 January 2014. See S24A(2) of the Land and Business (Sale and Conveyancing) Act 1994 (SA).

The legislation governing auctions is contained in the Land and Business (Sale and Conveyancing) Act 1994 (SA) and the relevant provisions are discussed below.

Dummy bids

Dummy bidding occurs when real estate agents plant employees or friends to pose as bidders during an auction in a bid to create the impression of competition and drive the price up. A further variation on this has been for auctioneers to take bids from non-existent bidders. Responding to criticisms that such behaviour is misleading and deceptive, the legislation in South Australia has been amended to ensure greater transparency of the bidding process.

Under section 24N of the Land and Business (Sale and Conveyancing) Act 1994 (SA) a person cannot make a bid on a vendor’s behalf nor can an auctioneer take a bid if he/she knows that it was made by the vendor. Similarly an auctioneer is prohibited from suggesting that they have taken a bid at auction when in fact no bid was made. The maximum penalty for an offence under this section is a fine of $20 000.

Under section 24O a vendor may make up to three bids provided the following conditions apply:

  • the conditions under which the auction is conducted permit the making of vendor bids, and
  • before commencement of bidding the auctioneer announces that vendor bidding will occur, and
  • immediately before such a bid the auctioneer announces the bid is a vendor bid, and
  • the amount of any vendor bid is less than the reserve price

All prospective bidders at an auction must be registered before bidding and an auctioneer is prohibited from taking a bid from someone who is not registered. From January 2014, all bidders are to be identified by a unique identifier, which may be a number, letter, colour or some other unique identifying feature [see s 24K]. When a bid is taken the auctioneer must audibly announce the bid as having been taken from a bidder using the unique identifying feature. Failure to comply with S24K may result in a penalty of up to $10,000.

Collusive practices at auctions

It is an offence for a person to induce, or attempt to induce, any other person to abstain from bidding or limit their bidding at auction or do anything that prevents a free and open competition at auction [see s 24L]. The maximum penalty for this is $20 000. A person who themselves abstains or limits their bidding at auction as a consequence of collusion is also guilty of an offence for which the maximum penalty is $20 000.

An agreement or understanding under which one person will allow another to take over as the purchaser on making a successful bid is also prohibited as collusive practice under this section.

There are further offences prohibiting bidders from knowingly preventing or hindering any other bidders from participating at an auction under section 24M which attract a penalty of up to $20 000.

Further references

Consumer and Business Services provides a range of information and publications for vendors and purchasers of property.

Common forms of land ownership

Land can be owned by natural persons, a corporation or a trust. The most common forms of land ownership are as joint tenants or tenants in common.

Joint tenants

In a joint tenancy two or more persons own land together in undivided shares. Each owner has the right to sell or transfer their interest but they do not have the right to include their interest in their will. This is because a joint tenancy has what is called a ‘right of survivorship’. This means that on the death of one of the joint tenants their interest automatically passes to the remaining tenant or tenants.

Tenants in common

Tenants in common differs from a joint tenancy in that each owner has a quantifiable share. The words on the document creating the co-ownership will indicate whether it is a tenancy in common:

- Eg ‘To Mary, Richard and Sally in equal shares’

- Eg ‘To Richard in the proportion of a quarter share and to Sally in the proportion of a three quarter share’

Each owner can sell, transfer or include their share in their will (unlike a joint tenancy there is no right of survivorship).

Offers

When an offer to purchase residential land is made to the vendor’s agent or the agent’s sales representative, the agent or sales representative is required to pass this offer on to the vendor within 48 hours. This is the case even if the offer is below the vendor’s minimum acceptable price. However, although this is required by law, there is no obligation on the agent to prove to the person making the offer that it has in fact been passed on to the vendor.

The offer must be recorded in writing and contain the information prescribed by regulation 20 of the Land and Business (Sale and Conveyancing) Regulations 2010 (SA) before being signed by the person making the offer. It is the agent’s responsibility to take all reasonable steps to put the offer in the correct form and there are penalties for failing to do so.

See Land and Business (Sale and Conveyancing) Act 1994 (SA) s 21(1).

Where there has not been sufficient time for an offer to be recorded in writing, the agent or sales representative must ensure that the vendor has been notified of the proposed offer before any other offer can be accepted.

An offer is not legally binding and the person who has made the offer can withdraw it at any time prior to signing a sales contract. Sometimes an offer will be made by a potential purchaser by signing a sales contract for the offer amount. This will then be taken by the agent to the vendor. If the vendor then signs the contract, it becomes binding on the purchaser [see Land and Business (Sale and Conveyancing) Regulations 2010 (SA) s 20]. However, the purchaser will still have 2 clear days in which to cool off on the contract and can revoke the contract at any time during this period [see Land and Business (Sale and Conveyancing) Act 1994 (SA) s 5].

    Buying a home  :  Last Revised: Thu Dec 12th 2013
    The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.