The Law Handbook 2024

Chapter 6.2: Buying or selling a house 557 • purchased within three business days on either side of the publicly advertised auction date; • is a selling agent or company; or • has bought a commercial or industrial property. Common elements of a conveyancing transaction Contract of sale A contract of sale is prepared by the vendor’s solicitor or conveyancer. A contract of sale contains the terms of the purchase, the parties’ details, the purchase price, how it is payable, a description of the property and chattels, and the day that possession of the property is available. Before you sign a contract of sale, you should seek legal advice. Some estate agents will accept offers via email or text message but most will ask buyers to do as follows: • the buyer signs the contract of sale with their preferred price, settlement date and amendments to any of the conditions; • the written offer is given to the vendor; and • once the vendor has accepted the buyer’s offer and signed the contract, the vendor’s agent sends copies of the signed contract to the vendor, the buyer and their solicitor or conveyancer. Note that when a buyer signs a contract of sale, they are effectively making an offer to the vendor. A buyer is bound by the offer once the vendor accepts it by countersigning the contract. At an auction, a vendor’s acceptance should be immediate. If a property is sold by private treaty or agreement, the vendor may accept the written offer immediately or they may take a few days to accept the offer. It is recommended that the buyer set a timeframe within which their written offer is valid (this is usually three clear business days from the day the buyer signs the contract, unless a different period is specified in the contract). Deposit A deposit can be paid in one sum, or as a pre­ liminary deposit and balance. The deposit should be the smallest sum the buyer can negotiate. It is general practice for a deposit to be 10 per cent of the purchase price. A deposit is usually paid when the buyer signs the contract of sale. The SL Act requires the vendor’s agent, solicitor or conveyancer to hold the deposit in a trust account. It is a criminal offence for the person holding the deposit to use it for their own purpose. If the vendor wishes to receive the deposit before settlement, a statement under section 27 of the SL Act must be given to the buyer (see ‘Section 27 statement’, above). If the vendor breaches the contract, the deposit must be returned to the buyer. In contrast, if the buyer breaches the contract, the vendor keeps the deposit. If both the vendor and buyer agree, the deposit can be put into an interest-bearing account in their joint names. However, paying the deposit from the account requires the signature of both the vendor and the buyer. While this practice allows interest to be earned, the accessibility of the deposit is diminished. This is usually only done for very long settlements. Another option that may be desirable for a buyer, where there is a longer settlement, is a deposit bond (see ‘Guarantees and deposit bonds’, above). Sometimes a contract states that the deposit must be paid directly to the vendor’s solicitor for investment in an interest-bearing account until the contract settles. Solicitors, not agents, can arrange these accounts. When this is the case, the buyer needs to provide their tax file number to the vendor’s representative. Co-ownership If a property is purchased by more than one indi­ vidual, each individual is required to note in the contract of sale their respective interest, or how the property title is to be shared (e.g. Mickey: 40 per cent; Minnie: 60 per cent); this is known as ‘the manner of holding’. Buyers need to choose one of four options: 1 The property is held jointly – each individual has an equal share in the property (if one buyer dies, the surviving buyers automatically receive equal portions of the deceased’s share, regardless of any contrary provision in the deceased’s will); 2 The property is held as tenants in common – each individual has an equal share in the property (individual buyers can choose who receives their share in their will);