What is conveyancing and how does it work?
Conveyancing is a key part of buying and selling property, and involves far more than simply signing on the dotted line and transferring ownership – so what do you need to know before you start the process?
If you are going to buy or sell your home, an investment property or a piece of land, you will have to sign various legal documents. ‘Conveyancing’ is the term used to refer to the legal work involved in preparing the sales contract and other associated documents.
Conveyancing encompasses the preparation, execution, verification and lodgement of these documents and generally involves three stages – before contract, before completion and after completion. In the past, conveyancers were sometimes referred to as ‘land brokers’.
Put simply, conveyancing is the legal term for the processes associated with transferring the legal title of property from one party to another.
Conveyancing can involve the following steps:
• Examining the contract for sale
• Arranging building and pest inspections
• Examining a strata inspection report
• Arranging finance
• Exchanging the contract of sale
• Paying the deposit
• Arranging payment of stamp duties
• Preparing and examining the mortgage agreement
• Checking if there are outstanding arrears or land tax obligations
• Finding out if any government authority has a vested interest in the land or if any planned development could affect the property
• Finding out any information that may not have been previously disclosed, such as a fence dispute or illegal building work
• Calculating adjustments for council and water rates for the property settlement
• Overseeing the change of title
• Completing any final checks prior to settlement
• Attending settlement
Source: NSW Fair Trading
There are three options for completing your conveyancing works: engaging a licensed conveyancer, using a solicitor or doing it yourself.
Who does conveyancing?
The licensing laws for conveyancers, and the bodies who govern and monitor these professionals, vary from state to state. In NSW, for example, conveyancers must be licensed with NSW Fair Trading.
Conveyancers are generally licensed to prepare the legal documents related to the exchange of property and give legal advice on contacts.
Solicitors can also perform your conveyancing works, in addition to providing you with legal advice on matters relating to the contract for sale and the contract terms.
If you’re going to use a professional to do your conveyancing works, it’s best to engage them as soon as possible. Rather than waiting until just before you sign the contract, it’s recommended that you select your conveyancer as soon as you decide to buy or sell.
Conveyancing is much more complex than simply signing forms, ticking boxes and filling in the blanks. With this in mind, even though it is legal for the buyer and seller to use the same conveyancer – and it can appear incredibly convenient to do so – it can be a recipe for further complications and delays.
A conveyancer is employed to work for you, give you advice and be your advocate during the transaction. If a conveyancer is working on behalf of the buyer and the seller, they must stop if a conflict of interest arises – ie, if they cannot offer the same advice to both parties. This can cause significant delays and unnecessary stress.
DIY conveyancing
While it is possible to do your own conveyancing, most people prefer to engage a professional to avoid the stress, complexities and potential mistakes that come with DIY conveyancing.
If you choose the DIY approach, make sure you research what is required and fully understand the risks involved.
DIY conveyancing kits are available, but these generally only act as a guide. Following the instructions won’t absolve you from any personal responsibility if the transaction goes wrong.
NSW Fair Trading cautions property buyers and sellers that if you do your own conveyancing, you become wholly responsible for the sale progressing in a legal manner – so you need to make sure you fully understand the process and all the relevant legislation.
If you undertake the conveyancing works yourself, it’s important to bear in mind that you cannot expect any assistance or advice from the conveyancer acting on behalf of the other party.
Mistakes during the conveyancing process may cause a delay to settlement – meaning you may have to pay default interest. Depending on the size and scope of the error, the other party could use it as grounds to terminate the contract.
There is no legal requirement for you to engage a conveyancer, but understanding the ins and outs of property sales and the complexities of property contracts is no mean feat – even for an advanced property investor.
Conveyancing and private sales
If you are conducting a private sale (ie, not buying or selling through a real estate agent), you could be forgiven for thinking many of the other professionals traditionally involved in the transfer of property can also take a back seat.
All of the same forms are required for the sale to proceed lawfully though, and you still need a contract of sale. It’s important that you fulfil all your legal obligations, and a licensed conveyancer will help you here.
A similar situation arises when you are looking to transfer a property to family or friends. Changing the registered ownership of a property involves many of the same processes as when you are selling.
However, unless they hold additional licenses, convenyancers generally cannot provide detailed financial or taxation advice on the impact of transferring your property’s ownership.
Conveyancing costs
There is no standardised costing model for conveyancing, so how much you pay will vary between solicitors and conveyancers.
You will be charged a legal service fee for engaging the solicitor’s or conveyancer’s services, and you may also be charged for disbursements including: a title search, certificate fees, photocopying, registering the mortgage and the transfer.
In addition, the conveyancing process can involve paying for the building and pest inspections, survey report, mortgage establishment, home building insurance, valuation fees, mortgage insurance, stamp duty, mortgage duty, levies, and council and water rates.
Make sure you ask your solicitor or conveyancer upfront about the maximum you can expect to pay in fees and charges – including for the additional services listed above.
How long will the conveyancing process take?
There is no hard and fast rule for how long the conveyancing process will take. There are three stages involved in conveyancing – before contract, before completion and after completion – and delays can occur anywhere along the way.
It’s important to bear in mind that there are multiple parties and variables involved in the conveyancing process, so timeframes will vary.
In most cases, your conveyancer can start providing services and advice from the moment you start looking through contracts, and will progress right through to settlement when the legal documents are exchanged and final payments are made. Conveyancers will also assist you with the official transfer of the property.
There are a number of key dates to be aware of during the conveyancing process, one of which is ‘the contract date’. This is the date when all parties have agreed to the contract’s terms and have signed on the dotted line. The contract date can often act as the reference point for other dates throughout the process – eg, ‘30 days after the contract date’.
This part of the process can also be called ‘exchange’ and indicates when the binding legal contract to buy and sell comes into effect. This is when the deposit is usually paid and held by a third party, such as a real estate agent, solicitor or conveyancer until completion of the contract.
It’s also important to be aware of when the cooling-off period ends. The cooling-off period is a timeframe during which the buyer can terminate the contract with limited financial ramifications. It is essentially a window of opportunity for buyers to change their minds and walk away from the purchase.
Buyers and sellers should also be mindful of the financial approval date. This date dictates when the buyer must inform the seller that financial approval has been secured. This date may not be applicable if financial approval has been arranged ahead of the contract date.
Building and pest inspection dates also dictate when the buyer must inform the seller of their satisfaction (or lack thereof) with the inspections they have obtained. You should complete your inspections as soon as possible to ensure you meet this date and can negotiate any changes based on the findings.
The final important date in the conveyancing calendar is the settlement date – when settlement of the transaction is scheduled to occur. The balance of the purchase is paid over and the title is transferred to the buyer. This is when the purchaser officially takes possession of the land and/ or property.