Conveyancing is full of legal jargon. Whether purchasing your first property or selling your home, the technical jargon can be overwhelming. At Provey, we make the conveyancing process as simple and stress-free for our clients as possible. We have compiled a short list of property terms below to help. The list is by no means a full list of all the jargon used, so feel free list out any other terms you wish to have clarified in the comments section below.
Certificate of Title
A Certificate of Title is a document that certifies who the owner is as it appears at the land registry. The certificate lists the owner of a given property and also records the registered covenants, mortgages and other third-party interests in the land. The Certificate of Title won’t always show current encumbrances as they get registered in real-time at the registry. Therefore, a Register Search Statement is required to obtain an accurate and current record of the registered owners, any encumbrances, caveats or notices.
If you hold an original Certificate of Title, it is important that you keep it in a safe place. Losing a Certificate of Title is costly should you wish to replace it (which will be required should you decide to sell). As the conveyancing industry moves toward an electronic process, traditional Certificate of Titles are quickly being phased out.
Contract of Sale
Once signed, a Contract of Sale is a legally binding document that outlines the exchange of a property from the vendor to the purchaser. It contains the terms of agreement between the parties and includes the purchase price, settlement date, property specifications (for off the plan apartments and units only) and any special conditions. The Vendor’s Statement also forms part of the Contract of Sale.
Cooling off period
Unless exceptions apply, purchasers are entitled to change their mind within 3 days after signing the contract. This period is called the ‘cooling off period’ giving purchasers a right withdraw from the transaction without any significant financial impact on them. The right to cool off comes at a cost of 0.2% of the purchase price or $100, whichever is greater.
A purchaser signing a contract at auction or within 3 days before or after auction does not have the right to cool off. Other exceptions apply.
Easement
An easement is the right of a third-party to use part of another party’s land for a specific purpose. A very commonly seen easement is the sewerage and drainage easement for the water authority’s right to use an owner’s land for supply of sewerage and drainage services.
Easements can restrict the manner in which the property is used, therefore it is essential to be aware of their existence. For example, you cannot build a swimming pool over an area reserved for a sewer main.
Encumbrance
An encumbrance is a claim on a property by a party who is not the owner. Examples include easements, mortgages, leases, covenants and caveats.
The most common encumbrance is a mortgage. It is the conveyancer’s responsibility to ensure that the vendor’s mortgage is discharged at settlement so that the purchaser does not take on the vendor’s mortgage.
Making an offer
When a property is advertised for sale, prospective purchasers are invited to ‘make an offer’. Making an offer is the act of signing a Contract of Sale to purchase a property, which if accepted (by the vendor counter-signing) will form a binding agreement between the vendor and purchaser.
A written offer can include special terms and conditions as well. For example, you may wish to make the contract subject to valuation, finance approval or a building and pest inspection. It is also possible to specify the number of days your offer is open for the vendor’s acceptance.
Once you have made your offer, the real estate agent will then present it to the vendor for consideration. Keep in mind that a vendor may reject an offer for reasons other than the price, such as the special conditions placed on the offer. For example, the vendor might reject your offer but instead accepts another similar offer due to that offer containing a shorter settlement period.
Register Search Statement
A Register Search Statement is a document which shows the information concerning a property’s title as recorded at the land registry (on the register of titles). As Victoria is under the Torrens system of ‘title by registry’, an update to date Register Search Statement is the most reliable source to ascertain information on the owner and the existence of encumbrances.
Strata title and Owners Corporation
Strata title is a form of ownership created for apartments, townhouses, units and even land subdivisions. When you purchase one of these properties, you become a member of an owners’ corporation. Strata title consists of individual properties (units, car park spaces, storage lots, etc) and common areas (driveways, lobbies and recreational facilities such as pools and gyms). When you purchase strata titled property, you are responsible for not only the upkeep of your own property, but for the upkeep and maintenance of common areas too. The owners’ corporation will be responsible for the common areas and a professional manager is usually appointed to carry out that responsibility on the owners’ behalf.
Vendors Statement
A Vendor’s Statement–also known as a Section 32 due to the legal requirement arising from Section 32 of the Sale of Land Act 1962)–is a document provided by the vendor to all prospective purchasers. A vendor must provide a signed statement to the purchaser before a Contract of Sale is signed, otherwise the contract is at risk of being rescinded by the purchaser. The Vendor’s Statement will usually contain a set of certificates obtained from various authorities (such as local council, water authority, State Revenue Office, Vic Roads etc) disclosing important information about the property. The following is a non-exhaustive list of information that can be found in a Section 32:
- Statutory warnings to the purchaser;
- Evidence of the vendor’s right to sell;
- Information regarding building permits issued in the past 7 years;
- Particulars of any mortgages or charges over the land (debts charged against the land);
- Information regarding other encumbrances such as covenants, easements and any other restrictions on title (whether or not they appear on the title);
- Services not connected;
- Planning information such as planning zones and overlays affecting the property;
- Any orders or notices issued by a governmental body on the property;
- If there is access by road;
- If the property is within a bushfire prone area;
- Information regarding outgoings payable by the owner of the property.
If the vendor fails to comply with the legal requirements or provides false information, a purchaser is entitled to end the contract at any time before settlement occurs. Of course, there are exceptions. A mere technical breach may not necessarily result in cancellation of the contract and legal advice should always be sought if the vendor is suspected of having breached the legal requirements of Section 32 of the Sale of Land Act 1962.