Are you looking to sell
your home or investment property?
Frequently Asked Legal Questions answered
Everyone has a job to do when selling your property. You,
the seller must present it well for sale. The real estate
agent must market it well to attract a buyer who is prepared
to pay you the best price. The property lawyer must look
after the conveyancing well to make sure that all goes
smoothly to collect the sale price for you.
Let us leave the home presentation tips to the home
improvement experts and the art of selling houses to the
real estate agents!
In this article, we answer 10 Frequently Asked Legal
Questions to do with selling your home or investment
property. Because each State and Territory has its own
conveyancing laws and practices, the answers are generalized
and local and specific advice should be obtained.
What is needed before selling
Q 1 What legal paperwork do I need to
have so that I can sell?
The essential legal paperwork is: a Contract for Sale which
is legally binding when it is signed by the seller and the
buyer, is exchanged and dated; and a Certificate of Title
which is handed over at Settlement when the price is paid.
The Contract for Sale is prepared by the seller’s property
lawyer or conveyancer. The Certificate of Title is held in a
safe place if the property is debt free, or by the lender /
mortgagee if the property is mortgaged.
Q 2 What Certificates do I need to have
for the Contract?
Have you ever noticed how home improvement and renovation
experts concentrate on kitchen and bathroom makeovers,
timber decking, polished floorboards and painting? The
reason is that these renovations are cosmetic work
which does not normally require Council Approval.
More substantial work, such as adding a pergola, sunroom,
extension, garage, swimming pool or granny flat/studio to a
house is structural work which must be Council
In NSW, you need to attach to the Contract a Home Owners
Warranty Insurance Certificate and a Compliance Certificate
or Final Occupation Certificate if structural work has been
completed within the past 7 years.
In NSW and Queensland, you need to attach to the Contract a
valid Pool Compliance Certificate / Pool Safety Certificate,
if the property has a swimming pool or spa pool. This
requirement applies to selling strata home units and villas
as well as to houses.
When renovating a strata unit or villa, such as: installing
a new bathroom, a full kitchen, a floating floor / tiled
floor, an awning, and air-conditioning unit, then owners
corporation (body corporate) approval is needed. The
approval – being a letter of consent or a new strata by-law,
needs to be attached to the Contract.
What do you look out for when
choosing a Real Estate Agent?
Q 3 How do I decide upon which real
estate agent will do the best job?
The reason why most sellers choose a real estate agent to
sell their property instead of selling it themselves is that
they are confident that the agent can close the deal with a
buyer at the best price. But first, the real estate agent
must close the deal with you, the seller, to have you sign a
Sales Agency Authority to list the property for sale.
The most important part of the real estate agent’s
presentation for a listing is the appraisal – What should
the listing price be, and what marketing strategy is best to
achieve the price?
In NSW (and soon in Victoria) the underquoting laws require
that a reasonable estimate of likely selling price,
supported by evidence of comparable sales, be given to the
seller by the real estate agent. This applies to residential
properties. The laws apply to price guides – either a fixed
price is to be given (not ‘offers above’ or ‘offers over’ or
‘+’) or a price range such as $500,000 to $550,000 (the
range must be within 10%).
Q 4 What do I look for before I sign a
sales agency agreement?
Before you sign, make sure you are happy with these
- The agent will want you to sign an ‘exclusive’
agency agreement. Do not sign this if you want to list
the property for sale with several agents - you sign an
‘open’ agency agreement.
- The asking price / price guide needs to be agreed.
The price can be revised later.
- The commission – usually, the commission is a fixed
percentage of the sale price.
- The marketing expenses are payable in addition to
the commission. Items to consider: Is it worthwhile to
have newsprint advertising in addition to internet
advertising? What kind of street signs, brochures and
flyers are best? Are the expenses to be paid up front?
- The method of sale – is it to be private treaty sale
where the asking price is set, or an auction sale, or a
sale by expression of interest (a Fixed Date Sale)?
- How long will the agency agreement last? Is it to be
the standard 90 days? The term is important because you
cannot ‘sack’ the agent until the term ends. Even when
the term ends, the agency agreement will continue until
you or the real estate agent gives a termination notice
- The real estate agent is entitled to receive their
commission if they introduce a buyer to the property
while the agency agreement continues. If that buyer
purchases the property after the agency agreement has
ended, commission may still be payable.
The essentials of the
Contract For Sale
Q 5 When does the Contract for Sale need
to be prepared?
In NSW, the Conveyancing Act requires the Contract for Sale
to be prepared before the property is marketed for sale. In
Victoria, a Section 32 Vendor’s Statement needs to be
Almost without exception, the Contract for Sale is the
standard form Contract approved jointly by the Law Society /
Law Institute and the Real Estate Institute. Special
conditions, are added; and also title searches and
certificates (in NSW), a Vendor’s Statement (in Victoria)
and Warning and Disclosure Statements (in Queensland), to
comply with conveyancing laws.
The Contract must be in a complete form when it is signed.
Otherwise the buyer may have the right to terminate the
Q 6 What items need to be covered in the
Contract for Sale?
- How many days must go by between entering a Contract
and settlement (when the price must be paid)? The
standard period varies from 30 days in Queensland, South
Australia, Tasmania & ACT; 28 – 42 days in Western
Australia; 42 days in NSW; 60 days in Victoria and 28
days in NT. Buyers and sellers can agree to a quicker
settlement or to a delayed settlement.
- Is the property sold with vacant possession or is it
subject to a lease? A tenant cannot be evicted if the
property is sold and they have a fixed term lease which
has not ended. However, if the lease has ended, the
tenant can be evicted in a short time if the property is
In Dubai, sellers will leave behind a luxury car in the
garage if you buy from a property developer
- What stays behind in the property? Until the 1960s,
sellers used to take light fittings, fixed floor
coverings, the stove and the clothes line with them when
they moved out. These days, these fittings and fixtures,
along with many other items such as range hoods,
dishwashers, built-in wardrobes and shelves and
air-conditioning systems are usually left behind.
Valuable or useful items such as solar panels, cubby
houses and garden ornaments tend to be excluded from the
fittings and fixtures left behind.
Q 7 What are cooling off rights and how
do they affect a Contract for Sale?
Cooling off rights apply by law throughout Australia (except
in Western Australia & Tasmania) once the Contract for Sale
is exchanged / entered into. They allow buyers to change
their mind about buying a property after they have entered
into a Contract for Sale.
Cooling off periods vary from 2 business days in South
Australia; 3 business days in Victoria; and 5 business days
in NSW, Queensland and the ACT. The cooling off deposits are
$100 (SA); higher of $100 or 0.2% of the price (Vic); or
0.25% of the price (NSW, Qld, ACT). The cooling off deposit
is non-refundable if the Contract is rescinded during the
cooling off period. At the end of the cooling off period,
the rest of the deposit is payable. The standard deposit is
10% of the price, which can be reduced to 5% if the buyer
The cooling off period gives the buyer time to obtain legal
advice, to obtain pest, building and strata inspection
reports, and to obtain unconditional finance approval.
Longer cooling off periods can be agreed.
Sellers and real estate agents hate cooling off rights
because sellers are ‘locked in’ while buyers can ‘opt out’
of the Contract. So they encourage sale by auction where an
exception applies to the cooling off law that buyers have no
cooling off rights if the Contract is signed on the day of
the auction. Or they insist upon a Certificate of
Explanation from the buyer’s conveyancing solicitor before
the Contract is exchanged / entered into / is legally
binding. In these cases, buyers need to have pre-approved
finance and have pre-purchase inspections carried out
beforehand, because no cooling off rights will apply.
Cooling off periods are not the same as making a contract
subject to finance. Subject to finance clauses usually allow
14 days to obtain an unconditional loan approval, otherwise
the Contract can be terminated and the full deposit be
refunded. Contracts in Queensland and Victoria often contain
subject to finance clauses, while Contracts in NSW do not.
Q 8 What tax traps do I need to keep in
mind when selling a property?
There are three main tax traps for property sellers –
- Capital Gains Tax (CGT) is payable if the
property is sold at a profit – the profit is calculated
as the sale price, less - sale expenses, purchase price,
purchase expenses and capital expenses. No capital gains
tax is payable if it is a main residence. This exemption
applies even if you move out, and continues for up to 6
years so long as you don’t buy and live in another
Because capital gains tax is triggered at the time the
Contract is entered into unconditionally, it is better
to sell in July than in June to defer the tax liability
for a year. Also, it is worth waiting at least 1 year
after buying a property before you sell it to take
advantage of the capital gains discount, which reduces
to one-half the CGT profit you need to include in your
- Goods and Services Tax (GST) is payable by a
seller if they are registered for GST by holding an
Australian Business Number (an ABN). Examples are
sellers who carry on an enterprise, sellers of
non-residential property, and new property sellers. Home
owners who sell their home are not liable to pay GST.
Some sellers of commercial property will use the ‘going
concern’ exemption from GST by leasing the property
- Land Tax is an annual tax, which does not
apply to a principal place of residence if it is
owner-occupied. When it does apply, it is adjusted along
with council rates, water rates and strata levies, as at
the settlement date. Unpaid rates, levies and land tax
are paid on settlement by the seller, as a general rule.
Preparing for Settlement
Q 9 What needs to be done to discharge
Your lender will be notified of the sale by way of a
Discharge Authority signed by you. The exact amount needed
to pay out the loan will be known only a day or two before
the settlement. You need to keep making the loan repayments
until settlement is due.
If the proceeds of sale are less than the amount needed to
pay out the loan, the lender can refuse to settle. This
situation should be dealt with before entering into the
Contract for Sale.
Q 10 Do I need to be present at the
There is no need to be present at the settlement. Everything
is done for you.
Settlements take a lot of work to organize – the discharging
mortgagee, the buyer’s conveyancing solicitor and their
incoming mortgagee need to be organized to be at the
settlement. If the settlement is a back to back settlement,
the organization involves more parties. I’ve had a
settlement with 27 parties in attendance to settle 10
properties at the same time. It took more than 1 hour! The
net proceeds of sale will be banked into your account the
same day, or the day after.