The information contained in this section of our website has been obtained with permission from the Office of Regulatory Services. This information should not be used as a substitute for the Civil Law (Sale of Residential Property) Act 2003, the Agents Act 2003 or for professional legal advice
Beginning the buying process
In the ACT, the seller of a residential property must provide certain documents and reports before the property is offered for sale. The availability of this information to prospective buyers is designed to minimise the delay between the inspection of a property and the making of an offer on the property. Of these, the most important document is the contract for the sale of residential property. This sets out the rights and obligations of the buyer and seller.
The material supporting the contract for the sale of residential property sets out any conditions on the land and dwelling, as well as reporting on the physical condition of the property. This information will be provided by appropriate agencies or prepared by experts with professional indemnity insurance. You have some limited protection if a problem is missed in the inspection and you suffer loss or damage because of this.
Visiting an open house
Your first inspection of a home will probably be at an open house. This visit will give you an initial viewing of the property and the opportunity to check whether the property meets your basic needs of location, age, size, position, style and condition.
You should make a close inspection for signs of structural problems and compare your observations to the information in the building inspection report. Some things to look for are:
- sloping or bouncy floors
- cracked walls
- damp brick walls
- blisters or bubbles on paintwork
- mouldy walles, lifting tiles, peeling paint or pools of water in wet areas
- fretting (crazed) brickwork
- sagging roof framing or cracked and broken roof tiles
Any unapproved structures must be disclosed in the contract for the sale of residential property and the building & compliance inspection report. If you become aware of any unapproved structure after the exchange of contracts, you can ask the seller to arrange for the structure to be approved. If the structure is not approved before completion of the sale, you may cancel the contract without paying any costs.
Do not sign the contract for the sale of residential property for an owner-built property before checking the dwelling very carefully. If there is a query concerning defective or incomplete work, have the matter sorted out to your complete satisfaction before signing the contract.
Checking the contract for the sale of residential property documents
As well as inspecting the property itself, you should have all legal aspects relating to the land and title checked before exchanging contracts. You cant ake a copy of the contract for the sale of residential property to your solicitor to check everything is in order.
Accompanying the contract will be a number of reports that the seller is required, by law, to provide. These reports will provide an assessment of the physical condition of the structures being sold, as well as a statement of any provisions that may influence or restrict what can be done to the house or on the land.
Each of the required documents is described below, but the documents that must accompany the contract for the sale of residential property are different for each type of property being sold.
The contract for the sale of residential property
A seller must have a draft contract for the sale of residential property ready before a property is first offered for sale. The draft can be prepared by the seller or their solicitor. Section 11 of the Civil Law (Sale of Residential Property) Act 2003 describes conditions that must be included in this contract and will be implied into the contract even if not stated.
The Crown Lease
Sets out the conditions upon which the land is held and how that land may be used, for example, residential, rural or commercial use.
The Certificate of Title
Sets out who the legal owner of the property is and in what manner they hold the land, for example, as a joint tenant with another person. It will also indicate whether anyone other than the registered owners claim an interest in the property, for example, a bank holding a mortgage over the property.
A copy of any encumbrance shown on the Certificate of Title
Shows the details of any caveats or restrictive covenants over the land.
A statement about any encumbrance not shown on the Certificate of Title
This gives details of any unregistered mortgage or other unregistered encumbrances.
Asbestos assessment report or asbestos advice
Sellers of residential premises are required to provide an Asbestos Assessment Report, which has been prepared by a Licensed Asbestos Assessor (Class A), with a contract for sale. If there is no Asbestos Assessment Report, or the seller is unable to obtain the report, the seller must instead provide Asbestos Advice with the contract for sale. This Advice is available at www.asbestos.act.gov.au (refer to Asbestos Laws). Note: Obtaining an Asbestos Assessment Report is optional. If, however, a Report does exist and is accessible, it must be provided with the contract for sale.
The deposited plan
Will show the plan of the land and any easements on the land, An easement is a defined area over which another person or organisation has permanent access rights. An easement normally takes in the land above and adjacent to electricity cables, water and sewage pipes. An easement cannot usually be built over or under, so the location of easements will affect the position where a home, garage, or extension can be erected.
A Building Conveyancing Inquiry
Conducted by the ACT Planning and Land Authority and will provide information, if any exists for the property, about:
- heritage listing
- outstanding rent under the crown lease
- development applications affecting the property
- breaches of the crown lease
- any orders issued against the property
- the compliance certificate (compliance with provisions of crown lease)
- applications for dual occupancy
- a contaminated land search.
An Energy Efficiency Rating Statement
Gives details about the energy efficiency of a property.
A Building & Compliance Inspection Report
Provides details about the structural soundness of a property and information about whether structures on the land have been approved under the relevant legislation.
A Pest Inspection Report
Provides details of any termite or other pest infestations.
A copy of the units’ plan or proposed units’ plan
Applies only to unit title property and shows the plan of the unit and the common property within the unit development.
A copy of the minutes of meetings of the owners’ corporation and executive committee for the last two years
Is required for a multi-storey unit instead of a building conveyancing inquiry, building & compliance inspection report and pest inspection report.
A Section 75 Certificate
Issued by the body corporate for a unit; provides information about any outstanding levies for the unit, any resolutions that affect the proportionate contributions for the unit and a copy of the articles for the body corporate.
You should carefully consider the information contained in all these reports. It is recommended you seek specialist advice if there are any findings in these reports that you do not fully understand.
Now that you have a complete assessment of the structure, as well as all the information relating to the enhancement and development potential of the land, you will be empowered to determine the offer you will make on the property.
Making an offer
When you have found the right property you can make your offer via the selling agent or directly to the seller in the case of a private sale. The agent may require a deposit to accompany your offer, but it is only a holding deposit and it will be returned if your offer is not accepted or if you change your mind. Your offer is not legally binding until the exchange of contracts for the sale of residential property. Exchange of contracts takes place when a contract signed by the buyer is handed over in exchange for a contract signed by the seller. It is at this stage that a mutually binding contract is made and a deposit, normally 10% of the purchase price is paid.
A deposit is legally payable on exchange of the contract for the sale of residential property. Do not sign the contract without carefully reading and understanding it.
Gazumping occurs when a seller and buyer verbally agree on a price for a property, but before the buyer can exchange a contract to secure the property, the seller accepts a higher price from another buyer. The first buyer is now said to have been gazumped. It is important for you as a buyer to note that an agent is required by law to submit all offers to the seller right up to the time of exchange of contracts.
How much should you offer?
The decision on how much to offer is a difficult one to make. You have to decide whether to make your best offer upfront or offer a lower price and be prepared to negotiate up. Be aware that if another person makes an offer at the same time as you, the seller may decide to accept that offer, without giving you a chance to alter yours.
If you are not confident about this process you may prefer to engage a solicitor or buyer’s agent to do your bargaining for you. You will be charged a fee for this service.
If you make an offer to buy in writing you should insert a date by which your offer will lapse. If you are not confident your offer will be successful you should continue to inspect other suitable properties.
Buying by tender
This form of selling is also used from time to time. It involves requiring all interested buyers to put their offer in writing, usually the maximum they are willing to pay. These offers are then taken to the seller, and they have the opportunity to pick the highest price. The seller is not obligated to accept any offers made by written tender. You may be required to provide a deposit with your offer, usually 10% of the offer you’ve made. There is no cooling-off period when buying residential property by tender.
Using a deposit bond
A deposit bond, or guarantee, is an alternative to providing a cash deposit or personal cheque upon the exchange of contracts for the sale of land. The use of a deposit bond requires the specific approval of the seller and needs to be written into the contract for the sale of residential property.
Deposit bonds should be used with caution, as you are effectively borrowing up to 100% of the purchase price of the property, which must be paid in full on settlement. There may be risks for both and the seller where a deposit bond is used.
Buying your home at auction
Attending an auction
There are strict rules that apply to the conduct of an auction. These rules ensure the auction is a fair and transparent process for all.
The marketing campaign for the sale of a home by auction is similar to that of a private sale. The house will be advertised, and open house inspections will begin about four weeks before the auction date.
Before the auction the agent may contact potential buyers to gauge their level of interest. This gives some idea of the possible attendance and bidding range on the day.
The auction may be conducted on-site or at an off-site location such as a function centre or hotel.
On the day of an on-site auction the property will be open for inspection, for at least half an hour before the bidding starts. This allows prospective buyers the chance to have one final look at the property and the paperwork. The agent or the auctioneer must display a copy of the conditions of sale at the place of auction for a minimum of 30 minutes before the auction begins. The contract for the sale of residential property and required documents must also be available. You must read these carefully before bidding.
When an auction is conducted off-site, a number of properties may be auctioned in succession. The contract for the sale of residential property and required documents must be available for each of the properties listed for auction.
Offers may be made through an agent prior to the auction. The process of negotiation is the same as for a private sale.
Registering to bid
Buying property in the ACT by auction requires all potential bidders to register prior to making a bid. This is usually done prior to the auction.
If you are bidding to buy the property jointly with another person (for example, your spouse or partner), only one of you needs to register. If you are bidding for another person or a company, you need to reveal the name and address of that person or company. If you are bidding for another person on the telephone you must register and provide the name and address of that person in a written sales authority to the seller’s agent.
Registering and obtaining a bidder number does not mean you must bid; it simply gives you the right to do so.
A bidder can register with the state agent at any time prior to the auction but will only be given a bidder’s number on presenting proof of identity on the day of the auction.
If you arrive late at an auction and wish to bid, you must locate the agent quickly and register as a bidder. It should only take a few minutes for the agent to note your details and give you a bidder number. If you need to make a bid immediately, hold up your hand to alert the auctioneer that you will be making a bid after you have registered. As soon as you have your number, your bid can legally be accepted.
A bid taken from an unregistered bidder will still be valid, but the auctioneer may be liable for a fine of up to $5,000 and may also be subject to disciplinary action by the Consumer and Trader Tribunal. An auctioneer does not have to accept a bid from an unregistered bidder.
Buyers tip Although you are able to register if you arrive late, it is advisable to arrive as early as possible to register and prepare for the auction. It can be a stressful event; therefore, it is a good idea to be prepared and allow time to compose yourself.
Proving your identity
The agent will write your name, address and the details of your proof of identity on a registration sheet together with details of any other person or company for whom you may be acting. This creates a bidder record for each property being sold at an auction.
The details in the bidder record are strictly confidential and cannot be shown to the buyer or seller, nor can the real estate agent or auctioneer use the details for any other purpose after the auction. The agent must store the records securely for three years after the auction.
A card or document issued by a government agency, bank or credit union showing your name and address is accepted as proof of identity. For example:
- a passport
- a driver’s licence
- vehicle registration papers
- a rates notice
- a tax assessment
- a bank statement
How the auction rules affect you
There are heavy penalties for anyone who breaks the strict rules that apply to the conduct of an auction.
Before accepting a bid, an auctioneer must state that:
- the auction will be conducted according to the auction rules
- any additional conditions will be made available for public inspection
- he or she must indicate the bidder number who made a bid
- the law prohibits an intending bidder from making a false bid or in any way intentionally preventing another person from bidding at an auction
- the law allows the auctioneer to make one seller bid during the auction. This bid must be announced as a seller bid
- heavy penalties apply to anyone who engages in prohibited conduct
Bidding at an auction
An auctioneer will strive to sell the property for the highest possible price.
Before bidding starts you (the prospective buyer) should:
- decide on a definite upper limit, based on a firm offer of finance from a lender
- check all documents including the contract for the sale of residential property and other required documents, preferably through a solicitor
- organise a cheque to pay the deposit, if successful
- register your details in the bidders record and obtain a bidder number
- organise someone to bid on your behalf, if desired
- understand that the terms of the contract are fixed and no cooling-off period applies
Buyers tip If your bid is successful there will be no right to withdraw from the contract and no cooling-off period. If you do not complete the purchase you will be at risk of losing at least 10% of the purchase price.
Anyone at a public auction is allowed to ask the auctioneer a reasonable number of questions about the property, the contract for the sale of residential property and the rules and conduct of the auction
The auctioneer can set the amount by which bids increase. These are called “rises” or “bidding advances”. You may make your bid at the set amount, or you can offer a figure higher or lower than the standard rise. The auctioneer has the choice to accept or reject the bid.
he auctioneer must call a bidder’s number when taking a bid.
On the market!
At some stage the auctioneer may call a pause to the auction and seek advice or instructions from the seller. If the seller is satisfied that the reserve has been met or is prepared to sell to the last bid offered, then the agent will announce that the property is “on the market”. This means that bidding has reached the value at which the property can be sold.
If you are the successful bidder at an auction, you will be immediately required to sign toe contract for the sale of residential property and pay a deposit. It is important that the buyer’s details are entered correctly on to the contract.
If the seller’s reserve is not met, the auctioneer will seek further bids. If the reserve is still not met, then the property may be “passed in” or withdrawn from auction. The seller may then first negotiate with the highest bidder to pursue a sale.
If a property is passed in on a seller bid, then an agent cannot quote this passed in amount when advertising and marketing the property without stating that it was a seller bid.
Explaining the legal process for buyers
Finding your solicitor
Any solicitor you engage must have formal legal qualifications, hold a current practising certificate and have professional indemnity insurance. Your solicitor can perform general legal work for you and provide legal advice when you need it. Some solicitors specialise in conveyancing and property law.
A buyer can use a solicitor to examine the seller’s contract for the sale of residential property and the required documents, and then ensure that the transfer of title is done correctly. A solicitor can also explain the different types of title, which may affect a buyer’s ownership rights and responsibilities.
You would be wise to have the solicitor check the contract and attached documents before making an offer or bidding for a property at auction. Your solicitor can also provide valuable advice and guidance with your financial matters.
Paying for the documents and searches
A seller is required, by law, to obtain all the required documents that accompany the contract for the sale of residential property. The seller has the right to ask the buyer for reimbursement for the building & compliance inspection report and the pest inspection report. Costs for all other documents are borne by the seller.
Paying stamp duty
This is a government tax to be paid by the buyer. The trigger for stamp duty liability is exchanging of contracts. Usually stamp duty must be paid within 90 days of exchange.
Stamp duty is calculated as a percentage of the purchase price or the market value (whichever is greater) of the property, at the date of exchange of the contract for the sale of residential property.
Contact the ACT Revenue Office on (02) 6207 0028 or visit www.revenue.act.gov.au for complete details
Settlement occurs when the balance of the purchase price is paid to the seller in exchange for the title to the property.
This is an official process held between legal and financial representatives of the buyer and seller. The settlement date is also when the buyer has access to the keys and can take possession of the property, unless other arrangements have been made.
At settlement, all charges such as rates etc will be adjusted between the seller and the buyer. The seller is responsible for rates up to and including the day of settlement. The buyer is liable from the day after settlement.
Settlement usually takes place between 30 to 90 days after signing the contract for the sale of residential property, but this can be decided between the buyer and seller.