What is property settlement?
Property settlement is the process of transferring property from one owner to another.
Although the aim of property settlement is simple, regulations and compulsory procedures mean that the settlement process itself is complex and time consuming.
For your property to change hands, your settlement agent needs to:
- Ensure any existing mortgage is paid off,
- Ensure any caveats on the property are lifted,
- Ensure all clauses on the Offer and Acceptance are fulfilled, and
- Register the transaction with Landgate to make the transfer official.
Below, we demystify the settlement process by detailing exactly what happens in a typical property settlement.
The settlement process
Here’s what happens at each step of a property settlement:
Step 1: Choose a Settlement Agent
A settlement agent will protect your interests during the settlement process. Most real estate agents will refer you to a settlement agent if there are none appointed by the time it comes to writing up the Offer & Acceptance – but you’re free choose your own.
You can do this by either;
- Nominating your preferred settlement agent on the Offer and Acceptance document,
- If you haven’t decided on a settlement agent yet, you can specify ‘TBA’ (to be advised). Let your real estate agent know as soon as you have one appointed, verbally and by fax or email.
The wording of a Contract has a large impact on how your settlement is conducted. Clear, precise conditions outlining required actions and who is responsible for them will reduce the potential for disagreements and delays.
- Take nothing for granted. The presence of a dishwasher during your inspection does not mean it will be there come settlement. Avoid conflict by carefully assessing the property and listing all the items you consider fixtures and chattels in the contract. These items may include; carpets, window and light fittings, dishwashers, TV antennas, clothes lines, garden sheds, security systems and air conditioners.
- The real estate agent selling the property is obliged to act in the best interests of the seller. Make it your business to protect your own. See our 5 Questions To Ask Before Choosing a Settlement Agent for advice on choosing a settlement agent who’ll protect your interests.
From here on in, most of the heavy lifting will be handled by the settlement agents working for the buyer and seller. The settlement agent of each party will:
2. Receive the contract
The original copy of the contract will be sent by the real estate agent to the buyer’s settlement agent. Once they have it, they’ll:
- Assess any potential risk to you. For example, there may not be enough time allowed between the finance approval date and the proposed settlement date – this can be particularly problematic if you’re planning a vacation during this time, or you will be working away.
- Disclose any potential conflict of interest. A conflict of interest might arise during settlement – especially when conveyancer is acting for both the buyer and the seller or where the real estate agent has a financial interest in the settlement agent – and your conveyancer is legally obliged to disclose this.
3. Send you an Authority to Act form
Both the buyer and the seller’s settlement agent will need to gain Authority to act. Once you’ve signed the Authority to Act form, they’ll be able to conduct the conveyancing process on your behalf.
Read all documents carefully, ensuring you understand what it all means - contact your settlement agent if you need clarification. Then complete the documents, sign them and return them to the settlement agency.
4. Follow up special conditions
Your settlement agent will follow up special conditions of the Offer and Acceptance to ensure your property settlement goes as planned.
This is especially useful if you’ve added building and timber pest inspection clauses to your contract. Missing the dates for those clauses often mean losing their benefit altogether!
Carry out any actions required by the contract’s special conditions. This may include organising a building and/or timber pest inspection, and returning the inspector’s findings to your conveyancer.
Make sure you have met your contractual obligations as you could incur penalty costs if settlement is delayed.
Once all clauses are fulfilled and finance has been approved, the contract becomes unconditional. Now, your settlement agent will:
5. Examine the title search
Your conveyancer will do a search to obtain the Certificate of Title and other relevant documents. From these, they will:
- Identify the existence of limitations on the title such as easements and rights-of-way. Encumbrances such as these may restrict your use of the property and it’s best to know about them up front, and
- Identify other encumbrances such as a mortgages and caveats that will need to be removed prior to settlement.
6. Prepare unconditional documentation
Your conveyancer will prepare unconditional documentation such as:
- Transfer of Land – this document sets out the property being transferred by identifying the title, any encumbrances to stay on the title after settlement (ie. restrictive covenant), the seller’s name/s, sale price, buyer/s names, buyer’s address after settlement and buyer’s tenancy (if more than one party). Both parties are required to sign the document and have their signatures witnessed by an independent person over the age of 18. It is important the transfer is prepared correctly and is signed correctly as it is the document lodged with Landgate to effect the settlement.
- Identification of Certificate of Title – this document includes a copy of the title and plan showing the property you are purchasing – this ensures that the correct property is transferred to you.
- Identification of Encumbrance/s – this document will include a copy of any encumbrances on the title, this is important as encumbrances have the ability to affect your plans for the property.
- Stamp Duty Application form – the conveyancer will assess what (if any) reduction you are entitled to for stamp duty and will send the appropriate form to you for signing ie. First Home Owners Rate or Residential Rate.
- Authority to Proceed to Settlement – this document gives your conveyancer permission to finalise settlement on your behalf. You generally hold onto this form and send it to your settlement agent once you’ve completed your final inspection and are happy with everything
They’ll also send you an initial settlement statement. This will detail how your funds have been distributed throughout the property settlement, and for the buyer will include:
- Purchase price,
- The deposit amount,
- Stamp duty,
- An estimate of rates,
- Our fees, and
- Government fees
For the seller, the settlement statement will include:
- Sale price,
- Agent commission,
- An estimate of rates, and
- Our fees.
The initial statement is an estimate – you’ll get a final statement later.
As your settlement agent prepares the unconditional documentation, you’ll need to:
- Sign the Transfer of Land when you receive it. Have this witnessed by an independent person over 18, and ensure that the transfer has the right contact details, including your full legal name.
- Identify the Certificate of Title – make sure it refers to the right property! Return this to your settlement agent promptly.
- Sign the appropriate Stamp Duty Application form.
- Sign the Authority to Proceed to Settlement document to give your conveyancer permission to finalise settlement.
7. Submit an EAS
You conveyancer will submit an Electronic Advice of Sale (EAS) to advise the Water Corporation, Office of State Revenue and Local Government Authorities of the impending settlement.
8. Rates and taxes
Now, your conveyancer will take care of various rates and taxes. They’ll:
- Ensure there are no outstanding water or council rates amounts owing on the property. This is especially important when you’re buying a property off someone that may have had a reason to defer the payment of their rates due to financial hardship.
- Check for any outstanding special government levies. These might include underground power levies or amounts payable on outstanding local government work orders.
- Ensure there are no outstanding strata levies, if applicable.
- Make sure you get the First Home Owner rate of duty.
9. Send you a final settlement statement
Your settlement agent will send an amended settlement statement once the adjustment of rates have been attended to and ensure all government fees are calculated correctly.
Read the settlement statement carefully, and if anything seems amiss contact your settlement agent ASAP.
The buyer’s conveyancer will ensure the Offer & Acceptance and Transfer of Land is lodged for stamp duty assessment prior to settlement.
The seller’s conveyancer will ensure the seller signs the Transfer.
11. Prepare for settlement
Your conveyancer will prepare for settlement by ensuring everyone will be ready on the date, and arranging a suitable time for settlement to occur with all parties.
The buyer’s settlement agent will also ensure the correct amount will be handed over at settlement and order cheques from your lending institution.
Keep in regular contact with your lending institution to ensure there is no delay in the preparation of their loan and mortgage documents and that the documents are made available for signing as soon as possible.
12. Attend settlement
Your settlement agent will attend settlement on your behalf and ensure all documents are correct and handed over to the party who will hold security after settlement.
The property is required to be vacant by 12.00 noon of the day following settlement if it is the seller’s principle place of residence, or as soon as settlement takes place if it is not.
13. Finalise settlement
Almost there! The buyer’s settlement agent will finalise the property settlement process by:
- Sending the buyer their final settlement statement and original stamped O&A following settlement being effected, and
- Ensure the title is in the buyer’s name and all details are correct (4-6 weeks after settlement).
The seller will also receive a final settlement statement, from their conveyancer.
Congratulations! You’ve completed property settlement and have successfully bought or sold your home!
To ensure your settlement goes as smoothly as possible, appoint the best settlement agent in Perth – Residential Settlements.