Buyers’ settlement resource centre
The following guide provides home buyers with a complete guide to the settlement process. It relates to WA property settlements based on contracts using the REIWA sales contract and the REIWA/Law Society of WA 2018 General Conditions.
For specific advice speak to your conveyancer.
- What to check in your contract
- Paying your deposit
- Finance approval
- First home owner grants
- Pre-purchase property inspections
- Paying your contribution to purchase price
- Pre-settlement inspections
- RCDs and smoke alarms
- The authority to proceed
- Settlement delays
- Penalty interest
- Keys and taking possession
- Utilities and services
About your contract
Your sales contract, commonly referred to as an Offer and Acceptance or O&A, contains all your rights and obligations in relation to your purchase. You’re also protected by some consumer protection legislation but most of what you need to know is contained within the contract.
It’s important to read and understand your contract and take immediate steps to address any concerns or correct any errors.
Your contract is contained within two parts. First there’s the Contract for sale of land or strata title by offer and acceptance, commonly called an Offer and Acceptance or O&A. We cover the key elements of the O&A below. Second is the 20 page booklet titled Joint form of general conditions for the sale of land, also called the general conditions or JFGC. These two documents work together and can’t be separated. Once you’ve signed a contract you’ve agreed to the terms contained within the general conditions unless they’ve been expressly varied by terms within the contract.
It’s important to understand that time is of the essence to your contract. Missing a due date by even a few hours can have costly legal implications so it’s important that you know the due dates, especially for your finance approval and pre-purchase inspection reports.
What you should check on your contract
There are four key items to check on your contract, as follows.
Ensure your name is spelled correctly
Check your name is spelled correctly and matches what’s on your ID documents. A simple error at this point can cause your settlement and loan documentation to contain the same error, something that could cause settlement delays. If your name is spelled incorrectly notify your conveyancer immediately.
Select the correct tenancy
If you’ve purchased a property in partnership with another person it’s important to choose the basis on which you’ll own the property together. There are two forms of joint ownership: Joint Tenants or Tenants-in-Common.It’s important to select wisely.
For investors, the type and split of tenancy may have taxation implications. Changing the tenancy and share of tenancy can be an expensive operation, especially if it’s done after settlement.
If you’re unsure about which tenancy to choose, read Whats the difference between Joint Tenants and Tenants in Common
If you chose a tenancy when signing the offer and have changed your mind, contact your conveyancer immediately as there may be stamp duty implications.
Check your GST withholding obligations
On 1 July 2018 the Federal government enacted new GST laws that require property buyers of new residential premises and new residential subdivisions to withhold a prescribed amount from the purchase price and remit that amount to the ATO on settlement. Failure to comply with this legislation can lead to substantial fines.
How do I know if I’m required to withhold GST?
If you’re purchasing a new house, villa, or apartment, or land in a new subdivision you’re almost certain to be required to withhold an amount for GST purposes. Established residential premises (premises that have been lived in by a previous owner or tenant) are exempt from the laws.
The amount withheld from the purchase price is not an additional tax.
Your contract contains a clause with respect to your GST withholding provisions. Ensure that it’s been completed correctly by the real estate agent.
If you have any doubt at all about your GST withholding obligations speak to your conveyancer immediately.
What do if you’re required to withhold GST?
If you’re required to, or believe you’re required to withhold GST, you should notify your conveyancer immediately.
How do I withhold GST?
Ensure your conveyancer is aware that you may have a GST withholding obligation. Once you’ve done that your conveyancer will withhold the required amount and remit it to the ATO on your behalf.
Check the chattels included in the sale?
Chattels are movable items that are included in the purchase. Chattels typically include curtains, carpets, and light fittings but may also include dishwashers, clothes dryers, and pool cleaning equipment.
Why are chattels included on the contract?
If a movable item isn’t noted as an inclusion on the contract the seller has no obligation to leave it at settlement. You may be disappointed after settlement if the pool filtration equipment you thought was going to be left at the property has been taken by the seller.
What to do if they’re not included in the contract
If the agent or seller led you to believe that an item was to be included with the sale but it wasn’t noted on the contract then send the agent an email immediately bringing this fact to their attention. A simple acknowledgement by the agent that the item will stay is usually sufficient but the ideal is to have a contract variation signed by all parties to the contract.
Make a genuine attempt to obtain finance approval
Since the changes to Australian Prudential Regulation Authority (APRA) regulations and the beginning of the banking and finance royal commission obtaining finance has become difficult and time-consuming for even well qualified applicants.
It’s important to start the finance application process immediately.
Is a bank loan pre-approval sufficient?
No, in short, clause 1.9 of your contract defines Finance Approval as an unconditional offer to lend from the bank and for the amount mentioned on the first page of the contract. In most instances a pre-approval letter won’t satisfy these requirements and shouldn’t be relied on.
What do I do if my finance isn’t going to be approved on time?
Clause 1.6 of your contract requires you to keep the seller or their agent informed of the progress of your finance application. If it looks as though you’re finance isn’t going to be approved on time you should immediately request an extension of time from the seller or their agent.
What should I do if the real estate agent asks me to waive the finance clause?
Unless you have enough cash in the bank to complete the settlement don’t waive the finance clause. If the real estate agent is putting pressure on you contact your conveyancer or lawyer immediately.
What should I do when my finance is approved?
Once your finance is approved you should notify the seller or their agent immediately in writing. An acceptable alternative is to have your bank or broker forward them a copy of your loan approval letter.
What should I do if my finance application is declined
If your finance application is declined, it’s essential to advise the real estate agent immediately. Failure to do so could mean your contract being deemed to be in full force and effect.
First home buyers grants and rebates
If you require the First Home Owners Grant and its associated stamp duty relief it’s important to start your application immediately. Delays in the approval of the grant can lead to expensive and inconvenient settlement delays.
For everything you need to know about the grants and rebates available to first home buyers check out the government’s comprehensive guide here.
Complete your pre-purchase property inspections
A pre-purchase property inspection is an inspection completed on the property by a qualified inspector prior to committing to the purchase. In some cases these inspections are completed prior to the buyer signing an offer but in most instances they’re completed as a result of rights and obligations created within a special condition on the offer.
Pre-purchase property inspections help you better understand what you’re buying so that you reduce the chances of finding a nasty after-settlement surprise.
What options do I have for my pre-purchase inspection?
There are several types of pre-purchase inspections you can request be included on your contract. See our article 6 Inspections to include on the Offer and Acceptance for a simple guide to the most common pre-purchase inspections.
Can I complete a pre-purchase inspection if my contract didn’t include a pre-purchase inspection clause?
You can only have a pre-purchase inspection completed if your contract includes a clause that compels the seller to allow you to complete that inspection.
What are my options if my contract didn’t include a pre-purchase inspection clause?
If your contract doesn’t include a pre-purchase inspection clause your only option is to ask the seller to vary the contract to have one included. It’s rare that a seller would do this.
Who can complete my pre-purchase inspection?
Before arranging a pre-purchase inspection check the wording of the relevant clause in your contract. Often pre-purchase inspection clauses will require that the inspection be completed by a structural engineer, a registered builder, or someone qualified to complete the type of building inspection you’re buying.
What standards apply to my pre-purchase property inspection?
Often pre-purchase inspection clauses will require that the inspection be carried out in accordance with Australian Standards (AS 4349.1-2007 PDF). If that’s the case it’s important that your building inspector follows the standard.
Can I get a relative or friend to do my pre-purchase inspection?
The answer is yes, so long as they are qualified to do so and adhere to the standard referred to in the contract, if applicable.
What happens when my structural inspection identifies non-structural defects?
In general terms, you’ll only have a legal remedy if the inspection identifies a structural defect. If your contract includes the REIWA Australian standard pre-purchase structural inspection annexure the seller is compelled to either repair the defect or release you from the contract in the event that a structural defect is identified.
The seller is not obliged to repair maintenance items noted on a structural inspection unless they’re specifically required to do so in the contract.
What should I do if a structural defect is identified?
If your contract includes the REIWA Australian standard pre-purchase structural inspection condition then you must serve notice on the seller within three (3) working days. Either yourself or your conveyancer can complete.
Be aware that the Structural Defects Notice must be in a form that complies with the requirements of clause 21 of the JFGC.
If you have any doubts ask your conveyancer to send the notice on your behalf.
Pay your contribution to the purchase price on time
As soon as your loan is approved, contact your bank or broker to arrange to make your contribution to the purchase price. Usually your broker or banker will direct you to deposit your contribution into an account with the same bank as your mortgage.
If you fail to make your contribution available on time you may cause settlement to be delayed and be charged penalty interest by the seller.
What fees and charges will I need to pay?
For a standard settlement you’ll need to pay the following estimated fees and charges. Please keep in mind that every settlement is unique and some fees change with the price of the property. Your conveyancer will provide you with an initial settlement statement that set these fees out in more detail.
|Fee or charge||Estimated amount|
|Professional Service Fee||$900|
|Transfer duty||Ask your conveyancer|
|Landgate registration||$200 (dependent on price of property)|
|PEXA/electronic lodgement fee||$113|
|Charges for extra work||Discuss with your conveyancer, if applicable|
|Foreign Buyers Duty||7% of the relevant share of the purchase|
|Strata levies||If applicable, strata dictates amount|
Will I be required to pay stamp duty if I’m a first home buyer?
The short answer is yes but there a lot of exceptions. See our Complete guide to first home buyer grants and rebates.
When do I pay my stamp duty?
Regardless of your circumstances or when the contract is due to settle, your contract must be assessed for duty within 2 months of the contract date. That means, if your contract was accepted by the seller on 1 Jan it must be assessed for duty before the the end of February.
Transfer duty must be paid on or before settlement but in any case no later than one (1) your after the assessment date unless your contract qualifies for an exemption because you’re buying off the plan. In that case you have three (3) years to pay the duty.
In most cases transfer duty is payable just prior to settlement.
What else will I need to pay at settlement?
In addition to the fees and charges mentioned above you’ll also need to pay your contribution towards the purchase price.
Exactly how much will I need to pay at settlement.
The exact amount you’ll need to pay at settlement is dependent on the transaction. Your conveyancer will provide you with a settlement statement in the period just prior to settlement that will provide you with the exact amount required to transfer to our trust account.
Where do I pay the balance of the purchase price?
There are two ways to pay the balance of your purchase price. First, you can make these funds available from your own bank account as described above. Your bank or broker will advise you of the exact amount required. Second, you can deposit the amount required into our trust account via BPAY.
When do I need to pay?
Your bank will only settle if your contribution is available as cleared funds. In most instances we recommend that you pay any balance required at least five (5) working days prior to settlement.
What’s the safest way to pay?
The safest way to pay money into our trust account is by bank cheque but this is needlessly time consuming. The next safest option is BPAY.
Why don’t you allow me to transfer funds via EFT?
In recent times there have been a number of instances where property buyers have had hundreds of thousands of dollars stolen while transferring funds to their settlement agent via EFT. These forms of fraud are common.
What is Foreign Buyers Duty
On 1 January 2019 legislation came into effect in WA that required foreign buyers to pay Foreign Buyers Duty (FBD) when purchasing residential property.
If you are not an Australian citizen or don’t have permanent resident status then you should check out our Foreign Buyers Duty guide.
Your contractual and other rights
Your contract gives you a number of rights that protect your interests in the transaction. Along with contractual rights you have a number of other rights that arise through government legislation and regulation.
Your pre-settlement inspection
Clause 5 of the JFGC gives you the right to conduct a pre-settlement inspection to ensure that the seller has complied with their obligations under the contract.
Before booking your inspection read our Comprehensive guide to completing your pre-settlement inspection.
Seller to complete their obligations
The seller has a number of obligations to you that arise directly from the contract. The more common obligations relied on buyer home buyers include but aren’t limited to the following:
- Handover the property to you in the same state and condition as the day you bought it, unless agreed otherwise (JFGC 9.1(f)).
- Allow you to complete a pre-settlement inspection to check that the seller has complied with their obligations to make repairs and undertake other works, as outlined in the contract (JFGC 5.1).
- Ensure the property is vacant at settlement unless the property is owner/occupied, or is tenanted and you’ve waived your rights to vacant possession (JFGC 6).
- Handover the keys(JFGC 6.5).
- Ensure all chattels included in the contract remain with the property (JFGC 5.1)
RCDs and smoke alarms
Government regulations require sellers of residential homes to install RCDs and smoke alarms prior to settlement. Strictly speaking, the requirement for the seller to install RCDs and smoke alarms aren’t contractual obligations.
For more information see our Complete guide to RCDs and smoke alarms.
Your contract may contain special conditions and warranties that provide both yourself and the seller with various rights and obligations. Time is of the essence to your contract. If your a special condition requires you to exercise your rights by a specified date then missing that date by even a few hours can have negative legal consequences.
Special conditions are often contained within ‘standard’ annexures. Usual standard special conditions include:
- A structural inspection clause
- A termite and timber pest inspection clause
- Warranties with respect to the working condition of plumbing and electrical appliances and pool filtration equipment.
Despite that some agents use standard REIWA annexures, many don’t, and this leads to issues where conditions don’t clearly outline the rights and obligations for both parties.
If you have any doubt about a special condition, speak to your conveyancer immediately.
Utilities and service connections
Who is responsible for connecting gas and electricity?
You’re responsible for connecting your own utilities including gas, electricity, internet, and pay TV.
Your conveyancer will arrange to have water and council rates and strata levies to be transferred into your name.
The Authority to Proceed
What is an Authority to Proceed?
The Authority to Proceed is a simple document that is your acknowledgement that the seller has complied with all of their obligations under the contract and authorising us to release funds to the seller in exchange for title to the property.
Why do I need to sign an Authority to Proceed?
Settlement is final and can’t be rolled back if you find out there’s something amiss with the property and that’s why we won’t settle the property until we receive your written authority.
Dealing with settlement delays
Settlements get delayed for a lot of reasons. Most delays are caused by banks not being ready because they don’t have cleared funds or their client hasn’t signed their mortgages on time. Disputes over work required as a result of pre-settlement inspections is another common cause of delays.
What happens if my settlement is delayed?
There are a lot of people and processes involved in settling a property transaction and delays are common. Most are short delays of 1-3 days but some can be much longer. It’s wise to think through the problem clearly and have a viable Plan B.
If your settlement is delayed you may be encouraged by the real estate agent to take possession of the property prior to settlement. Taking possession prior can help everyone overcome a sticky situation but it creates significant risks for you as the buyer.
Speak to your conveyancer before signing an agreement to take possession prior to settlement.
JFGC 4.5 gives you the right to charge the seller penalty interest if they cause settlement to be delayed beyond the grace period provided.
What is penalty interest?
Clause 4 of the JFGC allows for interest or compensation – commonly called penalty interest – to be charged in the event of a settlement being delayed by more than three days.
Who can charge penalty interest?
Either party can charge penalty interest but they must be ready, willing, and able to complete settlement and have provided a notice to that effect to the other party.
How do I charge penalty interest?
You must be ready, willing, and able to settle before you can charge penalty interest. That means signing your settlement documents, mortgage documents, completing your pre-settlement inspection, and giving your conveyancer approval to complete settlement. Once your conveyancer has your authority to settle they will send the required notice to the settlement agent acting for the seller triggering your entitlement to claim penalty interest.
What is title insurance?
Title insurance provides cover for losses arising from unknown or undetected risks that could exist prior to your settlement.
Such risks include:
- Structures built by a previous owner without the required Council permits or which do not comply with those permits.
- Outstanding rates and taxes on the property.
- Forced removal or relocation of an encroaching structure.
- Someone claiming ownership over part or all of the land.
- Fraud or forgery.
What options do I have if I want to take out title insurance?
In WA there are two main providers of title insurance, Stewart Title and First Title. We recommend Stewart Title.
Why do you recommend title insurance?
We recommend title insurance because there are risks inherent in property ownership that can’t reasonably known before settlement. The combination of our advice together with title insurance provides the most comprehensive cover available to protect your legal ownership.
How much does title insurance cost?
The cost of a title insurance policy depends on the value of the property. The average title insurance premium in WA is around $500.
How long is a title insurance policy?
Title insurance premiums last for the period in which you’re noted as the legal owner of the property.