The property settlement mistakes that can derail your home purchase

A qualified legal professional will often identify things that could preclude the purchase being a sound one.

Not only does a legal representative review a contract prior to signing, but they also coordinate the transfer of the property from one party to the other, manage significant transfers of money, and ensure that settlement occurs on time, and thoroughly.

Yet so many buyers treat the task of selecting a qualified legal representative as an afterthought. Some take the agent’s recommendation without question, while others shop for the cheapest option.

There are many varying degrees of expertise and professionalism when it comes to legal representatives though. And like any profession, there are varying costs. From $600 to $5,000, I’ve seen a wide array of legal representative quotes for purchaser files. While buyers don’t necessarily need to search for a high-end law firm in the city, they should be mindful of inexperienced conveyancers with Hotmail email addresses, too.

Some of the horror stories that come to mind include, but aren’t limited to, the following:

• Fast ‘verbal’ reviews, missing important dealbreakers for buyers.
• Settlement processes missing the transfer of additional titles that should have been settled together with the main title. This could include a storage cage, or a second car park of an apartment, for example.
• Non-responsive legal representatives who ignore emails and phone calls, placing the buyer in a precarious position in regard to their ability to settle on time. A late settlement will usually cost a buyer in penalty fees, but at worst, it could cost a buyer their entire deposit and potentially further damages.
• A legal representative who doesn’t understand the restrictions, duties and/or taxes for buyers who are non-residents and/or non-citizens. An alarming scenario could involve a purchaser who is not legally permitted to buy established (or any) property in Australia.
• A legal representative who miscalculates the adjustments, duties and taxes, leaving a purchaser with an unexpected shortfall at the last hour.
• Those who don’t order certificates that identify frightening liability for buyers. An example of this is a property with an order placed on it. Orders are council-generated and can be the result of non-permitted structural works, combustible cladding on buildings, illegal extensions, or any number of issues that breach council requirements.

Avoiding nasty, post-settlement surprises

Permits, certificates, owner-builder documentation and warranty insurance are often items that are raised in a contract review. A thorough conveyancer or solicitor will check the online photographs and floor plan of the property in question and often they’ll raise a request for more paperwork from the vendor. Pending the age of the works, the council planning requirements and the extent of the works, there may be missing documentation.

This deficiency strikes more than people could imagine. It is not unusual for us to requesting extra documentation from agents for permitted works on a weekly basis.

It’s when the works should have come with a permit but don’t, that we have an issue.

Once a property settles, the purchaser inherits the liability for any non-permitted works. Understanding the risk, the potential cost, the potential stress and the impact on future insurance claims is critical, not to mention the impact on future saleability.

Photos and other observations should be taken and provided to the legal representative if any works have recently been carried out; especially if the online photographs don’t show the works.

Neighbouring properties that have advertised for extensions, renovations or developments are to be mentioned in a contract of sale.

Another upset relates to special conditions being added to the contract by the vendor’s legal representative. Such additions are usually for the vendor’s benefit, and sometimes place the buyer in a more vulnerable, or disadvantaged position.

Removal of unfavourable conditions is possible. It is simply a matter of requesting deletions. Not all legal representatives permit their conditions to be struck, but we find that the majority do.

Choose wisely, save thousands

While plenty of solicitors don’t like their conditions being tampered with, a thorough legal review gives the purchaser a chance to negotiate the removal of such conditions.

A thorough contract review will identify any special levies in a strata block. Special levies can be a nasty surprise when unidentified to a buyer. They represent additional funds that need to be raised (usually urgently) to remediate issues that have not been budgeted for in the strata fees.

From underpinning to asbestos removal, plenty of horrible special levies arise in strata minutes. Sometimes a sign of an expensive levy can be multiple owners trying to sell in the one block at the same time.

Zoning, planning restrictions, encumbrances and caveats are always checked in a thorough contract review. It’s important that legal representatives know about any future plans or requirements of the purchaser for context. For example, if a buyer wishes to develop land where a ‘Single Dwelling Covenant’ exists, the purchase won’t be viable for them.

There are myriad potential issues that qualified legal representatives can identify and there are some great risk-mitigants, such as title insurance and other tips that good legal representatives can offer their clients.

One of the most important prerequisites for any client’s purchase is a thorough legal review.

Word-of-mouth is a powerful method of identifying a great legal professional to assist with a home purchase. Like all valued service providers, buyers just have to ask for recommendations from trusted sources.