Conveyancing & Property Law Explained
Conveyancing is the process of transferring ownership of a property from a Vendor (seller) to the Purchaser (buyer). This includes both individual and entity transfers. Over the past year, Victoria has been subjected to an ample amount of change in laws regarding property and conveyancing. Given the highly complex nature of such transactions, it is important that both Vendors and Purchasers engage the right legal practitioner to guide them through the process and assist in the intricate details.
Contract of Sale and Section 32
The very first step for a Vendor is the creation of a Contract of Sale and Section 32. The Contract of Sale outlines precise details of the property being sold, including the names of the Vendors on Title and Purchasers, the respective Estate Agent, the Legal Practitioner or Licensed Conveyancer of each party, the purchase price and lastly, any ‘special conditions’ that the Purchaser may need to be wary of.
The Section 32, more commonly known as a Vendor’s Statement, summaries the relevant information affecting the property being sold. This includes details of:
Any mortgages, covenants or caveats subjected over the property;
Any easements that mean someone can access or enter the property without being in legal possession of it;
What development zones and overlays relate to the property, such as a heritage overlay;
Whether the property is in a bushfire prone area;
Any proposals regarding access to the property via public roads;
Particulars of outgoings the property is subject to, including council rates, water rates and land tax; and Details of the Owners’ Corporation should the property be in an apartment area, unit complex etc.
GST Withholding Requirements
From here, once the property has sold is where it can get confusing! As of 1 July 2018, Purchaser’s of ‘new residential premises’ or ‘potential residential land’ are required to withhold an amount from the purchase price of the property and make the payment to the Australian Taxation Office (‘ATO’). It is the Vendor’s responsibility to provide the Purchaser with the relevant information as to whether the Purchasers have a withholding obligation or not. This includes determining whether the property is within the definition of new properties above, and ultimately, the amount that needs to be withheld and when it is to be paid to the ATO.
The amount required to be paid to the ATO is generally either:
1/11th of the purchase price of the property;
7% of the purchase price; or
10% of GST exclusive market value of the sale. See our article about GST withholding regime
Foreign Resident Capital Gains Withholding
Further to this, Vendor’s can be subject to what is known as ‘Foreign Resident Capital Gains Withholding Payments’. Certain properties that are subject to this withholding transaction include:
Australian real property sold for greater than $750,000;
An indirect Australian real property interest; and
The option or right to acquire such property or property interest.
When the Vendor is considered a foreign resident to any of the above transactions, the Purchaser must withhold 12.5% of the purchase price and pay this to the ATO.
Therefore, in the most common transactions, where a property is sold for over $750,000, the Vendor must apply to obtain the Capital Gains Withholding Clearance Certificate to notify the Purchaser whether they are a foreign resident or not.
PEXA – Property Exchange Australia
Furthermore, as of 1 October 2018, all accessible types and combinations of property transactions must be lodged by what is known as ‘PEXA’, which is our online e-conveyancing system. PEXA, (Property Exchange Australia) is Australia’s online property exchange network that allows Legal Practitioners, Conveyancers and Financial Institutions to lodge documents with the Land Registries within Victoria and ultimately complete the financial settlement of the property via the internet.
These are all very compound yet necessary requirements in accordance with the new laws in Victoria.
For any additional information or advice about conveyancing or property law, contact our property lawyers at 03 9571 7444. If you are considering selling your property or have recently purchased, we encourage you to contact the team at Argent Law and Argent Accounting so that we can discuss the requirements that are relevant to your situation.