Congratulations! You have secured a buyer or seller for your property, made it through the back and forth of contract negotiations and gone unconditional.
This is an exciting time because the end is so near, but it can get a little overwhelming as things tend to move quickly at crunch time. That's why in this article I've put together answers to common questions that tend to pop up at the end of the transaction.
Top conveyancing questions about settlement asked by sellers
01. When will I receive my settlement money?
The short answer: If you settle electronically, within a few hours. If you settle manually, about 3 business days.
Settlement has occurred! Hooray! But when can you expect the hard-earned cash to appear in your account? Well, it really depends on if your matter was settled electronically or by paper.
Electronic settlements are commonly settled on a platform called PEXA. In Victoria and Western Australia electronic settlements are mandatory and will soon be in New South Wales. Electronic settlements are available in Queensland and South Australia but not in ACT, Tasmania and the Northern Territory where a paper settlement is currently the only option.
If your matter settles electronically, the funds should appear in your nominated account within a couple of hours after settlement. However, PEXA does recommend allowing a maximum of 24 hours just in case banking delays occur.
If your matter settles by paper, representatives from each party attend a physical settlement venue to hand over bank cheques for transfer of title documents. You will not receive your funds as quickly as you would with an electronic settlement. Your funds will clear faster than usual if you have nominated an authority for surplus account with your bank in advance of settlement. This means you have a bank account nominated with your bank for the surplus of funds to go into after the bank have taken what they are owed.
- If you have a surplus account: your bank will take all the remaining funds at settlement, deduct the amount needed to pay off the mortgage and direct the rest to your account. This timeframe is entirely dependent on how fast the bank works, but normally takes 1-2 business days. You can normally set up an authority for surplus account on your mortgage discharge form. However, not all lenders have this facility so it is best to check with your bank if you are unsure.
- If you do not have a surplus account: a bank cheque collected at settlement will be deposited into your account after settlement. It takes at least 3 business days for the funds to clear into your account.
At lawlab we prefer to settle electronically to ensure you get your funds faster. However, if the buyer’s lawyer or conveyancer is unwilling or unable to settle electronically and electronic settlements are not mandatory in your state, then your matter will need to settle by paper.
02. What happens with the deposit?
The short answer: The deposit holder (normally the agent) will transfer the balance of the deposit to you after settlement.
After the contract has been signed the buyer will pay a deposit. This deposit is paid to a third party stakeholder (either the real estate agent or solicitor) and held by them in their trust account until settlement is completed. Once settlement is confirmed, the lawyers will notify the deposit holder, and give them authority to release the deposit to the seller.
The agent will normally deduct their fees and/or commission from the deposit monies and give the balance to you (if any). As the seller you will normally receive two separate payments after settlement has occurred:
- The payment of settlement funds transferred from the electronic settlement or deposited by bank cheque; and
- The balance of deposit funds transferred by the agent.
This means that generally you will not have access to the deposit until after settlement. If you require the deposit before this, it is important to let your lawyer know early. In every jurisdiction the process for early release of deposit is a little different, but the key message is that there is no guarantee the buyer will agree to release the deposit early.
03. Should I pay my rates/water bill before settlement?
The short answer:
- If the bill is due before settlement: pay the bill on time to avoid additional charges for late payment.
- If the bill is due after settlement: there is no need to pay as it can be paid at settlement.
At lawlab we will provide you with a draft settlement adjustment statement about 5 days before settlement. This statement shows you the adjustments that have been made to the purchase price on a pro-rata basis for outgoings such as council, strata levies and water charges. Adjustments are made so each party only pays for the outgoings for the period in which they own the property.
The most common way to adjust for outgoings is as follows:
- any outstanding amount due to the outgoings authority to be drawn from the seller’s dale proceeds (i.e. paid by the seller); and
- the buyer to reimburse the seller for their share of the paid outgoings by an adjustment in favour of the seller.
lawlab notifies the council, water and strata authorities of the change of ownership after settlement. You will need to notify any other providers (e.g. gas, electricity, internet) of the change of ownership and finalise your account.
04. How do I give the keys to the buyer?
This is an easy one! In most cases, just get in touch with the agent and give them the keys before settlement to hold onto.
The agent will not release the keys to the buyer until lawlab has confirmed settlement has gone through. The buyer can then contact the agent to organise a convenient time to collect them.
05. When do I need to leave the property and do I have to clean up first?
The short answer: Generally, it is good to aim to leave the property in a neat and tidy condition on the morning of settlement.
In most states, you need to provide vacant possession by settlement which means you need to have removed all your items and vacated the property by then. For example, if settlement is scheduled to complete at 2:30PM, then you need to have left by then and handed the keys to the agent. It is good practice to have vacated no later than the morning of settlement day to avoid any dispute from the buyer about you being ready to settle. If there are tenants in the property, but the buyers are buying the property with vacant possession, then the same rule applies to them.
The exception is if you’re are selling your principal place of residence in Western Australia. In this case, the standard form of contract provides that you generally do not need to move out until midday on the day following settlement.
It is also important to give the property a clean and remove any rubbish. You usually have no obligation to give the property a professional clean, but you do generally have an obligation to ensure the property is in the same condition it was at the time the contract was signed.
There are often disputes about the removal of fixtures and chattels from the property. A fixture is something that is fixed to the property and forms part of the property e.g. oven and cooktop, shelves, or trees planted in the garden soil. Chattels are usually moveable items like furniture or a free-standing refrigerator. Generally, fixtures are included in the sale of the property, while sellers can take chattels with them when they leave. Arguments can occur about whether something like a dishwasher or a wall-mounted television is a fixture or a chattel. To avoid this issue, you can list items as inclusions or exclusions under the contract so that it is decided early on who gets to keep what.
The buyer should raise any issues they have with the final condition of the property during their pre-settlement inspection. If an issue does arise then please notify us straight away. Although it sounds trivial, these kinds of issues commonly hold up settlement and cause unnecessary time, expense and stress for you so it is best to have an empty clean house before settlement.
Top conveyancing questions about settlement asked by buyers
01. Is it important to do a pre-settlement inspection?
The short answer: Yes.
We strongly recommend you conduct an inspection of the property before settlement. If you do not inspect the property and discover something is missing or not working after you have moved in, then it can be much more difficult to enforce any rights you may have.
You are usually entitled to one pre-settlement inspection. Inspections are normally conducted on the morning of or day before settlement. During the inspection, you should check that the property is in the same condition as it was on the contract date and advise us if something isn’t right.
If the property is not in the same condition, then you may be able to ask the seller to fix the problem, delay settlement or negotiate for something to be done after settlement and funds withheld to secure that obligation.
02. Do I need to provide some extra funds for settlement. How do I do that?
The short answer: lawlab will calculate any extra funds you need and let you know where to send them.
lawlab will upload a draft settlement adjustment statement to you approximately 5 days before settlement. This statement will include the total estimated funds you need to provide at settlement and instructions on how to do so.
This statement shows you the adjustments that have been made to the purchase price on a pro-rata basis for outgoings such as council, strata levies and water charges. Adjustments are made so each party only pays for the outgoings for the period in which they own the property.
The most common way to adjust for outgoings is as follows:
- any outstanding amount due to the outgoings authority to be drawn from the seller’s sale proceeds (i.e. paid by the seller); and
- you will reimburse the seller for their share of the paid outgoings by an adjustment in favour of the seller.
The total funds required in the statement will also include any transfer duty (stamp duty), legal fees, registration fees, bank cheque fees etc.
If you have a lender, we will let you know how much more we need from you than they are providing. It is important to note that the loan funds the lender provides at settlement (called funds available) will normally be lower than the loan amount you were approved for. This is because the lender deducts their own fees and registration costs from the loan amount.
Whilst we provide an estimate of the total funds required to settle, we also recommend a higher amount to transfer to ensure you have enough to settle in case the draft settlement figures change (which can happen in the lead up to settlement). We will transfer any leftover funds back to you after settlement.
Once you know the amount you need to provide, you will need to get the money to settlement!
You can either:
- Set up an authority for a shortfall account with your lender – you can transfer the funds needed to settle to this account and your lender will draw them from this account so they hand over all the funds required at settlement. This is the easiest method.
- Transfer the funds to a trust account – this will be our trust account if it’s an electronic settlement and if it’s a paper settlement then usually it will be our local settlement agent’s trust account. For paper settlements, it can take about a week or more to transfer any left over funds back to you.
If you are transferring funds within three days before settlement, lawlab recommend you do a telegraphic transfer to ensure the funds are cleared in time. A telegraphic transfer is a really fast way of transferring funds. To complete a telegraphic transfer, you will need to go into your bank branch and pay a small fee (usually $30).