When purchasing property in Australia, there are a number of legal issues that buyers need to be aware of. A single misstep can lead to various pitfalls, resulting in financial, time, and energy losses. Therefore, if you are looking to buy property in Australia, it is essential to familiarise yourself with Australian property law in advance. Using New South Wales as an example, the following is an in-depth introduction to the property-purchasing process and property law in NSW for those looking to buy.
A common way to buy a house or apartment in New South Wales, Australia, is through a private treaty. When negotiating with prospective buyers, sellers will try to talk up the value of their property during the sale process to secure a higher sale price. Once you and the seller exchange signed contracts, the contract of sale becomes binding. At this point, you must also pay the full deposit (usually 10% of the total price, less any deposit you have already paid). However, this does not mean your purchase contract is locked in. A standard contract of sale includes a “cooling-off period”, during which you may change your mind.
Ways to Buy Property in New South Wales, Australia
There are various channels and methods for buying property in Australia. Here are some of the more common primary purchasing channels:
- Real estate agents: Purchasing property through an Australian real estate agent is one of the most common channels. Buyers can proactively contact a local Australian real estate agency, convey their property requirements and budget, and the agent will then provide a list of available properties and assist in arranging inspections and purchase procedures.
- Online property websites: Australia has many online property websites, such as Domain and Realestate. Buyers can search and filter properties matching their requirements on these websites, then contact the real estate agent or seller for further enquiries and purchase arrangements.
- Auctions: Auctions are one of the common methods of sale in the Australian property market. At an auction, the seller publicly auctions the property, buyers place bids, and the highest bidder wins the property. If a buyer is interested in a particular auction property, they can attend the auction and bid for it.
- New housing development projects: If you wish to buy a brand-new property, you can consider participating in new housing development projects. These projects are generally built by developers and offer brand-new apartments, townhouses, or urban residences. To purchase such new developments, you can contact a real estate agent or deal directly with the developer to learn about project details and purchase procedures.
- House construction: That is, buying land and building your own house. If a buyer has specific housing requirements and is willing to bear the cost of building, they can choose to purchase land and build their own home. In Australia, you can purchase land and hire a builder to construct a custom home.
Buying at auction
Property auctions can sometimes be daunting, particularly because there is no cooling-off period. If the hammer falls and you are the highest bidder, you must generally complete the purchase, no matter how unfair the contract may be. However, provided you have your lawyer review the contract of sale before bidding, there is no reason to consider an auction any riskier than a purchase by private treaty.
Before the auction, you need to determine your maximum bid in advance and ensure you can afford that price. Taking into account your budget, the market value, and the condition of the property, develop a clear bidding strategy. During the bidding process, remain calm and stick to your bidding plan, avoiding overbidding. Next, you need to familiarise yourself carefully with Australian property auction rules and procedures. In particular, different regions and auction houses in Australia may have different rules, such as bidding methods, bid increments, and auction time limits. So, before the auction, make sure you understand and abide by these rules in order to participate fully and avoid breaches. In addition, you can consult a property lawyer in advance. Your lawyer will identify any terms that may be unfavourable to you and negotiate with the seller’s lawyer to amend those terms. They will also do their best to ensure that the property you are purchasing is smoothly transferred into your name. This way, if your bid is successful, you can be confident that the contract you have signed serves your interests.
Buying an apartment or townhouse
Most apartments and townhouses in New South Wales are strata-titled, which means that when you buy the property, you also enjoy/bear the rights and obligations of being a member of the owners corporation (or body corporate).
Being a member of the owners corporation means you will have a say in matters affecting the building, but it also means you will need to pay strata levies, and the way you use the property will be restricted by law. By-laws typically cover issues such as parking restrictions, pet ownership, and the use of common property. You may also need to contribute to shared issues such as plumbing, roof and window repairs, and property maintenance, even if you are not directly affected.
Because this affects the value of what you are purchasing, it is very important to gain a full understanding of the owners corporation’s activities before buying, and to know exactly what works are planned and whether there are sufficient funds to cover them. Obtaining a report on the owners corporation’s records can provide useful insights into the owners corporation’s financial position as well as specific issues arising in its operations. Your lawyer can arrange such a report for you.
The seller must include certain information about the owners corporation in the contract of sale, from which you can determine the relevant owner’s rights.
The pros and cons of buying "off the plan"
Builders in NSW often raise funds for their development by selling units or townhouses before an apartment or townhouse is built. At this stage, you may be able to acquire the property at a lower price, and the developer recoups funds — which looks like a win-win situation.
However, after you, as the buyer, take possession, you may encounter various issues you are not satisfied with. For example, a Sydney investor recently purchased an off-the-plan apartment after being promised 180-degree water views by the agent. When the complex was completed, the buyer discovered that a wall completely blocked his view. He argued that the contract of sale was invalid and demanded that the builder refund the deposit. The builder, however, refused the client’s request.
The buyer took the case to the New South Wales Court of Appeal, which ruled in his favour. The court found that he had relied on the agent’s misrepresentations in deciding to purchase, so the contract was invalid and ordered the builder to refund the buyer’s deposit.
Amendments to the law in 2015 and 2019 have made it more difficult for developers to rescind (exit) off-the-plan contracts, but there is still considerable risk in buying something that has not yet been built, including indeterminate, not-yet-added finishes and inclusions. Because of the complexity of such contracts, off-the-plan contracts have a 10-business-day cooling-off period, giving buyers more time to seek legal advice.
There are many legal issues to be aware of before buying property in NSW. Before purchasing a property, it is best to have a lawyer explain the issues you need to be aware of, especially when buying off the plan — otherwise, you may end up with a property that does not meet your expectations or incur additional costs.
Finally
Buying property is a major investment decision, involving a large amount of money and a long-term commitment. The reason to pay attention to these Australian property-related legal issues is to protect your interests, guard against fraud, reduce purchase risk, and ensure the legality and compliance of the transaction. Before purchasing property in NSW, we recommend consulting a lawyer on potential issues to avoid unnecessary losses.
On the topics of buying Australian property, Australian property taxes and related costs, and Australian property law, we have written a series of related articles to answer various questions from prospective Australian property buyers. You are welcome to keep reading:
Even with PR you may still need to pay this surcharge — make sure you understand before buying!
Legal issues to consider before buying property in NSW
Buy a home with a deposit as low as 2%? Who is eligible? Be sure to note these points!
Caveats — an effective tool for protecting property interests
Should you engage a lawyer or a conveyancer when buying property in Australia?
