Buying a Property

A building inspection and a pest inspection are primarily used to determine whether the property itself has any structural, quality or pest-related problems, and they are particularly important when buying a freestanding house.

A property that looks neat and tidy may still have hidden defects. A building inspection can uncover issues such as roof leaks, cracked walls, damp, foundation subsidence, poor drainage and structural damage. A pest inspection focuses mainly on the risks posed by termites or other pests. Some problems may not affect day-to-day living in the short term, but the future repair costs can be high, and they may also affect finance, insurance or resale.

The purpose of these inspections is not simply to decide “whether there is a problem”, but to help the buyer assess how serious any problem is. Minor repairs, for example, may simply be a bargaining point; but serious structural problems, termite damage or long-term water ingress may change a buyer’s view on whether to proceed with the purchase at all.

When buying an apartment, a townhouse or a community-title property, a buyer cannot focus on the interior of the dwelling alone. What the buyer is acquiring is not merely an internal living space — they also become part of a strata management structure, taking on the associated strata levies, shared maintenance responsibilities and by-laws.

A strata report generally reflects the management and financial position of the building, for example:

Some apartments may look reasonably priced, but where the building has a major works programme or a special levy in prospect, the costs the buyer ultimately bears can be far higher than expected. For first-home buyers and investors alike, this is a risk worth understanding well in advance.

A survey report is primarily used to confirm the land boundaries, the position of buildings and whether the dwelling or any ancillary structures sit within the legal boundary. This is especially important for freestanding houses, vacant land and properties with fencing or outbuildings.

A survey report can help identify:

Issues like these are not always apparent from an ordinary inspection of the property. A buyer may only realise after settlement that a driveway, fence or outbuilding does not sit entirely within the land they purchased. Should renovations, an extension, a sale or a neighbourhood dispute arise later, these matters can bring additional costs.

Finance is one of the most real-world risks in a property transaction. Pre-approval is not the same as final, unconditional loan approval. Before formally advancing funds, a bank will usually still review the property valuation, the buyer’s income documents, the loan conditions, the source of funds and other internal approval matters.

As a buyer, it is important to understand that your contractual obligation to purchase and your loan approval operate on two different levels. Even if the bank later declines to approve finance, a contract the buyer has already signed and exchanged does not necessarily lapse automatically. Without appropriate protections built into the contract, the buyer may still be required to complete the transaction on time, failing which they could face loss of the deposit, default costs or other liability for damages.

Preparing your funds is also about much more than the deposit. A buyer typically also needs to allow for stamp duty, legal fees, loan fees, the cost of inspection reports, settlement adjustments, insurance and moving-related expenses. A great deal of the pressure in a transaction comes not from the purchase price itself, but from the buyer underestimating the total funds that need to be ready in the short window after exchange. For this reason, before signing a contract of sale, NS Legal recommends that you obtain clear legal advice from a professional legal team.

For a buyer, contract review is usually one of the most important legal steps in the entire buying process. A contract of sale is not a simple document confirming an offer — it is the central legal document that determines each party’s rights and obligations, the settlement arrangements, the risk attaching to the deposit, the apportionment of costs and the consequences of default.

A contract review typically focuses on matters such as:

Whether title to the property is clear and the vendor has the right to sell it;
Whether the property is subject to a mortgage, easement, restrictive covenant or other encumbrance;
Whether the contract contains special conditions that limit the buyer’s rights or expand the buyer’s obligations;
Whether the settlement date is realistic and aligns with loan approval and funding arrangements;
Whether there are planning restrictions affecting future use, leasing, alteration or development;
Whether the vendor’s disclosure documents are complete — for example the title documents, the planning certificate and the drainage diagram.
For instance, a property that appears on the surface to be an ordinary home may have title documents showing an easement over the land that affects any future extension; a dwelling may contain unapproved building works; and some contracts include special conditions that make it difficult for a buyer to require the vendor to deal with problems discovered before settlement. The value of a contract review lies precisely in identifying these issues early, during the negotiation stage.

Exchange of contracts is a pivotal point in a property transaction. Once contracts are exchanged, both buyer and vendor become legally bound, and the transaction moves from intention or negotiation into the stage of legal enforcement.

A buyer generally pays a deposit at exchange. The amount varies according to the transaction, but in practice it is commonly a set percentage of the purchase price. The deposit is not merely “good-faith money” — it is contractual money with a definite legal significance. If the buyer, without lawful grounds, refuses to complete the transaction once the contract is on foot, the deposit is usually the first amount put at risk.

Before exchanging, a buyer should confirm a few things: that the finance arrangements are sufficiently stable, that the contract has been reviewed, that any necessary property investigations are complete, and that they clearly understand the consequences of being unable to complete the transaction. Many buyers find themselves in a difficult position not because the contract itself is complex, but because they entered into a binding contract too soon, before they were properly prepared.

Settlement is the point at which a property transaction is formally completed. On the settlement day, the buyer pays the balance of the purchase price and related costs, the vendor delivers title, and ownership of the property formally transfers into the buyer’s name.

Modern property settlements are usually completed through an electronic platform. Before settlement, the buyer’s lawyer or conveyancing team attends to the transfer documents, the loan funds, stamp duty, settlement adjustments and the related payments. The bank, too, must complete its review of the loan documents and have funds ready before settlement.

Settlement may look like the final step in a transaction, but in reality it depends on a number of earlier matters falling into place. A delay can be caused by late loan documents, unpaid stamp duty, insufficient funds, errors in the documents or a vendor who is not ready to settle.

A delayed settlement can give rise to additional costs and even the risk of default. For this reason, after exchange the buyer still needs to keep working closely with their lawyer, bank and mortgage broker to ensure every settlement matter is completed on time.

The final inspection is usually the buyer’s last opportunity to confirm the condition of the property before settlement. Its purpose is not to re-examine the overall quality of the dwelling, nor to renegotiate the price, but to confirm that the property remains in substantially the same condition as at exchange and that the vendor is preparing to hand it over in accordance with the contract.

A final inspection should generally cover:

Whether any new damage has appeared;
Whether the fixtures included under the contract are still in place;
Whether agreed items such as the air-conditioning, hot-water system and stove have been removed;
Whether the vendor has moved out and cleaned the property;
Whether any repairs or matters specifically agreed in the contract have been completed.
If the final inspection reveals a problem, the buyer should notify their lawyer or conveyancing team as soon as possible and deal with it through the proper channels. The available options may include requiring the vendor to rectify the issue, negotiating an adjustment to the price, retaining part of the funds, or — in a serious case — assessing whether it affects the settlement arrangements.

Stamp duty — in NSW commonly referred to as transfer duty — is a significant government charge a buyer must pay to Revenue NSW when purchasing a property. It is not part of the purchase price paid to the vendor, but a government tax arising from the transfer of the property.

This means that, although the law appears to allow 3 months, the settlement period for most ordinary residential transactions may be shorter than 3 months. Where the buyer needs bank finance, the bank will usually also require transfer duty to be dealt with before settlement. When working out a buying budget, therefore, a buyer cannot look only at the price and the deposit — transfer duty must be factored in early as a major funding item.

First-home buyers may be eligible for the NSW First Home Buyer Assistance Scheme. Under Revenue NSW’s current rules, the purchase of a new or existing home for up to AUD 800,000 may qualify for a full transfer duty exemption, while the purchase of a home above AUD 800,000 but below AUD 1,000,000 may qualify for a concessional rate. The purchase of vacant land intended for building a home to live in may also receive an exemption or concession within a particular price range.

For an off-the-plan purchase where the buyer intends to live in the property, transfer duty may, if the eligibility conditions are met, be deferred for up to 12 months; however, the off-the-plan duty deferral generally does not apply to vacant-land contracts.

Stamp duty matters because it has a direct effect on the buyer’s cash flow and their ability to settle. A buyer who has set aside only the deposit, without reserving funds for transfer duty, settlement adjustments and other costs, may not discover the shortfall until settlement is almost upon them.

After buying a property, the buyer takes on the ongoing costs associated with it, such as council rates and water rates, and in some cases land tax or strata levies as well.

Council rates are charges levied by local government on property owners to fund basic local services such as waste collection, road maintenance and community facilities. Water rates generally relate to water supply, sewerage and metered usage. For apartments and community-title properties, there may also be strata levies.

At settlement, these charges usually need to be adjusted on a pro-rata basis. In simple terms, the vendor is responsible for the costs attributable to the period during which they owned the property, and the buyer is responsible for the costs from the settlement day to the end of the relevant charging period. If the vendor has already paid council rates or water rates for the whole period in advance, the buyer will usually need to reimburse the vendor at settlement for the portion attributable to the buyer’s period after the settlement day. In a NSW settlement, adjustments for council rates, water rates and strata levies are a routine arrangement.

For example, if council rates have been paid by the vendor through to the end of the financial year, but the property settles partway through that year, the apportionment is calculated by date on the settlement day, with the vendor bearing the portion before settlement and the buyer the portion after. This adjustment is usually reflected in the settlement statement.

These charges may not be the most conspicuous part of a transaction, but they affect the total amount a buyer ultimately needs to have ready on the settlement day. A buyer should not prepare only the “balance of the purchase price” — they also need to allow for stamp duty, adjustments, loan fees and other settlement-related outgoings.

Property insurance is something buyers easily overlook, yet it is very important. For a buyer of a freestanding house, insurance should usually be arranged as soon as possible after exchange, because from the moment the transaction becomes legally binding the buyer may already have a real interest in the risk attaching to the property.

The point of insurance is that, should a fire, storm, accidental damage or other unforeseen event occur before settlement, the buyer is not left wholly exposed and unprotected. A bank lender may also require the buyer to arrange insurance before settlement and to note the lender as an interested party.

A buyer of an apartment generally needs to distinguish between the building’s overall insurance and cover for their own contents, fit-out or personal liability. The building insurance is usually arranged by the owners corporation, but this does not necessarily cover all of the buyer’s personal risks. When buying an apartment, a buyer should confirm from the strata report whether the building insurance is current and the cover reasonable, and whether they still need to take out additional personal insurance.

An off-the-plan purchase is one where the property has not yet been built, and the buyer purchases the future, completed property on the basis of the plans, specifications, display materials and contract provided by the developer. What the buyer sees at the time of signing is usually not the finished product, but the planned house or apartment.

An off-the-plan transaction is characterised by a long time horizon and a higher degree of uncertainty. The buyer needs to consider more than just the price and the floor plan, including:

A vacant-land purchase carries a different set of risks. The buyer is acquiring land, not a dwelling ready to live in. The core question is not “does this block look suitable”, but whether it can be used as the buyer plans.

A vacant-land transaction generally calls for attention to:

Neither off-the-plan nor vacant-land purchases should be treated like an ordinary established-property transaction, because the buyer is taking on the uncertainty of future delivery, future approvals or future construction.

NS Legal can assist property buyers across the entire legal process, including: