Selling a Property
In a property transaction, the vendor’s legal obligations begin well before the property is formally listed on the market. In NSW in particular, the vendor is usually required to prepare a contract of sale before the property is listed, and to disclose key information and documents relating to the property within that contract. The first step in selling, therefore, is to confirm: whether the contract is ready, whether the title documents are complete, whether there are any issues that need to be disclosed, whether there are any unapproved alterations, and whether the settlement timing aligns with your own relocation, the discharge of your loan, or the purchase of your next property.
Many vendors run into difficulty during a transaction not because the property cannot be sold, but because the contract was poorly prepared, the disclosure documents were incomplete, or the purchaser’s solicitor identified problems on review — leading to delays in exchanging contracts, the purchaser renegotiating the price, or the transaction failing to progress smoothly.
NS Legal can help vendors prepare the contract of sale, handle disclosure documents, identify potential risks attaching to the property, and provide legal assistance throughout the exchange of contracts, the discharge of any loan, and final settlement — helping you complete the sale more smoothly.
Key Stages in the Selling Process
Preparing the contract of sale before listing
The vendor’s disclosure obligations
Alterations, additions and unapproved works
Accepting an offer and exchanging contracts
Deposit and cooling-off period
Settlement and transfer of title
Preparing the contract of sale before listing
In NSW, the vendor is usually required to prepare the contract of sale before the property is formally listed. When the agent advertises the property, arranges inspections or accepts an offer from a prospective purchaser, they generally need to be able to provide the contract to the purchaser so that the purchaser’s solicitor can review it.
This is one of the biggest differences between selling a property and an ordinary commercial transaction. The vendor cannot simply wait until a buyer appears and then prepare the documents at the last minute. The better prepared the contract is, the more smoothly the transaction tends to proceed; where the contract documents are incomplete, the purchaser’s solicitor will often raise further requests, and the transaction timeline is easily delayed.
The contract of sale usually needs to include:
- title information for the property, such as the certificate of title, the plan of the land and details of the registered owner;
- a planning certificate, setting out the zoning and use restrictions applying to the land on which the property stands;
- a drainage diagram, showing the relationship between the sewer lines and the property’s land;
- any easement, restrictive covenant or other registered document affecting use of the land;
- for an apartment or strata property, the relevant strata documents; and
- any special conditions or disclosure matters relating to the property.
The vendor’s disclosure obligations
When selling, the vendor must disclose important information about the property to the purchaser. At the heart of the disclosure obligation is the aim of allowing the purchaser to understand the legal status of the property and its principal risks before signing.
This kind of disclosure is not merely a matter of “honestly answering the purchaser’s questions”. In a NSW property transaction, the contract of sale itself usually has to be accompanied by a number of prescribed documents. If those documents are missing, or the contract fails to disclose certain important matters correctly, the purchaser may in certain circumstances be entitled to rescind the contract, and even to require the return of the deposit.
Disclosure matters the vendor should pay particular attention to include:
- whether the land or building is affected by an easement, a restrictive covenant or any other title restriction;
- whether any notice has been received from a government department, the local council or another relevant authority;
- whether the property has any unapproved alterations, additions or change of use;
- whether there are any legal issues that could affect the use, sale or settlement of the property; and
- for a strata property, whether there are any issues with the owners corporation, repairs, special levies or common areas.
Proactive, clear disclosure in fact helps to reduce later challenges from the purchaser and avoids more serious disputes arising after contracts are exchanged.
Alterations, additions and unapproved works
Before selling, the vendor should pay particular attention to whether the property has previously undergone any alteration, extension or structural change. Examples such as converting a garage into a room, adding a pergola in the backyard, building a sunroom, installing a pool, extending the kitchen or altering the internal structure may all raise approval issues.
The issue is not that “having carried out alterations means the property cannot be sold”, but rather whether those alterations need to be disclosed, and whether they may affect the purchaser’s assessment of the property.
Where the property has unapproved works, the purchaser’s solicitor may raise queries when reviewing the contract or carrying out enquiries. In serious cases, the purchaser may require the vendor to provide further documents, apply for the relevant certificates, amend the contract terms, renegotiate the price, or even — in certain circumstances — seek to rescind the contract.
For this reason, at the contract-preparation stage the vendor usually needs to advise their solicitor of:
- whether the property has previously been altered or extended;
- whether the relevant works were approved by the local council;
- whether any approval documents, occupation certificates or other supporting materials have been retained; and
- whether any notice, warning or order relating to building works has been received.
The sooner the vendor sets out these matters clearly, the sooner the solicitor can assess whether disclosure is required in the contract, whether further documents are needed, and how to reduce transaction risk.
Accepting an offer and exchanging contracts
When a purchaser makes an offer and the vendor accepts it, the transaction does not automatically become a binding contract. A property transaction generally only forms a legally binding sale and purchase relationship once contracts are exchanged.
Exchange of contracts usually means that the purchaser and the vendor each sign their copy of the contract, and the two copies are then formally exchanged by the parties’ solicitors, the agent or other representatives. Once exchange is complete, the purchaser usually pays the deposit and both parties become bound by the contract.
For the vendor, exchange of contracts is a very important milestone. Before exchange, the transaction may still change because of the purchaser’s review of the contract, finance issues, inspection reports or other reasons; only after exchange does the transaction truly enter its formal performance stage.
Before exchange, the vendor usually needs to confirm:
- whether the purchaser’s price and conditions are settled;
- whether the deposit arrangements are clear;
- whether the settlement date suits the vendor’s relocation or onward purchase plans;
- whether the purchaser is seeking any additional conditions; and
- whether there are any contract issues that need to be resolved before exchange.
If the vendor is also buying another property at the same time, the timing of exchange and settlement particularly needs to be coordinated in advance — otherwise the sale may complete before the purchase, or the two settlement dates may fail to align.
Deposit and cooling-off period
In a property sale, the deposit is usually paid by the purchaser at the time contracts are exchanged. For the vendor, the deposit is an important indicator of the transaction’s certainty, but a deposit does not mean the full purchase price has been safely received.
If a cooling-off period applies, the purchaser may still be entitled to withdraw from the transaction during that period, subject to the prescribed statutory cost. For the vendor, this means that even after contracts have been exchanged, the transaction carries some uncertainty until the cooling-off period ends.
If the purchaser waives the cooling-off period, the contract usually becomes more firmly binding on the purchaser immediately on exchange. Whether the vendor accepts an exchange with a cooling-off period, or requires the purchaser to waive it, generally has to be assessed in light of the circumstances of the transaction, the purchaser’s standing, market conditions, and whether the vendor is buying another property at the same time.
Settlement and transfer of title
Settlement is the point at which the sale is finally completed. On settlement day, the purchaser pays the balance of the purchase price, the vendor completes the transfer of title, and ownership of the property formally passes to the purchaser.
For the vendor, several important matters usually need to be dealt with before settlement:
- confirming whether any existing loan needs to be discharged;
- arranging the discharge of the mortgage with the bank;
- confirming whether the property can be delivered on the settlement date as agreed;
- dealing with keys, the agent and moving-out arrangements;
- checking the adjustment of council rates, water rates, strata levies and other charges; and
- confirming how the sale proceeds are to be distributed after settlement.
If the vendor’s property still has a loan, the bank usually needs to receive the relevant repayment at settlement and to discharge the mortgage registered on the title. This process needs to be arranged in advance, or it may affect settlement.
Getting ready to sell, but unsure whether your contract and disclosure documents are complete?
Preparing for Risk Before You Sell
Essential documents and contract annexures
The vendor’s contract usually needs to annex a number of important documents relating to the property. The purchaser’s solicitor will use these documents to assess the legal status of the property, its use restrictions and its potential risks.
Commonly required documents include:
- the certificate of title;
- the plan of the land;
- the planning certificate;
- the drainage diagram;
- easement or restrictive covenant documents;
- relevant strata documents; and
- any notice, order or restriction document relating to the building or land.
These documents are not a mere formality. They directly affect whether the purchaser is willing to proceed with the transaction, and whether the vendor has discharged their disclosure obligations. If contract documents are missing, the purchaser may request that they be supplied, delaying the listing or the exchange. In more serious cases, where certain prescribed documents are missing or disclosure is inadequate, the purchaser may in certain circumstances seek to rescind the contract.
Building certificates and survey issues
For a freestanding house or a property with outbuildings, building certificates and survey issues can be very important.
A survey can help confirm whether the house, fencing, garage, shed, pool or other structures sit within the correct land boundaries. A building certificate or related approval documents help to show whether the building’s structure and any alterations have obtained the necessary approvals.
The vendor should pay particular attention to:
- whether the house has previously been extended;
- whether a pergola, garage, pool or outbuilding has been added;
- whether a garage, storeroom or other space has been converted to residential use;
- whether any fencing or building may encroach across the boundary; and
- whether the relevant approval or certification documents have been retained.
If these issues are only discovered during the purchaser’s enquiries, the purchaser may request further documents, delay exchange, or seek to amend the contract conditions. Gathering this information in advance generally helps the transaction proceed more smoothly.
Government notices, restrictions and property defects
If the vendor has received a notice from the local council, a planning authority, the water authority, the owners corporation or another government body, they should tell their solicitor as early as possible.
Such notices may relate to:
- unapproved building works or rectification requirements;
- drainage, fire safety, safety or compliance issues;
- land use restrictions;
- road, planning or resumption matters; and
- repair or compliance issues within a strata scheme.
Even if the vendor considers a notice “unimportant” or “long in the past”, they should not decide for themselves whether it needs to be disclosed. The safer course is to hand the relevant documents to their solicitor and let the solicitor assess whether they affect the contract and the transaction’s risk.
Key Costs and Settlement Arrangements Vendors Should Understand
Council rates, water rates and adjustments
When selling, council rates, water rates and certain strata charges are usually adjusted on a proportional basis at settlement.
In simple terms, the vendor bears the charges attributable to the period during which they owned the property, and the purchaser bears the charges from the settlement date onwards. If the vendor has already paid the charges for an entire billing period in advance, the purchaser usually reimburses the vendor at settlement for the portion attributable to the purchaser after the settlement date.
For example, if the vendor has paid a full year of council rates but the property settles mid-year, the amount is calculated by reference to the dates at settlement, and the purchaser reimburses the portion for the period from the settlement date to the end of the billing period.
These adjustments are usually reflected in the settlement statement. While the individual amounts may not be especially large, they affect the net proceeds the vendor ultimately receives, and the way funds are distributed at settlement.
Existing loans and discharge of mortgage
If the property the vendor is selling still has a loan, the bank loan usually has to be repaid from the sale proceeds at settlement, and the mortgage registered on the property discharged.
This process cannot be left until settlement day. The vendor usually needs to contact the lending bank in advance, lodge a discharge of mortgage application, and confirm the repayment amount the bank requires at settlement.
If the discharge documents or the bank’s arrangements are delayed, settlement may be directly affected. Timing is even more important where the vendor is buying a new property at the same time and needs the sale proceeds to complete the next transaction.
Whether tax issues arise after selling
Selling a principal place of residence will not always give rise to complex tax issues, but if what is being sold is an investment property, a property that has previously been rented out, an inherited property, or a property held by a company or trust, the tax implications can be more complex.
Common matters to consider include:
- whether capital gains tax may be payable;
- whether land tax applies;
- whether the property has long been used as a rental;
- whether the vendor is a foreign tax resident; and
- whether withholding tax or other compliance requirements apply.
A solicitor can assist with the legal documents and settlement arrangements for the transaction, but the tax consequences usually also need to be assessed together with advice from an accountant or tax adviser.
Selling Particular Types of Property
Selling an apartment or strata property
When selling an apartment, townhouse or other strata property, many disputes arise from the management and costs of the whole building. In addition to preparing the ordinary contract of sale documents, the vendor also needs to consider the owners corporation documents and the associated risks.
Selling a tenanted property
If the property still has tenants when it is sold, the vendor needs to consider the effect of the lease on the transaction.
Selling and buying another property at the same time
Many vendors sell in order to buy another property at the same time. In this situation, the timing of the two transactions is critical.
Selling an apartment or strata property
When selling an apartment, townhouse or other strata property, many disputes arise from the management and costs of the whole building. In addition to preparing the ordinary contract of sale documents, the vendor also needs to consider the owners corporation documents and the associated risks.
Purchasers usually focus on the strata report, the building’s repair history, the capital works fund, special levies, management disputes, water-leak issues, by-law restrictions, and the ownership of car spaces or storage. Where the building has major repair works, special levies, management disputes or structural problems, the vendor usually needs to assess in advance whether disclosure is required and how to deal with it accurately in the contract.
Selling a tenanted property
If the property still has tenants when it is sold, the vendor needs to consider the effect of the lease on the transaction.
The purchaser may want vacant possession at settlement, or may be willing to buy subject to the existing lease. Different arrangements affect the contract terms, the settlement timing, the rent adjustment and the notice obligations.
The vendor needs to confirm:
- whether the current lease is still in force;
- whether the purchaser requires vacant possession;
- how rent and bond are to be dealt with;
- whether notice needs to be given to the tenant; and
- how the rights and obligations under the lease transfer after settlement.
If these matters are not dealt with clearly in the contract, disputes can easily arise around the time of settlement.
Selling and buying another property at the same time
Many vendors sell in order to buy another property at the same time. In this situation, the timing of the two transactions is critical.
If the sale settles too early, you may face temporary accommodation problems; if the purchase settles before the sale completes, there may be pressure on bridging the funds; and if the two transactions are arranged for the same day, the banks, solicitors, agents and counterparties on both sides need to coordinate closely.
These transactions need to be coordinated in advance:
- the timing of exchange of contracts on the sale and the purchase;
- whether the two settlement dates coincide or are sensibly staggered;
- whether the sale proceeds are needed for the deposit or balance on the next property;
- whether the discharge of the existing loan and the drawdown of the new loan can be aligned; and
- whether the move and the handover of keys are practically workable.
Selling and buying at the same time can certainly be done, but the timeline needs to be planned early — otherwise a delay on either side may affect the transaction on the other.
How NS Legal Can Help
NS Legal can assist vendors throughout the full sale process, including:
- preparing the contract of sale for the property;
- gathering and reviewing the disclosure documents required for the contract;
- advising on unapproved alterations, building issues, government notices or title restrictions;
- liaising with the agent, the purchaser’s solicitor, the bank and other relevant parties;
- assisting with exchange of contracts, the cooling-off period and deposit arrangements;
- coordinating the discharge of mortgage and the settlement process;
- dealing with adjustments for council rates, water rates, strata levies and similar charges;
- helping vendors align the sale with the purchase of their next property; and
- providing a course of action where disputes or delays arise in the transaction.
Not sure which parts of the selling process need legal assistance? We can map out the entire sale transaction for you.
Frequently Asked Questions
I’m getting ready to sell, but the property has had extensions or alterations in the past without complete approval documents — will this affect the sale?
It will not necessarily prevent the sale, but these issues should never be left to be dealt with reactively after the purchaser’s solicitor discovers them.
Many vendors have at some point extended the property, added a pergola, converted a garage, installed a pool or altered the internal structure, but have not necessarily kept complete approval or completion documents. The issue is not “whether works have been carried out”, but whether the circumstances might affect the purchaser’s assessment and whether they need to be disclosed in the transaction.
If the relevant issues are only discovered during the contract review or the purchaser’s enquiries, the purchaser may:
request further documents;
require further investigation;
ask for the contract to be amended;
renegotiate the price; or
in some circumstances, seek to withdraw from the transaction.
The earlier these issues are identified, the greater the opportunity to plan how to deal with them in advance and reduce the risk of the transaction breaking down.
The house I’m selling still has a loan — how are the funds settled on a sale? Does the full amount go into my account first?
Not necessarily. If the property still has a loan, the bank usually needs to recover the outstanding loan from the sale proceeds at settlement and discharge the mortgage registered on the property. In other words, the sale proceeds generally do not simply “all go into the vendor’s account first”; instead, they are distributed in accordance with the settlement arrangements.
The funds may typically involve:
repayment of the bank loan;
adjustments for council rates, water rates or strata levies;
the agent’s commission (if applicable);
legal fees; and
the vendor’s final net proceeds.
If the vendor plans to use the sale proceeds to buy their next property at the same time, the timing of the funds is particularly important, because the discharge of the existing loan and the funding of the new transaction often need to be coordinated in advance.
The purchaser has signed the contract, but later wants to delay over finance, inspections or other reasons — what practical risks does the vendor face?
After contracts are exchanged, the certainty of the transaction usually increases, but this does not mean the vendor’s risk disappears entirely. If the purchaser later runs into finance problems, tries to delay settlement, raises new conditions, or the transaction clearly fails to progress smoothly, you may face:
disruption to your original relocation plans;
an impact on the funds for purchasing your next property;
increased ongoing holding costs for the property;
additional financial pressure caused by delay; and
the risk of market changes.
In law the vendor will of course have corresponding rights, but in practice the most important question is usually how to identify the risk early and adopt an effective course of action, rather than waiting for the problem to keep getting worse.
I want to sell while also buying another property — how should the two transactions best be arranged?
This is one of the most typical selling scenarios, and one that most needs planning in advance.
Many vendors sell not simply to cash out, but to upgrade their home, change suburbs or adjust their family’s living arrangements. The real complexity lies not in the sale on its own, but in how the timelines of the two transactions are aligned.
Matters to consider in advance include:
whether the settlement dates for the sale and the purchase match;
whether the sale proceeds are needed directly for the deposit or balance on the next property;
whether the discharge of the existing loan and the drawdown of the new loan can be aligned;
whether a temporary funding gap may arise;
whether bridging finance is needed; and
whether the relocation timing is practically workable.
A delay on either side of the two transactions may affect the other. We recommend planning the overall timeline as early as possible.
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