In this article, we’ll break down the essential steps that occur immediately before, during, and after settlement day in New South Wales, providing you with a clear roadmap for what to expect.
Working with a licenced conveyancer in Sydney can help ensure your property settlement goes smoothly, whether you’re a buyer or a seller.
What is property settlement?
Property settlement is the legal process of transferring property ownership from the seller to the buyer. In New South Wales, this occurs after the exchange of contracts and the completion of a cooling-off period (if applicable).
Settlement typically occurs on an agreed date, usually six weeks after exchanging contracts. During settlement, all financial obligations are finalised, including payment of the purchase price, council rates and water adjustments, and any outstanding fees. Once these are resolved, the property title is officially transferred to the buyer, marking the completion of the purchase and granting legal ownership.
Steps in the property settlement process
The property settlement process involves several steps on or around settlement day to meet the financial, legal and government compliance requirements of buying and selling a property.
Pre-settlement
In the lead-up to settlement, you’ll work closely with your conveyancer or property solicitor to ensure all requirements are met. In NSW, all settlements have been completed electronically since 2021 via an electronic lodgement network, such as PEXA, to manage the electronic settlement process on your behalf. They will verify financial adjustments, confirm that funds are ready for settlement, and prepare the documents for the electronic lodgment of the property transfer with the NSW Land Registry.
Buyers
If you’re buying a property, you’ll need to finalise your financing arrangements in the lead-up to settlement. Although cash purchases account for over a quarter of property transactions in NSW, most property purchases are still funded by a home loan. If you’re getting a home loan to buy a property, your lender must approve this before settlement so that funds are available to complete the transaction. Since a home loan rarely covers 100% of the purchase price, government charges, rates and conveyancing fees, your conveyancer or property lawyer will usually advise the shortfall of funds required to complete the transaction. You’ll typically need to pay this into their trust account.
In NSW, the buyer becomes liable for the property on settlement or occupation, whichever occurs first. For this reason, it’s worth considering getting property insurance starting from the day of settlement (or occupation) to ensure you’re covered for damage to the property occurring once the property is transferred to your possession. If you’re getting a home loan, most lenders will require proof of insurance as a condition for finalising the settlement, so it’s important to have this in place beforehand.
Most property contracts in NSW allow for a final inspection on or immediately before settlement day to confirm it matches the agreed condition, including any repairs or inclusions negotiated during the purchase.
Sellers
If you’re selling a property, you must arrange for your existing mortgage to be discharged before settlement. This involves notifying your lender well in advance, as the discharge process can take time. Additionally, you must fulfil all contractual obligations, such as completing agreed repairs or ensuring any included items are left on the property. Your conveyancer or solicitor will assist in preparing the necessary documentation and coordinating with your lender to ensure a smooth settlement process.
Before settlement, you’ll also need to review the settlement statement prepared by your conveyancer or solicitor, which outlines financial adjustments for council rates, water charges, and any other applicable fees. This step ensures all calculations are accurate and prevents disputes during settlement. You should also ensure the property is ready for the buyer’s final inspection by removing personal belongings not included in the sale and leaving the property in the agreed-upon condition.
Lastly, coordinate with your real estate agent to ensure all keys, remotes, and security codes are ready for transfer to the buyer after settlement.
Settlement day
On settlement day, your conveyancer or solicitor will use PEXA (or an alternative) to manage the property transfer process on your behalf. They’ll ensure all required documents are signed, financial adjustments are accurate, and funds are ready for transfer. PEXA facilitates the secure transfer of funds, including the purchase price, stamp duty, and adjustments for rates and utilities. Once the financial settlement is complete, the system electronically lodges the documents with the Land Registry, officially transferring the property title into the buyer’s name.
Buyers
If you’re buying the property, you’ll collect the keys and access details, typically from the real estate agent, once settlement is finalised.
Sellers
If you’re the seller, you’ll typically receive the proceeds of the sale, less fees and liabilities, on the settlement date. If you have a mortgage for the property you’re selling, the lender will typically require that the loan be discharged (i.e. paid out) before you get the sale proceeds.
Post-settlement
Congratulations, the property is now officially sold! Post-settlement, both the buyer and the seller should receive a settlement statement from their conveyancer or solicitor outlining all disbursements, adjustments and payments.
Buyers
After settlement, you may need to organise utilities such as electricity, gas and internet for your new property. Your conveyancer or solicitor will typically provide you with a copy of the Certificate of Title and other important documents related to your new property.
Sellers
After settlement, it’s important to cancel any services in your name for the property and set up mail forwarding.
Common pitfalls and how to avoid them
Property settlement involves the transfer of a significant asset and sum of money. There are also financial and legal ramifications for not meeting your obligations as a buyer or seller come settlement day. Failure to settle by the buyer or seller can result in compensation claims by the other party or even legal action.
Here are some common pitfalls and how to avoid them.
Not having finance approved
In NSW it’s the responsibility of the buyer to arrange finance or funds to purchase a property. No one will stop you from signing a contract to buy a property, even if you don’t have the money to complete the purchase.
This means it’s essential to ensure you have the funds or finance to complete the purchase before signing contracts. Furthermore, we usually recommend buyers request the contract to include a clause subject to obtaining satisfactory finance. This ensures you’re able to obtain finance before the contract becomes unconditional. However, even with a subject-to-finance clause, you could still lose your deposit (usually 10%) or 0.25% of the purchase price if the contract is rescinded during the cooling-off period because you can’t get finance.
Unresolved repairs or inclusions
If the buyer has negotiated certain repairs or inclusions as part of the property purchase, the seller must undertake these. This is why it is important for the buyer to complete a pre-settlement inspection to ensure that the property is in the agreed condition. Should this not be the case, the buyer might delay settlement, request compensation, make a claim under the contract or take legal action.
Errors in documentation
If you thought the contract of sale was long, there are a myriad of documents, deeds, searches and letters that need to be dealt with during a property transaction. With that in mind, it’s little wonder that errors often occur, and inexperienced conveyancers or people doing their own conveyancing can easily get caught out.
We’ve even seen a property purchase where the other party did not own the house they were living in (and thought they owned) and were trying to sell!
Other frequent errors we’ve seen include:
- Incorrect details in the contract of sale – often the buying or selling entity
- Incorrect loan documents, such as loan amount or borrower details
- Mistakes in the settlement statement, such as adjustments for council rates, water charges, strata levies
- Transfer of Land document errors – mismatched names, incorrect title references or failure to include joint ownership details
These are just a few.
If there are documentation errors, the at-fault party may need to delay settlement, and the other party may be entitled to compensation. However, in practice, if we notice an error in the other party’s documents, we’ll usually inform them so as not to delay settlement for our client.
Settlement account fraud
Financial scams are increasing, and property transfers are a major target for criminals due to the significant one-off transfer of money involved.
This type of fraud can target either the buyer or the seller. Buyers can be deceived into transferring the balance of settlement funds into a fake trust account. On the other hand, scammers can impersonate a seller and send fake account details to their conveyancer or real estate agent for settlement proceeds.
Either way, the result is tens or hundreds of thousands, even millions of dollars lost by the buyer or seller – often unrecoverable.
For this reason, it’s essential to verify account details by phone with your conveyancer or real estate agent before transferring money. Scammers can be very good at impersonating another party via email. Without technical expertise; many people cannot identify a bogus email.
At RS Law Group, we make property settlements stress-free
Property settlement is a complex process involving financial, legal, and logistical steps that require careful coordination.
By understanding your responsibilities as a buyer or seller and working closely with a qualified conveyancer or solicitor, you can avoid common pitfalls and ensure a successful property settlement.
At RS Law Group, we understand the complexities and potential challenges of property settlements. That’s why we work diligently to ensure that our clients’ interests are protected and their settlement process is as smooth as possible.
We conduct thorough documentation checks, communicate effectively with all parties involved and take precautions against fraud to ensure a successful settlement for our clients. We also provide comprehensive advice on joint ownership details to avoid future disputes or complications.With RS Law Group, you can have peace of mind knowing that your property settlement is handled by an experienced and qualified property lawyer with your best interests at heart. So whether you’re buying or selling a property, trust us to make your settlement experience stress-free and successful.
