Purchasing interstate is a great way to expand your property portfolio however not everyone is aware that each state differs in their processes and procedures.
If you choose to diversify your portfolio in this way, it is important that you understand the differences. Below are the two key differences between the processes in NSW and QLD.
The Contract for Sale of Land – who prepares it, and what does it contain?
NSW
- Vendor’s solicitor prepares contract
- Contract contains multiple searches detailing the nature of the property
- Contracts are exchanged
- Purchaser inspects searches contained in the contract
In NSW, the Contract for Sale of Land is prepared by the vendor’s (owner’s) solicitor or conveyancer. Once it is completed, the contract is then sent to the real estate agent for the purposes of marketing the property.
In order for the contract to comply with the regulations (and as such be a valid contract), it must contain specific documents which are known as the ‘prescribed documents’. These documents contain information to assist the potential purchaser in assessing the suitability of the property for their purchase. For example, the documents contain the zoning of the property (and its permitted use), a sewer diagram, a title search, and all easements or restrictions that apply to the property.
There are various other searches that can be conducted by the purchaser’s representative on behalf of the purchaser in addition to the prescribed documents, however in most cases these additional searches do not show results that might affect the decision to purchase the property (e.g., an RTA search to ensure that a road is not being widened next to your property).
QLD
- Real estate agent prepares contract
- Contract does not contain searches regarding the nature of the property
- Contracts are exchanged
- Purchaser carries out thier own property enquiries as soon as possible
In QLD, whilst it is possible for the Contract for Sale of Land to be prepared by the vendor’s solicitor or conveyancer, it is usually the selling agent who prepares it. The documents that are required to be attached to the contract by the regulations contain little to no information regarding the nature of the property, and subsequently the suitability of it for your purchase. This is because the law of “let the buyer beware” applies in QLD.
This means that the purchaser is required to conduct their own searches and enquiries to ensure that they are satisfied with the property prior to exchange or in the cooling off period.
When does the Contract become unconditional (i.e., the purchaser is “locked in”)?
A five-business day cooling off period applies in majority of purchases in both NSW and QLD, mostly to enable the purchaser to obtain legal advice on the contract. Whilst the purpose of the cooling off period differs between NSW and QLD, the purchaser will be required to pay a 0.25% deposit in both states to exchange with a cooling off period.
NSW
- Contracts exchanged on a 5 day cooling off period
- Purchaser meets with legal adviser, carries out property inspection
- Cooling off period expires
- Contacts unconditional
In NSW, the purpose of the cooling off period is for the purchaser to meet with their legal representative to obtain advice on the contact, to carry out their property enquiries (for example pest and building reports, strata reports, and council certificates), and to obtain their formal loan approval.
If the purchaser is satisfied with their enquiries made, and they receive formal loan approval during the cooling off period, they are required to pay the balance of the 10% deposit to the real estate agent by 5pm on the last day of the cooling off period. Once the cooling off period expires, the contracts becomes ‘unconditional’ and are legally binding on both the purchaser and the vendor.
In the event that the purchaser does not want to proceed with the purchase as a result of their enquiries during the cooling off period (e.g., the pest report details that the house is termite infested, or the purchaser is unable to obtain formal loan approval), they are entitled to rescind the contract before the expiration of the cooling off period. In this situation however, the purchaser forfeits the 0.25% deposit paid to the vendor.
QLD
- Contracts exchanged on a 5 day cooling off period
- Purchaser meets with legal adviser and carries out property inspecation
- Cooling off period expires
- Purchaser receives pest & building reports and formal loan approval with 21 days
- Purchaser confirm receipt of these
- Contract become unconditional
In QLD, the main purpose of the cooling off period is for the purchaser to obtain legal advice and carry out the property searches that are not included in the contract (e.g., title search, plan of the land, flood search, and council enquiries).
In addition to the cooling off period, most contracts in QLD are conditional upon the purchaser receiving satisfactory pest and building reports within a specified time (usually 21 days after the date of the contract). If the reports are not received within the specific time the purchaser can request an extension to the due date however it is up to the vendor to agree or not. If the reports received are not satisfactory to the purchaser, or are not received and the vendor does not agree to an extension, the purchaser is entitled to terminate the contract and retrieve all deposit monies paid back (including the 0.25% deposit).
The same principal also applies to the purchaser obtaining formal loan approval – that is, the contract is conditional upon the purchaser obtaining formal loan approval within the specified period (also usually 21 days). This means that the purchaser does not need to obtain formal loan within the cooling off period, as required in NSW. Once the purchaser confirms the receipt of satisfactory pest and building reports and formal loan approval, the contracts become unconditional (and the purchaser is “locked in”).
How we can help
If you’re looking at expanding your property portfolio, why not consider purchasing interstate. Coutts Lawyers & Conveyancers has a wide range of experience in purchasing and selling in both NSW and QLD and can assist you in your transaction no matter where the property is located.
