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Australian Real Estate Practices

Queensland

Torrens Title:
All registered freehold land ownership in Australia is based on the Torrens Title system. This is a system of land ownership where traditionally there were two titles issued over land. One title remained with the owner whilst the other remained at the State Registry Office. All transactions over the property had to be registered on both copies of the title. The Land Title Act regulates the Torrens Title system of land ownership in Queensland.

Freehold
There are two main forms of freehold estate.

1. Fee Simple
The most absolute form of freehold estate is that of fee simple . This gives the property holder full rights of ownership. They can sell their property or will it to someone else. It is freely transferable or inheritable. Despite this, the Crown reserves some rights to freehold land. These are mainly concerned with mining minerals, petroleum and gas, which the Crown can grant prospecting and mining licenses for over any form of land holding.
2. Estate for Life
An estate for life can be granted to a tenant for the term of their life. This is not commonly used any more, but it is usually created by a will. The holder of a life estate holds it for the duration of their life. They are entitled to occupy the property and receive rents or profits of the land for the time they hold it. On their death, the life estate ends and reverts to the person entitled to it. This is usually the beneficiary under a will who would make application to have the land transferred into their names in fee simple.

The life tenant has an obligation to maintain the land and not commit acts of waste, which may diminish its value.

Leasehold
A lease is generally understood as an agreement in writing granting exclusive permission to use property in return for the payment of rent.

A lessee (tenant) is the person who holds an interest in land under a lease. A lessor (landlord) is the person who grants the interest to the lessee. The Freehold can still be sold subject to the existing tenancies. A tenancy must always be respected in the event of a sale and tenants rights upheld at all times.

Crown Leasehold
In some circumstances, the Crown is the lessor and the lease becomes Crown leasehold. A statute governs the conditions of such a lease. A Crown leasehold may be of a limited duration or it may be perpetual. A perpetual lease does not end unless the lessee nominates to end the arrangement. Most pastoral leases in Queensland are Crown leaseholds.

Prescribed Sales Commissions
Residential commissions are regulated and set at a maximum rate of:

5% on the first $18,000 and 2.5% on the balance of the purchase price. (An easy way to calculate the maximum commission is to add $18,000 to the contract price and divide by 40).

Non-residential commission rates are de-regulated and highly negotiable. This means that there is no set commission structure and commissions are determined by negotiation between the client and the agent.

Documentation for a Valid Contract
Three are several important procedures relating to real estate contracts that must be followed where certain special circumstances exist. These procedures directly relate to legislation impacting on the validity of a contract and require a series of disclosures to be made to consumers before a contract can be enforced. The major impact on the standard house and land contract comes from the provisions in the Property Agents and Motor Dealers Act.

The Contract Warning Statement – Form 30c
Section 366 of the Property Agents and Motor Dealers Act requires the top page of all relevant residential contracts to contain a warning statement.

A relevant contract is defined as “a contract for the sale of residential property in Queensland, other than a contract formed on a sale by Auction”.

Therefore, a contract for a residential property sold under the hammer at Auction does not require a warning statement. However all other residential contracts must contain the Warning Statement.

The Warning Statement will:

• Inform the buyer that a 5 business day cooling off period applies. The cooling off period will commence as soon as the seller (or their appointed agent or solicitor) gives the buyer a copy of the signed and dated residential property contract (if that day is a business day).
• Advise the buyers of their rights under the contract, including when the cooling off period starts and ends.
• Alert buyers that if the property is a house and land package, then they should also seek quotes from a number of builders to ensure that their building contract is fairly priced. In the case of a house and land package, it also informs the buyers that their building contract has a cooling off period, so they must remember to cancel both contracts if they decide to terminate the sale during the 5 day cooling off period.
• Advise buyers to seek independent legal advice before signing a contract.
• Advise buyers to seek an independent valuation during the cooling off period.
• Inform buyers that a percentage of deposit (0.25% of the purchase price) may not be refunded upon termination of the contract during the cooling off period.
• If the seller is a developer the buyer cannot claim against the Claim Fund in the event of a financial loss
• A recommendation that the buyer carries out their own Department of Natural Resources sales history search.

Deposit
A deposit is a payment as security for the performance of the contract by the buyer. It is the agreed amount of damages between the parties to the sale in the event that the buyer defaults and does not complete the contract. It also forms part of the purchase money. The payment of a deposit is not necessary for the contract of sale to be enforceable. However a deposit is normally paid in full or in part to the deposit holder. Failure to pay an agreed deposit takes effect as a breach of an essential term of the contract. The amount of deposit should not exceed 10% of the total purchase price.

New South Wales

In NSW the vendor pays the Agents fee which is de-regulated and subject to negotiation between the parties (Vendor and Agent). Depending on the value of the property the fee can be as low as 1.5% to 5% on residential and generally a little higher on Commercial/Industrial property. Additional Marketing costs are usually paid by the vendor for Private Treaty and Auction sales. Buyers agents are becoming more common particularly in a buoyant market.

Contracts
Purchasers sign a Contract of Sale which has been prepared in advance of the marketing and promotion of the property by the vendors (Sellers) solicitor. This contract is available for all prospective purchasers to view at initial inspections. The contract is usually a standard format approved by the Real Estate Institute of NSW and the NSW Law Society. Ten per cent (10%) of purchase price (unless otherwise agreed) as deposit in payable on the exchange of Contracts and settlement generally takes place around five to six weeks later. The exchange of contracts takes place when the vendor's signed contract is "exchanged" for the purchasers signed contract and the (balance) of deposit is paid. The deposit is normally held in the Agent's Trust Account or invested for both parties until settlement takes place.

A five (5) day cooling off period exists in NSW (unless purchasing at Auction) whereby the purchaser can obtain any necessary searches and obtain final approval for finance. A purchaser may waive their rights to a cooling off period with a Section 66W Certificate signed by their solicitor or conveyancer. This means the terms and conditions of the contract have been explained to the purchaser.

Should a purchaser wish to rescind the contract within that five day period for whatever reason, they may forfeit 0.25% of the purchase price to the vendor.

South Australia

Overview
South Australia society is diverse and sophisticated with European, Aboriginal and Asian influences. Approximately 80% of the population lives within the city limits of Adelaide.

Real Estate Practices
Real Estate commissions are deregulated and paid by the seller and range from 2-4% except on lower priced transactions in which the rate of commission may be higher. A Goods and Services Tax (GST) also applies at a current rate of 10%

South Australia uses the Torrens system of land registration and all real estate property is registered in the local district and searchable for a nominal fee. The Torrens certificate contains information regarding the land, improvements, ownership and encumbrances. The register is available to the public and is computerized.

Real property may be mortgaged as security for debt and mortgages must be registered with the Land Titles Offices. Mortgages up to 95% loan to value and a thirty year term are common and acceptable. The most common mortgage sources are banks and financial institutions.

Closing procedures are regulated by the government and usually occur within 30-60 days of contract execution. Once the contract is executed, brokers/solicitors for both parties effect settlement of the sale and arrange for registration of the new owner of the property. Legislation is in process to ensure a broker/solicitor can only work for one of the parties involved in the transaction instead of the current situation where they can work for both parties.

Tasmania

The vendor pays the agents fee which is deregulated although there is a recommended fee put out by the REIT (Real Estate Institute of Tas).

Commission for the sale of residential property is $5,084 (GST incl) for $100,000 plus 3.26% of excess over $100,000.

Commission for the sale of a business is $2,414 (GST incl) or 4.91% (whichever is the greater) on total sale price inclusive of stock.

Additional marketing costs (advertising) are usually paid by the vendor/ seller whether a property is sold by auction or private treaty.

There are very few buyers agents in Tasmania.

Contracts
Purchasers sign a contract which is more often than not prepared by the listing agent. It is a standard proforma agreement put together by the Law Society, Real Estate Institute and Auctioneers Council.

A ten percent (10%) deposit (unless otherwise agreed) is payable by the purchaser to the vendors agent upon signing of a contract. The deposit is held in the listing agents trust account until settlement which is usually 30 days after the confirmation of any conditions eg (arranging finance, selling another house, builders report).

On settlement the balance of monies are paid by the purchaser to the vendor.

There is no cooling off period in Tasmania at the moment although that is probably going to chan