Buying a property is one of the biggest financial commitments most people will make. Whether you are purchasing a house, condominium, apartment, commercial property or land, the transaction involves several legal, financial and administrative steps.
Understanding the conveyancing process can help buyers make better decisions and avoid unnecessary delays.
The process usually begins when a buyer identifies a property and agrees on the purchase price with the seller or developer.
For a subsale property, the buyer may be required to pay an earnest deposit or booking fee. Buyers should understand the terms of any document they sign at this stage.
Before making a substantial payment, it is advisable to understand:
Whether the payment is refundable;
The agreed purchase price;
The conditions of the sale;
Whether the seller has the legal right to sell the property; and
Whether there are any restrictions affecting the property.
A legal search can provide important information about the property, including:
The registered proprietor;
The title details;
Existing charges in favour of a bank;
Restrictions in interest;
Private caveats; and
Other registered interests affecting the property.
A title search is an important part of the due diligence process because it allows the buyer's solicitor to identify potential legal issues before the transaction proceeds.
The Sale and Purchase Agreement, commonly known as the SPA, is the main contract governing the sale and purchase of the property.
The SPA normally sets out:
The purchase price;
The deposit payable;
The completion period;
The rights and obligations of the buyer and seller;
The consequences of default;
The conditions for completion; and
The arrangements for vacant possession or delivery of the property.
The terms may differ depending on whether the property is purchased from a developer or from an existing owner.
Many buyers obtain financing from a bank or financial institution.
The bank will generally assess the buyer's financial position and determine whether to approve the financing. If financing is approved, the borrower will usually receive a Letter of Offer or similar document setting out the principal terms of the facility.
The buyer will then be required to sign the relevant financing and security documents.
Depending on the status of the property's title, the bank's security may be created by way of a registered charge or by assignment of the buyer's rights under the relevant documents.
The legal documents may include:
A Facility Agreement or Loan Agreement;
A Charge;
A Deed of Assignment;
A Power of Attorney, where applicable; and
Other security documents required by the bank.
Borrowers should understand the important terms of their financing before signing the documents.
Various instruments in a property transaction may be subject to stamp duty.
The relevant documents may include:
The instrument of transfer;
The loan or facility agreement; and
Security documents.
Where registration is required, the relevant documents must be submitted to the appropriate land office or land registry.
Completion occurs when the relevant conditions under the SPA have been fulfilled.
For a subsale transaction, this may include:
Payment of the balance purchase price;
Redemption of the seller's existing bank loan;
Discharge of the seller's existing security;
Registration of the transfer; and
Delivery of vacant possession, where applicable.
The exact procedure depends on the circumstances of the transaction.
Before committing to a property purchase, buyers should consider:
Whether the purchase price is affordable;
Whether financing is available;
Whether the property is subject to restrictions;
Whether there are outstanding charges or encumbrances;
Whether the property has an individual or strata title;
The estimated legal and disbursement costs; and
The applicable stamp duty and taxes.
The purchase of a property involves more than simply signing an SPA. It may involve title searches, financing, stamp duty, registration, redemption of existing loans and various legal documents.
Obtaining legal advice at an early stage can help a buyer understand the transaction and identify potential issues before signing binding documents.
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