12 Property Contract Phrases Explained In Layman Terms

Property contracts can be hard to decipher by yourself, which is why it makes good sense to hire a solicitor to help you.

It doesn’t hurt to educate yourself about the common terms that you might find in your contract of sale. The following are nine of the most common: 

Adjustments

This refers to the splitting of rates and charges that run with the property. The Vendor is generally responsible for Council rates, Water Rates, and Strata Levies until the settlement date, and the Purchaser is responsible thereafter.

Certificate of Title

A Certificate of Title is like the ID card for a property. It’s an official document that shows who owns a piece of land or property. Just like your ID has your name on it, the Certificate of Title has the name of the property owner. It’s used to prove ownership, especially when you want to sell your property.

So, if you own a house, your name would be on the Certificate of Title for that house. Every time the property is sold to another owner, the name of the new owner is registered on the Certificate of Title.

As the conveyancing process is now moving towards becoming paperless and done via PEXA, the issuance of paper Certificates of Title is slowly phasing out.

Contract of sale

A contract of sale is a legal contract that outlines the exchange of property from the seller, also known as a vendor, to the buyer. It outlines information such as the property address (including title), purchase price, special conditions, and finance arrangements.

Conveyancing

Where this is pursuant to a sale and purchase transaction, it involves drawing up and carrying out a written contract that includes the agreed purchase price, date of transfer, and obligations of both parties.

Conveyancing also needs to be undertaken for mere transfers where there is no ‘buyer’ or ‘seller’ per se (e.g. transfer between spouses, ex-spouses or family members without any purchase price).

Cooling off period

A “cooling-off period” in Queensland is like a test drive for buying a property. It’s a set time of 5 business days starting from the day you receive a fully signed copy of the contract.

During this time, if you change your mind or decide the property isn’t right for you, you can back out of the deal without any major penalties. But remember, this doesn’t apply to properties bought at auction. It’s like a safety net that gives you peace of mind when making a big decision like buying a property

In Queensland the cooling off period is five business days, and the fee is 0.25% of the purchase price. However, there are circumstances where you may not be entitled to a cooling off period.

Deposit

A deposit is required to be paid prior to a Contract being exchanged. The amount can vary. If Contracts are exchanged pursuant to a cooling off period, the initial deposit payable is 0.25% of the price and then balance of 10% is payable prior to the expiration of the cooling off period. The total amount may be negotiable though.

Disbursements

The amounts that are paid to third parties on your behalf as part of the conveyancing process, such as fees to Council and Government Departments for searches on the property.

Easement

An easement is the right of a person for using someone else’s land for a specific reason. For example, if your neighbor’s land has a path that you need to use to get to your house, you might have an easement that allows you to use that path.

It also refers to the right to prevent the property owner from using a part of their property in a particular manner.

Easements, like a right of way or access, drainage, or other essential services, can affect the value of a property and restrict the manner in which the property is used, so it should be duly consulted with a conveyancer.

This right to use the land is usually for things like access, drainage, or other essential services. But remember, the land still belongs to the original owner

Encumbrance

An encumbrance is a claim against a property by a party who is not the owner. It refers to any obstacle that may become known during a transfer of land, like easements, mortgages, leases, covenants and caveats.

Mortgage

If a loan borrower defaults in payment under the loan contract, the mortgage gives the creditor the legal right to sell the borrower’s property in order to reclaim the amount owing to them. The buyer’s conveyancer should always ensure that the seller’s mortgage is discharged at settlement so the new owner does not take on the previous owner’s mortgage.

Settlement date

The settlement date is the date on which the property title is legally and officially transferred to the buyer. The balance of the purchase price and any financial adjustments and payments, like land taxes and council rates, will be made on the settlement date. Once a settlement is confirmed to have successfully occurred, the buyer may arrange with the agent to pick up the keys.

Strata title

Strata title is a form of ownership created for multi-level apartment blocks and horizontal subdivisions with shared areas like swimming pools and car parks.

In other words, these properties consist of individual properties – like apartments and garages – and common areas – like driveways and gardens.

When you purchase strata titled property, your conveyancer will review extra documentation such as the Owners Corporation’s Certificate in the disclosure statements, to check for potential risks such as large upcoming expenses i.e. Repainting the complex, replacing the roof, etc.
 
This article is provided for general information purposes only. You should obtain specialist advice based on your specific circumstances before taking any action concerning the matters discussed in this article.