Conveyancing trends in
NSW Ė PEXA, Auctions, building defects, ATO clearances, etc
Real Estate conveyancing practice has evolved in NSW,
with PEXA used for electronic settlements, 5% deposits and
delayed settlements common for auctions, personal guarantees
required for corporate purchasers, continuing issues with
building defects, restrictions on tree removals, absence of
finance clauses and ATO tax clearances.
This is an overview of the current trends:
Property settlements have moved to an electronic
A company called PEXA, which is owned by Macquarie
Group, the big four banks, the NSW, Victorian, WA and
Queensland governments and others, is the leading e
conveyancing settlements platform used in Australia.
A settlement is when the title to the property is
transferred in exchange for payment of the price.
Gone are the days when settlement clerks would
head for settlement clutching bank cheques, Certificates of
Title, Transfers, Mortgages and Discharges of Mortgage to
meet up in a settlement room where often 20 other
settlements were taking place simultaneously. And after
settlement took place, those with bank cheques from property
sales would head to the bank to deposit those cheques, which
could be for hundreds of thousands or even millions of
dollars, while others would head to the Land Titles Office
to register the transfers of title, mortgages and discharges
These days, settlements take place electronically
on the PEXA platform, accessible from your desk. What
happens is that a PEXA workspace is opened, invitations are
sent to each party in the transaction, a settlement time is
nominated and accepted by all parties. Once loan
documentation has been certified by the incoming bank they
input the source funds available one settlement, the
purchaserís solicitor/conveyancer will input their clientís
source funds available (if required), the vendorís solicitor
/ conveyancer will input the destinations for payment and
the discharging bank will input the amount required to pay
out the loan and provide a CoRD consent for the release of
the title to the property. The ready buttons light
When the settlement time arrives, the settlement
takes place in real time on the screen. The settling
button lights up on the screen (see image). PEXA locks in
the funds and locks the title to the property for the 15 or
so minutes that it takes for the settlement to take place.
When the disbursing button lights up on the screen,
the funds are automatically deposited into the nominated
bank accounts. Finally, the settled button lights up
which means that the funds have been disbursed and the title
has been transferred into the name of the purchaser. In NSW,
a few days later, a new Certificate of Title issues.
It is common for purchasers to ask pre-auction that a 5%
deposit be payable and for the settlement period to be
extended from the standard 42 days to 60 or even 90 days.
If the deposit of 5% of the price is agreed, the Contract
will contain a clause that the other 5% deposit will be
payable on settlement or on default under the Contract.
There have been a number of law suits for recovery of the
unpaid 5% in circumstances where the Contract has been
terminated because of the purchaserís default. The Court
usually orders the defaulting purchaser to pay the unpaid 5%
Until recently, only off-the-plan sales Contracts
contained personal guarantees: if the purchaser was a
company. Personal guarantees are given by the directors of
the company, to guarantee that the balance price payable
will be paid when the Contract settled.
Nowadays, it is common for standard Contracts to contain
a personal guarantee where a company is the purchaser. This
means that for standard Contracts, it is essential to have
unconditional loan approval in place when signing the
Contract because the personal guarantee is to pay the price.
New Residential Buildings up to 3 storeys high are
covered by Home Building Compensation Insurance for a
limited time. This insurance is taken out by the builder
before they start building. The cover provided is 6 years
for major defective works (structural) and 2 years for other
defective work, from the date of completion of the work. The
cover extends to purchasers.
As a practical matter, purchasers of homes less than 6
years old need a building inspection report to check for
building defects. Purchasers of home units need a strata
inspection report to check for records of building quotes
and expenditures for repairs.
If the home unit is in a high rise block with cladding
(metal panels which sandwich a polyethylene core) exercise
caution because the cost of replacing the panels will be
high and will be paid by the owners. Similarly, if there are
cracks in the basement because it usually indicates that the
building is subsiding.
Do not assume that a tree (a tree is 5 metres or more
high) can be easily removed. If it is on your land, a
Council Permit is needed. A permit will be given if the tree
is dead or dying, if it is a noxious tree (such as a willow,
a coral tree, cocos palm) or if it is less than 3 metres
away from and is damaging the house or other structure. If
the tree is on a neighbourís land, the same applies. Even if
the neighbour agrees to the tree removal, a Council Permit
In NSW Contracts are not subject to finance, unlike in
Queensland and Victoria where Contracts often contain a
subject to finance clause. This means that unconditional
finance approval is necessary when signing a purchase
Contract in NSW.
The only exception is if the Contract is signed at a real
estate agentís office with a cooling off period. This means
there are 5 business days in which to terminate the Contract
(and forfeit the cooling off deposit paid of 0.25% of the
price). This right to terminate (rescind) is not available
if the property is sold at auction.
If a property is sold for $750,000 or more, the vendor
will need to obtain a Foreign Resident Capital Gains
Withholding Certificate from the Australian Taxation Office.
The Certificate is issued provided that the vendor has
lodged a tax return within the past 2 years. The Certificate
can be obtained before or during the sale process and must
be provided to the Purchaser prior to completion. The
Certificate is valid for 12 months from the date of issue.