Hello, I am Attorney Gil Kim from Insight Lawyers.
It is generally advised to avoid meeting with lawyers as much as possible during one's life. While this may be feasible in Korea, in Australia, whether voluntarily or involuntarily, one will need a lawyer at least once. The most common and voluntary situation is likely when purchasing real estate. In Korea, only one real estate agent is needed for property transactions, whereas in Australia, four lawyers or their representatives are involved for the seller, buyer, seller's bank, and buyer's bank. This is due to the more complex nature of real estate transactions and the need to protect the interests of each economic entity. I will briefly introduce the real estate purchasing process in Victoria.
1. Pre-contract Stage
In the case of existing homes, when you discover a property of interest, you typically inquire with a real estate agent, but the responses are often limited. For example, information about the condition of the building, pest infestations, renovations and council approvals, boundary encroachments with neighboring properties, and nearby construction plans such as roads or tunnels. These matters are often inquired about through the buyer's lawyer to the seller's lawyer, or experts may be hired to investigate. If any of the aforementioned issues arise, the potential damage can be significant, and the costs to uncover these issues can be considerable. Furthermore, there is a practical limitation in verifying these matters for every property of interest without any guarantee of becoming the final buyer. In the case of apartments, there may be plans for a Special Levy for major facility replacements like elevators, so checking the Strata Report is also necessary. The information and documents that the seller is legally required to disclose are stipulated by law, and in Victoria, the Vendor's Statement mandates the disclosure of more information compared to other states.
2. Contract Stage
In Australia, the seller's lawyer prepares the real estate contract. Although there is a standard contract, clauses that are unilaterally favorable to the seller are often inserted through Special Conditions. Therefore, the contract review process involves requesting amendments for any unfavorable terms for the buyer, and once the final response is satisfactory, the contract is signed. The signed contract from the buyer is sent to the seller's lawyer, and a 10% deposit is transferred, after which the contract signed by the seller is delivered from the other party. This mutual exchange of the same contract is referred to as having been 'exchanged,' indicating the completion of the contract. If, after signing the contract, one suddenly changes their mind or discovers a defect that was unknown prior to the contract, they can terminate the contract within three business days after the contract date, known as the Cooling Off period. However, even if the contract is terminated during this period, a penalty of 0.2% of the contract amount applies. Recently, there has been an increase in explicit clauses stating that there is no Cooling Off period in the contract. If purchasing through an auction, there is no Cooling Off period.
3. Pre-settlement Stage
Before settlement, transfer duty must be paid. When obtaining a bank loan, it was previously advised to start the loan process three months before settlement, but due to increasingly stringent loan assessments, it is now recommended to prepare at least six months in advance. Just before settlement, a Final Inspection is conducted to check for any changes to the property compared to the time of contract, and in the case of Off-the-Plan purchases, to confirm that the building has been completed as per the contract. It is also necessary to check for any trash or unwanted items left behind just before or on the day of settlement. Additionally, it is advisable to notify the electricity, gas, and telephone companies of the moving plans in advance.
4. Settlement Stage
Settlement refers to the process where the buyer pays the transfer duty and the remaining purchase price to the seller, and the seller removes all encumbrances such as mortgages before transferring ownership (Title) to the buyer. In the past, the four lawyers or their representatives would physically gather at a location to carry out this process, but with the introduction of electronic transactions (PEXA), it is now conducted more conveniently and securely online.
[Disclaimer] The above content is general legal information and not legal advice. The author and publisher do not bear any legal responsibility for the content of this post. For accurate legal information, please consult a lawyer.
Gil Kim (Attorney Gil Kim)
Principal Lawyer / INSIGHT LAWYERS
T: +61 2 9410 1817 F: +61 2 9410 1820
M: +61 410 932 930 E: [email protected]