ILN: BUYING AND SELLING REAL ESTATE - AN INTERNATIONAL GUIDE

[BUYING AND SELLING REAL ESTATE IN AUSTRALIA]

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KEY FACTS OF REAL ESTATE ACQUISITIONS UNDER AUSTRALIAN LAW

INTRODUCTION The majority of land in Australia consists of freehold title. Registration of ownership of freehold title is recorded using the Torrens system. The Torrens system is a system of title by registration. This means that an interest will only be a legal interest if it is registered on title. Once the interest is registered, that interest is indefeasible and takes priority over all other interests. Both the vendor selling the land and the purchaser purchasing the land execute a legal document transferring ownership. Once settlement of the property has occurred, the transfer document is registered. Each State and Territory in Australia has its own register. The purchaser becomes the registered proprietor of the land, which is recorded on the Torrens title register. The registered proprietor is issued with a specific certificate of title for the property which typically contains a volume and folio number and a plan identifying the land, details of any restrictions (e.g., a covenant) affecting the land and details of any encumbrances (e.g., mortgage). Titles may comprise of land or spaces defined by a plan. In recent years, property settlements and registration of interests on the Torrens system have been effected electronically through the Property Excha nge Australia platform (“ PEXA ”). One of the key benefits of using PEXA is that registration of interests is effected immediately. Certificates of title were previously issued only in paper, but now titles can be issued electronically. COMMON TYPES OF PROPERTY TRANSACTIONS Land In Australia you can acquire or sell a vacant block of land. Subject to zoning, the land maybe used to construct a residential and/or

commercial building on the land. Developers commonly subdivide large blocks of vacant land into smaller blocks, (subject to local zoning and planning restrictions) which are then on-sold to purchasers. It is often a condition of the land contract that purchasers must commence and complete the construction of a dwelling on the land within a certain timeframe. The type of dwelling may be controlled by restrictions imposed by the vendor, or the planning authority (e.g., local council) such as a covenant, building envelope and/or design guidelines. Residential Dwellings (Existing and Proposed) Existing Dwellings The purchase or sale of an existing residential dwelling is a common transaction. This involves the transfer of ownership of the land, including any fixed dwelling, improvements, and other permanent fixtures on the property. The property is usually sold to a purchaser in its current condition and subject to all defects. It is important for purchasers to undertake their own due diligence enquiries concerning the property and to be satisfied with its state and condition. These enquiries should be conducted before a contract is signed. As contracts are prepared by the vendor, they tend to be one- sided (except for certain statutory protections). Alternatively, the contract could be conditional on the purchaser being satisfied with certain enquiries and if not, then have a right to terminate the contract. Purchasers are entitled to attempt to negotiate contracts in order to make them more even handed. Proposed Dwellings Purchasing “off -the- plan” involves purchasing a dwelling that is yet to be built on a lot which is yet to be created. Settlement occurs once the subdivision has been registered (which creates a title for the lot), and construction of the

ILN Real Estate Group – Buying and Selling Real Estate Series

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