While our Gold Coast Conveyancing and Property team settle hundreds of conveyancing transactions each month, and know all of the ins and outs of the process, we understand that buying or selling a house is not an every day occurrence for our clients and often, our clients don’t know what actually happens on settlement day.
That’s why the Affinity Lawyers conveyancing team go above and beyond to make sure that our clients understand the entirety of the process, from start to finish, and provide expertise advice and guidance throughout the transaction.
There are some common questions that our property law team get asked on a regular basis, so we have prepared the following information so that you can read it at your leisure, and have a more thorough understanding of the process, and what actually happens on settlement day.
What actually happens on settlement day?
If you are a Buyer.
1. Should I do a pre-settlement inspection?
Yes, if possible, you should undertake a pre-settlement inspection.
A pre-settlement inspection is organised with the real estate agent and will allow you to ensure that the property is in the same state and condition as it was when you entered into the contract, that there has been no unauthorised removal of fixtures and chattels from the property, that everything is working as it should, that there has been no damage to the premises, and that nothing that was supposed to be included in the sale is missing.
A common area of dispute occurs when the buyer believed something was to be included in the sale, however the seller did not think it was included and removes it prior to settlement. Contracts have a specific clause where inclusions/exclusions of the sale can be written in, and it is a good idea to ensure that any fixtures/fittings and chattels that have been agreed to be included/excluded in the sale are written in for clarity.
Fixtures are usually attached to the property and include items such as oven/cooktop and shelving whereas chattels are moveable items such as the furniture, furnishings and refrigerator.
Under the contract you are usually entitled to only one pre-settlement inspection, so we would recommend that you undertake your pre-settlement inspection the day before settlement if possible to ensure that the seller has vacated the premises and so that if any issues arise they can be sorted out with no (or minimal) effect on settlement day.
The options available to you if issues are identified during the pre-settlement inspection will vary depending on the nature of the issues raised. Generally, if there are small items to be fixed or repaired, you may be able to ask the seller to fix them prior to settlement (time permitting) or alternatively, negotiations about rectification can be had to organise for the works occur after settlement, and a portion of the sellers settlement monies can be retained to ensure the work is carried out.
It is important to be aware that generally speaking, you cannot refuse to settle on the basis of minor issues and instead, any rights you may have to pursue the seller may need to be enforced post-settlement.
In any event, our solicitors are able to guide you through this process, and advise you on your rights and options after you undertake your pre-settlement inspection.
2. Do I have enough money to settle?
When purchasing a property, it is important to ensure that you have remembered to include all of the expenses associated with the purchase to ensure that you will have enough money at settlement.
Not only will you have to pay the agreed price for the property, you will also have to factor in stamp duty expenses, borrowing costs, solicitors fees, search fees, title registration fees (if not covered by your financier), bank cheque fees, insurance costs (the property is generally at the buyer’s risk on the day after the contract is signed), moving costs, as well as the adjustments that are made at settlement for the council rates, water and body corporate fees (if applicable).
Closer to settlement day, our conveyancing team will send you a settlement statement which shows you the total amount of money that you will need to have available for settlement, including a breakdown of the council rates/water/body corporate (if applicable) which are calculated on a pro-rata basis so each party pays for the portion of the period in which they owned the property.
It is important to be aware that the amount the bank will have available to you on settlement is usually less than the amount of the loan that you were approved for as the bank deducts its fees and registration charges from the loan amount.
If you are tipping any funds in to the purchase you will need to either arrange with our conveyancing team to deposit the funds into our trust account prior to settlement, or alternatively you will need to liaise with your bank to ensure they have access to the extra funds on the day of settlement.
3. When will the rates/water accounts be due for the property?
As detailed above, the council rates/water will be adjusted for at settlement to ensure that the seller pays for the period that they owned the property (from the first day of the last rating period up until the day of settlement), and that you pay for the period from settlement to the end of the period.
If the rates/water accounts have not been paid by the seller prior to settlement, then generally a cheque will be drawn at settlement from the sellers funds to ensure that the rates/water accounts are paid for the upcoming period and the settlement figures will be adjusted so that you reimburse the seller for the days that you will be in the property.
4. What time will it settle and when do I get the keys?
Settlement generally does not occur until after 1.00pm on the day specified for settlement. This is for various reasons, but mainly because the settlement statement is usually not finalised until at least 10am on the morning of settlement, and then there are variety of tasks that need to be undertaken by the bank, the seller’s solicitor and your solicitor prior to settlement. Pre-settlement inspections also occur often on the morning of settlement and there needs to be enough time to undertake the inspection and sort out any issues prior to settlement.
Once settlement has occurred, our conveyancing team will telephone you to let you know that your purchase has settled, and correspondence will be sent to the real estate agent letting them know, as well as authorising them to release the keys to you. The real estate agent must wait for both parties’ solicitors to advise that settlement has occurred prior to releasing the keys to you.
You will need to liaise with your real estate agent in order to collect the keys after settlement.
If you are a Seller.
1. What happens with the deposit?
The buyer will generally pay the deposit amount directly to the real estate agent who will retain the amount in their trust account until settlement.
After settlement has occurred, Affinity Lawyers will authorise the real estate agent to release the balance of the deposit (after deducting their commission payment) to your nominated bank account, and the buyer’s solicitor will do the same. You should liaise with your real estate agent in respect of any arrangements you would like to make regarding these funds after settlement.
If the amount of the deposit is not sufficient to cover the agents commission, then the balance of the agent’s commission payment will be drawn as a cheque from your settlement funds.
2. When do I receive my settlement money?
Unless your transaction settles electronically, settlement monies are drawn on bank cheques and these bank cheques are handed over at settlement. After a bank cheque has been banked into your account, the funds are usually cleared within three (3) business days (but can be processed sooner depending on your bank).
Conveyancing transactions in Queensland are slowly moving towards an electronic settlement system, and if your settlement is able to be settled electronically Affinity Lawyers are able to organise this for you. When a settlement occurs electronically, the funds are generally available in your account the same day.
If you are receiving more money than the mortgage owing on your property, you will need to ensure that your bank is happy to accept a higher sum at settlement, and that they have the correct account details to deposit the surplus into.
3. What happens with the rates/water accounts for the property?
If you have paid the rates/water account for the current period, adjustments will be made on the settlement statement to ensure that the buyer reimburses you for the number of days left in the paid period that they will be the owners of the property.
If the rates/water accounts are not paid prior to settlement, then either an adjustment will be made in the buyers favour (for the number of days in the current period that you have been the owner of the property) or alternatively, cheques will be drawn out of your funds to pay the accounts for the current period, and the settlement figures will be adjusted so that the buyer is reimbursing you for the days that they will be in ownership of the property.
It is important that you tell Affinity Lawyers if you have paid the rates/water for the property during the transaction/prior to settlement so that we can ensure all adjustments are correct. It is also very important that you cancel any direct debit payments that you may have set up with the Council for these payments, so no extra payments are taken after you sell the property.
You should also consider cancelling any other services you have connected to the premises after settlement, including electricity, body corporate fees, gas, internet and home phone.
4. How does the buyer get the keys?
After settlement has occurred, Affinity Lawyers will authorise the real estate agent to release the keys to the buyer. The buyer’s solicitor must also send an authorisation after settlement to the same effect.
You will need to ensure that all keys, codes and remotes for the property are provided to the real estate agent prior to settlement.
5. How do I need to leave the property?
While there is no requirement that a professional clean of the property be undertaken prior to settlement, it is important to the ensure that the property is clean, neat and tidy prior to settlement, and in the same condition as it was when the contract was entered into.
Most contracts provide for vacant possession of the premises (this means all of your items must be removed except for those listed in the contract as inclusions) and this also applies if there are tenants in your property who are vacating prior to settlement (if vacant possession is a requirement under the contract).
When removing your items and rubbish, it is important to remember not to remove items that are fixtures or that are included in the sale. Removal of these things can raise a dispute on the morning of settlement when the buyer undertakes their pre-settlement inspection, and can delay settlement as well as leaving you open to a potential damages action.
6. What time will it settle and when do I need to be out?
Settlement generally does not occur until after 1.00pm on the day specified for settlement. This is for various reasons, but mainly because the settlement statement is usually not finalised until at least 10am on the morning of settlement, and then there are variety of tasks that need to be undertaken by the bank, our office and the buyer’s solicitor prior to settlement. Pre-settlement inspections also occur often on the morning of settlement and there needs to be enough time for the buyer to undertake the inspection and sort out any issues prior to settlement.
Once settlement has occurred, our conveyancing team will telephone you to let you know that your sale has settled, and correspondence will be sent to the real estate agent letting them know, as well as authorising them to release the keys to the buyer and the balance of deposit to you. The real estate agent must wait for both parties’ solicitors to advise that settlement has occurred prior to releasing the keys and the deposit monies.
It is highly recommended that you be completely out of the property the day before settlement, including leaving the property in a clean and tidy state, free of rubbish. This will ensure that the buyer can undertake their pre-settlement inspection on the morning of settlement and that there are no mad rushes on settlement day!
In any event, you will need to be completely out of the property prior to settlement time, which generally occurs between the hours of 1 – 4pm on the day of settlement.
We trust the above has been of some assistance to you, however if you have any further questions or need any further information our friendly conveyancing team are always happy to help. Feel free to telephone our Gold Coast office on 5563 8970 to discuss any queries you may have with one of our professional and experienced team members.