Are you feeling confused about all of the jargon and lingo you’re coming across throughout the process of researching and buying property? It’s understandable! Legalese (which has not much ‘ease’ about it) is a language not many of us speak. We’ve put together a list of commonly used terms to help you out:
Body corporate: is a legal entity that is created when land is subdivided or a registered strata plan exists. The body corporate exists to manage mutual interests for all owners on the common land including physical property (such as gardens and common areas) and issues that relate to people living together and sharing ’space’.
Administrative Fund levy: this is a levy paid to body corporate and covers day to day operational costs including things like management fees, audits, bank charges, caretaking, community power, taxation, body corporate insurance, body corporate administration, lifts and equipment servicing, pool and common area maintenance. These expenses constitute your staple ongoing owners corporation fees.
Caveat: A caveat is a legal document lodged to provide notice of a legal claim on a property. For example, a relationship may break down with only one of the partners listed as the owner, however the other partner may have made significant financial contributions such as paying down the mortgage. A caveat allows them to register their interest, potentially control and or perhaps slow down any sale process or transaction of the property . If there’s a caveat on your property transaction you should seek legal advice. If you require to lodge a caveat you should also seek legal advice.
Certificate of Title: issued by the Registrar of Titles, a Certificate of Title is a person’s record of interest and rights which affect the land they own or have a mortgage on. It provides proof of ownership along with historical information such as encumbrances or easements. Currently an owner is entitled to a register search statement of their certificate of title. In the current climate titles are electronically held. If you require proof of your ownership we can obtain an electronic copy for you.
Chattels: A chattel refers to any property that is moveable and accordingly, not a permanent fixture of a property. This includes things like fridges, washing machines and dryers which can be expensive and are usually taken when the property is sold or transferred. If you wish to have these items included in a property purchase you must ensure that they are specifically written in to the contract as goods to be sold with the property and that they are advised as to being in working order.
Common property: These are areas on a registered strata plan which area shared such as courtyards, gardens, pools, hallways and driveways.
Contract of sale: A legally binding agreement between the buyer and seller for the sale of property. It includes all aspects of the sale including property details, rights and obligations and is a very technical document requiring legal representation for both parties to ensure correct execution of the agreement.
Cooling off period: the number of days from which a contract has been signed by Purchaser during which a buyer can back out of the purchase. In Victoria as at June 2020 a cooling off period of three clear business days from the date of a Purchaser signing a Contract applies to private sales of residential and small rural properties. As it stands a full refund less $100 or 0.2% of the purchase price (whichever is greater) is payable.
There are exceptions to the cooling off period if the property:
- was purchased at auction or within three business days of the auction
- is or commercial or industrial purposes
- is more than 20 hectares or used for farming
- you previously signed a contract for the property on the same terms
- the buyer is an estate agent or body corporate
Unless any of the above applies a Purchaser may cool off from a Contract of Sale for a fee.
Disbursements: Additional costs incurred by the conveyancing lawyer/ conveyancer throughout the sale and /or purchase process for which you are required to pay. This includes things like title searches, certificate fees or registering the title transfer. Non-legal fees / disbursements may also include building and pest inspections, survey reports and valuation fees.
Discharge of mortgage: this can occur in a range of scenarios including when you are selling a property, refinancing to another lender, to release the mortgage once you’ve paid off the loan, substitute an existing security for an new security or to release a guarantor from your home loan. This is something to be dealt with when you have an existing loan which needs to be discharged upon sale, refinanced upon purchase or otherwise dealt with if a property subject to a mortgage is to be used as a guarantor property to another loan.
Easement: An easement, in legal terms, is ‘the right to cross or otherwise use a portion of someone else’s land’. An easement is usually in place to serve the common good, for example, to give access to essential services like water, sewerage and/or drainage. It could also be a ‘right of carriageway’ in other words the allowing of neighbour’s road access to reach their property. It’s important to know if your property has an easement, because it will mean there are restrictions on your ability to use and or develop your property and also possible restrictions as to access, maintenance and use. Pertinent to note is that you can’t build a garden shed over a registered easement on your property without consent from the relevant authorities and if such consent is provided, it will be provided upon strict terms and conditions to the favour of the authority who hold the rights to the easement.
Encumbrance /Covenant: A formal obligation on the land. The most common encumbrance is a mortgage which will be outlined on the Certificate of Title. Other encumbrances and/or covenants include limitations to the number of dwellings that can be built on the land, limitations on the use of the land or an easement giving rights to other parties to access a portion of the land.
Fixtures: A fixture is an item within a property that is not easily removable and (usually) stays with the property when sold or transferred. This includes things like ovens, dishwashers, carpeting and window coverings. You don’t generally sell a house and then rip up all the carpets to take with you.
Freehold: the definition on a property title allowing the owner to hold this land in perpetuity or “free from home” and can sell, lease or mortgage the land without any restriction. Most residential and commercial property in Australia is freehold property.
Joint Proprietorship: when two or more people hold an undivided equal share of a property. For example, a husband and wife own a property jointly. When one of the joint owners passes away, the ownership of the property is transferred to the surviving owner(s) by way of a simple application not the Land Titles Office. In the case of the husband and wife, if the husband were to pass away his ownership automatically transfers to his surviving wife – this is known as the right of survivorship. In the event of an accident wherein both a husband and wife are caused to be deceased and it can not be determined who passed first, the younger of the two would be deemed to be the survivor and any property assets would pass in accordance with their Will (or the intestacy rules in the absence of a Will).
Land titles office: Land Use Victoria (aka the Land Titles Office) is the Victorian Government’s key agency for land administration, subdivisions and property information.
Maintenance Fund levy: applicable if an owners’ corporation (body corporate) has an approved maintenance plan and the funds are used for improvements and upgrades such as large common maintenance and repairs and the purchase of new assets such as lifts, coolers, heating, roof repairs and the like
Transfer of Land: The legal mechanism of transfer of ownership of real estate from the vendor to the purchaser at the agreed price.
PEXA: The company who manages most of the digital settlements in Australia.
Power of attorney: A legal document giving legal authority for someone to act on your behalf (or for you to legally act on someone else’s behalf). In Australia there are several types of power of attorney including general power of attorney, financial or medical power of attorney.
Section 32: A legal document provided by the owner to the buyer before they sign a contract. It is a disclosure statement which is required to contain all of the information about the property that the owner/vendor must legally provide to a potential buyer prior to a Contract being signed so they can make an informed decision before agreeing to purchase (subject to strict legal terms and requirements subject to legislation). .
Settlement: settlement is the final process that occurs at the end of a property transaction. It includes several steps such as:
- checking and signing title transfer documents
- registering the transfer of ownership with relevant government bodies
- making final payment to the vendor
Settlement day is the day the ownership of the property transfers and the buyer takes legal possession of the property.
Stamp duty: Stamp duty is a government tax payable on property transactions. Stamp duty charges differ in each state and certain people are eligible for duty concessions on certain grounds (such as first home buyers) subject to meeting certain criteria.
This is also known as land transfer duty.
Statement of adjustments: This is a document prepared by the solicitor or conveyancer outlining how the final figure for settlement has been arrived at. It includes things like a pro rata adjustment of Council and Water rates, Land Tax and Body Corporate Fees.
Strata title: Is the individual ownership of an apartment or unit within a multi-unit property. All owners are joint owners of common property and individual owners of their apartment or unit and possibly their car space / storage unit.
Tenants in common: When two or more tenants live together and can own equal or unequal shares in a property. For example, a brother and sister living in a property together and own 50% each. The main different between tenants in common and joint tenants is what happens when one of the owners passes away. For tenants in common, ownership of the property does not automatically transfer to the surviving owner. Instead ownership is transferred to the beneficiary of the deceased estate according to their Will and in the absence of a Will in accordance with the rules of intestacy.
Vendors statement: see Section 32.