When you buy a home there is a lot of money at stake. Too much is at risk to take shortcuts or make false economies, which is why it’s critical to seek legal advice as early in the process as possible. Most buyers are unfamiliar with the legal aspects of the process; title, easements, caveats, etc, all of which determine exactly what you are buying, as opposed to what you think you are buying. It is essential to have someone in your corner who knows the potential pitfalls and can navigate you safely through what can be a legal minefield.
Lawyers are perceived as being expensive, but like insurance, when things go wrong they are worth their weight in gold.
When property is bought or sold, the ownership has to be legally transferred. This is often called conveyancing, though property lawyers acting for you on the sale or a purchase do a lot more than simply transfer a property. This will normally be carried out by your usual lawyer, but you may prefer to go to a law firm specialising in property transactions. In due course there may be more competition in this area from licensed conveyancers, since the Lawyers and Conveyancers Act 2006 abolished lawyers’ monopoly on conveyancing.
The cost of carrying out a property transaction will vary depending on the complexity of the task, from around $600 to $1200. Some lawyers offer the service for a fixed fee. There’s too much riding on this to only consider the cheapest deal, though: ask friends and colleagues for their recommendations of lawyers they have used.
What does a property transaction involve?
It can be extremely frustrating to pay legal fees to buy a home because it sounds so simple. However, it’s not just a form-filling exercise.
The lawyer checks for potential problems by doing on-title (legal ownership) and off-title (enjoyment of property) searches. The first involves checking all aspects of the title, to ensure there are no complications. For example, any rights of way or covenants on the title that may affect how you can use the land.
The off-title search covers a variety of issues depending on the property and its location. It starts with the information in the Land Information Memorandum (LIM) report that will be made up of all the information that the Council has on the property you are looking to buy. The LIM Report covers a broad range of topics such as – building consents for the house on the land, notices about the building, public works in the area such as a motorway at the end of the street, local zoning of the area, council rates or other features of the land. All this will be important if you wish to do alterations on the house or subdivide the property later.
If you are concerned with any aspects of the property revealed by the LIM, eg, a non-permitted garage, your lawyer can insert clauses in the sale and purchase agreement, making any offer subject to these items being remedied. But this can only happen if you have given the lawyer the chance to review and approve the agreement beforehand.
Other off-title searches might include an analysis of many other documents, such as building and engineering reports, local authority reports, council plans, survey plans, geo-technical requirements for seismic conditions, the Hazardous Waste Register and valuations. Usually these won’t turn up anything new or shocking – but if something is discovered, it could save you heartache and substantial future costs.
If you are buying at auction or tender the normal vendor warranties (promises) about features of the property and the purchaser’s right to requisition (raise objections to) the title are removed from the agreement. This means you need to get your lawyer to check the title and any other reports on the property before the auction or the lodgement of a tender.
This is an extract from The Streetwise Home Buyer. The full chapter covers much more and you can download it below for free.