When selling your house, settlement day marks the conclusion of one chapter and the beginning of another.
You are (ideally) relocating to a new house, somewhere new to discover and develop a love for. First things first, however. First, your buyer must make a payment.
What is Property Settlement?
Property settlement is a legal procedure aided by the sellers and your legal and financial agents. It occurs when the seller transfers ownership to you, and you pay the remaining purchase price balance.
What Exactly Happens During the Rental Property Settlement Process, and What Must the Seller Do?
If you are unsure, property settlement is the phase where property ownership is passed from the seller to the buyer. Although it is feasible to perform conveyancing on your own, you should consult a qualified property lawyer or conveyancer because different states have different laws and processes controlling how a property can lawfully be transferred to a new owner.
What Must Be Done Before Rental Property Settlement Day?
A few things need to be ready before settlement day, but most of them belong to the buyers and will be handled by their legal counsel.
These consist of:
- Examining the contract of sale’s provisions to ensure that each party complies with its duties.
- Ensuring sufficient time between the intended settlement date and the date your buyer’s mortgage receives final approval.
- Check the property’s history to ensure that any outstanding debts are paid off and no mortgages are still being held against it.
- Before closing, your buyer has the opportunity to view the property to ensure that it is in excellent shape and that the boundaries and measurements match the certificate.
What Occurs That Day?
Surprisingly, your solicitor can conduct your final settlement meeting; neither you nor your buyer need to be present.
- Legal papers are swapped at this encounter, and money is moved. The land transfer duty will also be your buyer’s responsibility to pay.
- If, for instance, you have to pay costs linked to the property in advance, you might be entitled to compensation from your buyer (such as council rates or water fees) in some situations. You must inform your lawyer in these situations so that they can work with your buyer to modify the property’s purchase price to account for these expenses.
- The buyer’s attorney will check to see whether any other parties having claims to the property have been expelled, and if you have a mortgage on the title, they will know if it has been paid off.
- Both solicitors will inform you (or your agent, if you are using one) once settlement has taken place, and you can turn over the keys to the property to its new owner.
Who Gets Their Rent on Settlement Day?
Since this is a selling factor for real estate investors, houses are frequently rented out. In addition, it prevents empty rental periods, which cost money in advertising and result in lost rental income. Rent payments will be adjusted between the seller and the buyer as part of the settlement of a rented property.
The most typical outcome is that the seller inherits all rental payments made before settlement, and the buyer inherits any outstanding rental amounts.
Purchasing a Property with an Existing Tenant
What happens if you purchase a property with renters living there? Do you have to wait until they have moved out to settle, or may you do so as soon as all the requirements have been met and you are free to take ownership of your new property and occupy it yourself?
The solution is easy:
- As soon as all requirements have been met, you can move in and take possession of your new investment property:
- Describe the terms of the renters’ fixed-term or ongoing lease with the old landlord.
- Schedule a meeting with them to decide whether to keep or replace the property management.
- A property manager can also look after the property if you’d like.
- Requesting information about past rent payments and explaining any property repair needs.
- When tenants are not on a fixed lease, their periodic rent payments will rise.
- You must give notice in writing.
Completing Formalities at Settlements
Although most people consider settlement to be just another day in their lives, some necessary formalities must be completed. The conveyancer will take care of most of these issues on your behalf, but you should be aware of what they are.
Property damage and loss insurance coverage must be supported by documentation. For instance, if you rented out your property before selling it and had a contract with a renter. Additionally, you may be asked to show that renters were informed of their rights and obligations under Australian tenancy law.
Is There Any Room for Error?
While issues with property settlement are uncommon, they can happen. A competent attorney will anticipate common issues and put protective legal provisions in place.
The most frequent issues are missed payments or settlement delays. However, if the buyer experiences financial matters, there may be delays. Occasionally, they may completely miss the final payment due to unforeseen circumstances. In these situations, the buyer is typically responsible for paying interest on the balance owed for the property (about 10% annually, calculated daily).
However, if either of these happens, you and your buyer might agree to modify the outcome by extending the settlement date and waiving interest. If so, you’ll need to convince your buyer to accept the revised conditions. Once the settlement is complete, you can move into your new home and begin the next chapter of your life.
I hope this blog may assist in answering several questions regarding property settlement. However, if you have any further questions, call (02) 8084 2764, and one of our professionals will be happy to help. Platinum Lawyers offer conveyancing services because we have years of experience with a range of cases, giving you peace of mind so you can concentrate on other facets of rental property ownership.