Protecting Your Property Purchase

What you need to know when buying a property

There is a new evolutionary platform known as PEXA for property buyers across NSW. Exchange (‘signing the Contract’) and Settlement can now be handled online. A party can now sign a Contract for the Sale of Land on an electronic device such as an iPad or smartphone from anywhere at any time – and thus protecting your property purchase.

The new era of electronic conveyancing introduces new security measures for purchasers to ensure their legal interest in the land is protected up until the transfer is registered with the Land & Property Information Office (“LPI”). The new platform has been welcomed by some practitioners and conveyancers but there is still resistance to embark on the change by many. It will be compulsory from 2019.

In the meantime, buyers need to be aware of exchanging a contract and the risk to their ‘equitable’ interest before settlement and registration of the property to their name. Without a caveat on the title of the property after Exchange, which your solicitor/conveyancer can arrange for a small additional fee, it is possible for a creditor of the vendor to put a writ on the title of the property and potentially be able to sell YOUR property to pay the debt.

What can happen?

In 2007, the High Court decision of Black v Garnock brought a shock wave to purchasers and property solicitors around the country. The sale of a rural property ran smoothly and settlement took place like any other purchase. A final search of the title was done before settlement and showed no additional interests.

Settlement took place and the purchaser paid $1M however before the transfer was registered at the Land & Property Information a writ was placed on the title, as the vendor was in financial strife.

A writ allows the court’s sheriff to seize and sell specific land in order to pay off debt. The writ registered on the title meant that the transfer to the purchaser could not be registered even though the purchaser had paid the purchase price to the vendor. Registration of the transfer is crucial to prove that the purchaser owns the land.

The purchasers were left paying $1M for no interest in the land. Chief Justice Gleeson noted, “at the expense of the purchasers, the creditors will have obtained blood from a stone”.

How can you protect your property purchase?

1. Place a ‘caveat’ on the title. A ‘caveat’ comes from the Latin meaning ‘warning’. It publically announces through the register that a purchaser has an interest in the property. In the instance that any dealing such as a writ is placed on the title, the purchaser would be contacted by the Registrar-General.

2. For the electronic system, the introduction of the ‘priority notice’ through PEXA gives priority to the registration of the transfer before any other dealings that are placed on the title. Ask your solicitor to place a priority notice on the title. This will ensure the registration of your transfer is given priority.

3. ‘Title Insurance’ – this will protect you against any loss incurred through the conveyancing process right up until the point of registration. A small premium that may cover the loss of your deposit, settlement funds and legal costs along the way.

Take away points

• Ask your solicitor/conveyancer about placing a caveat on the title after Exchange and about Title Insurance
• And if your purchase is an electronic one, ask your solicitor/conveyancer have they lodged a priority notice – as it’s not always automatically done

We thank Contance Campbell from JMA Legal – Business Lawyers for this information on how to protect your property purchase.

If you have any other questions about your property purchase or finance please contact us anytime