Settlement is the process by which a contract to buy and sell real estate is completed. Settlement representatives ensure that legal title to real estate is transferred from sellers to buyers, rates are adjusted and the purchase price is paid.
The seller and the buyer each need a settlement representative. It is permissible for both parties to have the same representative however it is usually preferable for the parties to be separately represented.
Want more information? Read our post – What does a settlement agent do?
As buyer, you should attend to the following matters, where applicable, before the settlement date:
As seller, you should attend to the following matters, where applicable, before the settlement date:
The standard REIWA contract provides that if for any reason attributable to the other party, settlement is not completed within 3 business days after the settlement date, you may demand compensation at the rate of 9% per annum on the balance of the purchase price payable (penalty interest). Penalty interest is calculated from the settlement date to the date upon which settlement is completed and must be paid at settlement.
Your right to compensation is subject to you and your lender (if any) being ready, willing and able to complete settlement on the settlement date. If you are not ready, willing and able to settle on the settlement date, then your right to compensation begins from the date upon which you give written notice to the other party that you are ready, willing and able to complete the settlement.
We will only claim penalty interest on your behalf if we receive your written instructions to do so. We will advise you should there be any delay in settlement.
For more information, read out blog post Penalties for late settlement.
As of 9 August 2009 the Electricity Regulations 1947 (WA) require sellers of residential properties built after 1 January 2000 to install at least 2 residual current devices (RCD’s) in the premises before the sale is completed. As of 1 October 2009 it is compulsory that mains powered smoke alarms are installed in residential properties prior to sale.
Prior to settlement, the seller should provide the buyer with a certificate certifying that RCD’s and smoke alarms are installed in accordance with the Electricity (Licensing) Regulations 1991.
Unless stated in the contract, the property is sold free of all encumbrances. This means that, at settlement, any mortgages, caveats and other encumbrances must be discharged so that the buyer receives a clear title.
If there is a mortgage or other encumbrance on the title, the seller must contact the relevant financial institution or other persons and request that the encumbrance be removed at settlement.
The most common reason that settlement is delayed by a seller is that the discharging financier is not ready to settle. If settlement is delayed for this reason the seller may be liable to pay penalty interest to the buyer.
All local authority rates, Water Corporation rates, strata levies and land tax (outgoings) for the current year will be apportioned between the buyer and seller with the effect that:
We will notify those authorities of the change of ownership.
If land tax is payable by the seller in respect of the property, it will not be apportioned where:
Transfer duty (formerly known as stamp duty) is a State Government tax calculated on the value of the property. You can calculate transfer duty using our settlement calculator.
The buyer is liable to pay transfer duty on the contract and transfer. You may be eligible for a reduced rate of transfer duty if you are a first home buyer or you are buying a residence for owner occupation.
You must lodge your contract at the Office of State Revenue for assessment within 2 months of the contract date. If you fail to do so you may be liable to pay a fine or late lodgement penalties.