What happens on settlement day?

What to expect on settlement day

What is settlement?

Settlement is where that massive chunk of money you've borrowed from the bank gets handed over to the vendor, and in return, you get the keys and a bunch of paperwork which enables you to be registered as the new owner of the property. “It is the finalisation of the sale/purchase. This is your ‘signed, sealed, delivered’ moment. After settlement and the lodgement of paperwork, you will officially be the legal owner of your new home!” says lawyer Ken Fung from Conveyancing.com.au.

How long is it?

Generally speaking, the settlement period is usually 30 to 90 days, and is a date agreed by both parties and stipulated in the contract of sale. It allows both parties sufficient time to meet their financial and contractual obligations, plus organise the logistics of moving. If you're buying off-the-plan, it could be a few years until you settle.

Who’s involved?

Settlement is a legal process involving financial representatives (bank or lender) and legal representatives (conveyancer or solicitor) for both buyer and seller. “Conveyancing refers to everything that needs to be checked, searched, signed, and certified,” says Ken, which is why a conveyancer should be engaged when you first start looking to buy property. They are essential during this final phase.

Consumer Affairs Victoria says, that “you are entitled to inspect the property at any reasonable time during the week before settlement.” So, you’ll also need to be in touch with the estate agent to arrange the final inspection, which is to check the property is still in the same condition it was on the day of the sale. The estate agent is also the one who hands over the keys.

If you’re buying a brand-new home, you may want to get a building inspector to conduct a final inspection to make sure all Australian Building Codes have been met. Consumer Affairs Victoria advises to "use an inspection service with full professional indemnity insurance. This will protect you if the inspection misses a problem that must be fixed."

Finally, if settlement day is also moving day, you’ll also be dealing with removalists.

What’s happens financially?

“Settlement is when the buyer pays the balance of the purchase price to the vendor,” says Ken. “Your conveyancer will confirm with your bank to make sure they’re ready to provide and transfer the amount required.”

Other bills you need to pay on the day include land transfer duty, commonly known as stamp duty, and if you have it, lenders mortgage insurance. Stamp duty, which can be tens of thousands on top of everything else, is paid at settlement, usually electronically. While in some rare cases you have up to 30 days from settlement to pay this, the title to the property – that piece of paper saying it is yours – will not be transferred to your name until you have paid this in full.

To calculate how much you might be up for, check here.
 

Settlement is a legal process involving financial representatives (bank or lender) and legal representatives (conveyancer or solicitor) for both buyer and seller.

What happens legally?

The property is being rightfully and legally transferred into your name. "Your conveyancer prepares all the legal documents required for this exciting real estate transaction. Once both parties sign the documents, they're sent to the titles office to register you as the property's new owner. If settlement occurs electronically, this lodgement and registration process will take place immediately after settlement," explains Ken.

Who tells council?

“As part of the conveyancing process, after settlement has gone through, we will send a document called a Notice of Acquisition to the water authority, local council, State Revenue Office and Owners Corporation Manager, if applicable, to advise them that you are the new owner of this property from the settlement date,” says Ken.

Council rates are the responsibility of the seller up to and including the day of settlement. Your conveyancer will prepare a ‘State of Adjustments’ that apportions the outgoings, including water rates, council rates, and if applicable, land tax or owners corporation fees. Ken also advises that “any outstanding fees payable to the authorities will also be collected from the seller at settlement to ensure that the rates are paid in full.” 

Can I change the settlement date?

The settlement date stipulated in the sale of contract can only be varied by agreement of both parties. This is intended to protect both parties to the contract. The buyer may ask for an extension, however, “the vendor has the right to charge penalty interest under the contract, though. This will be calculated from the original settlement date to the new date you are requesting,” says Ken.

Anything else to consider?

Arranging your insurance and getting utilities connected is your job. Ken advises to “contact your preferred suppliers for gas, power, internet and things like that about a week or so before settlement, so everything can be connected on the day, making for a seamless move into your new property."