ConveyancingPotential Legal Pitfalls in Conveyancing – What Can Go Wrong

When choosing a legal firm for your conveyancing needs, it’s important to understand the potential risks involved in transferring property ownership. While some firms may present conveyancing as a straightforward administrative task, they often overlook the significant risks that can arise during a property purchase. Below, we’ve outlined key examples of What Can Go Wrong, highlighting the importance of selecting a skilled and experienced lawyer over opting for a low-cost conveyancer.

1. Title Issues and Unregistered Interests

• Unregistered Encumbrances: If the property has any unregistered interests or encumbrances (e.g., mortgages, caveats, or easements), these can complicate the transfer of ownership. It’s essential to conduct a thorough title search to confirm that the property title is clear.
• Title Searches: Conveyancers need to ensure that the title search is up-to-date and includes all relevant caveats and encumbrances.

2. Contract Clauses and Errors

• Incomplete or Incorrect Contracts: An incorrectly drafted contract can lead to disputes or invalid agreements. It’s crucial that both the buyer and seller’s rights, obligations, and deadlines are clearly stated.
• Special Conditions: Special conditions in contracts (e.g., subject to finance or building inspections) must be carefully reviewed. Failing to meet these conditions can lead to a breach of contract or termination of the agreement.

3. Cooling-off Period

• In Queensland, buyers are entitled to a 5-day cooling-off period after signing a contract to purchase residential property. However, if the buyer decides to rescind the contract during this time, they may forfeit 0.25% of the purchase price. Failing to understand the cooling-off period can result in unnecessary financial loss.

4. Zoning and Planning Issues

• Non-compliance with Zoning Laws: If the property is subject to zoning or planning restrictions, buyers may not be able to use the property as they intended (e.g., for renovations or development). It’s important to ensure the land is zoned appropriately for its intended use.
• Building Approval Issues: If there are unapproved works or building defects, buyers can be faced with unexpected costs. Verifying building approval with local councils is critical to avoiding disputes.

5. Land Tax and Stamp Duty

• Failure to Account for Stamp Duty: Stamp duty can be a significant cost in a property transaction. Buyers must ensure they account for this cost in addition to the purchase price. A conveyancer should confirm the amount of stamp duty payable.
• Land Tax Liabilities: If a seller owes land tax on the property, the buyer may inherit these liabilities if they are not identified and properly accounted for at settlement.

6. Environmental Restrictions

• Environmental Issues or Restrictions: Some properties may be located within flood zones, heritage overlays, vegetation overlays or protected environmental areas. These restrictions can limit the property’s use and future development. A property search for environmental restrictions is necessary to avoid such pitfalls.
• Flooding or Contamination: A failure to investigate if a property has been impacted by past flooding or is contaminated can lead to significant loss and safety risks.

7. Undisclosed Defects or Property Condition

• Undisclosed Building Defects: The seller must disclose any known defects in the property. If these are not disclosed and are uncovered post-sale, the buyer may have legal grounds to pursue compensation.
• Lack of Building Inspections: Without professional building and pest inspections, the buyer may overlook serious issues like structural damage, plumbing issues, termites, or mould, which can lead to costly repairs.

8. Boundary and Encroachment Disputes

• Boundary Issues: Properties in Queensland are prone to boundary disputes or encroachments. If the boundaries are unclear or not formally surveyed, disputes with neighbours over property lines can arise. A formal boundary survey should be conducted to prevent these issues.

9. Unresolved Caveats

• Caveats on Property Title: A caveat can be placed on a property title to prevent its sale or transfer until a particular issue is resolved (e.g., unresolved debts). If not addressed, these caveats can block the sale or complicate the transfer process.
• Failure to Remove Caveats: Failing to ensure that caveats are removed or resolved before settlement can delay or prevent the transaction from being affected.

10. Failure to Meet Settlement Deadlines

• Delays in Settlement: Both the buyer and seller must meet the agreed-upon settlement date. If either party fails to meet these requirements, then the defaulting party may be sued.
• Failure to Prepare Settlement Funds: The buyer must ensure that the necessary funds (including the purchase price, stamp duty, and any other costs) are available and ready for settlement.

11. Mortgage and Financing Issues

• Mortgage Conditions: If required, buyers need to confirm that their finance is approved and mortgage documents completed in readiness for settlement. Failure to do so could cause delays or cancellation of the contract.
• Unclear Financial Arrangements: Any confusion about the buyer’s ability to obtain financing or failure to meet finance clauses can delay settlement or give the seller the right to terminate the contract.

12. Water and Sewerage Charges

• Outstanding Utility Bills: If the property has unpaid water, electricity, or sewerage bills, these charges may transfer to the new owner unless correctly adjusted for at settlement. A final reading of water meters and confirmation of unpaid charges should be done prior to settlement.

13. Tenant and Lease Issues

• Lease Obligations: If the property is being sold with tenants in place, both parties must ensure the terms of the tenancy agreement are clearly outlined and legally binding. Issues such as the timing of expiration dates and tenant vacating the property must be handled properly.
• Failure to Disclose Tenancy Arrangements: A failure to disclose ongoing tenancy agreements or related issues can create conflicts leading up to settlement.

14. Professional Misconduct

• Incompetent or Unethical Conveyancing: If the conveyancer fails to properly investigate or advise their clients, it could lead to legal claims for damages. Ensuring that you choose a qualified and experienced conveyancer is essential to avoid negligence or misconduct, leading to unnecessary stress.