Property contracts, finance and taxes

Contract terms and conditions

A

Affordable homes

Properties, including house and land packages, for sale within a set price range and specifically for low to medium income households.

Agent

A registered person authorised to act for another during the selling and buying process. Usually a real estate or land agent employed by the property's owner to act on their behalf.

Amalgamation

The process of joining two plots of land on two different titles into one plot and one title.

Auction

The public sale of a property. The highest bidder is usually the successful buyer.

B

Body corporate

The collective ownership of common areas in a group of units or apartments. It is responsible for the administration and upkeep of the areas shared by all owners.

Borrower

Refers to the person who takes a loan from a lender, usually a financial institution.

Breach of contract

Breaking one or more of the conditions of a contract. This will usually carry repercussions - eg a fine being applied.

Bridging finance

A short term loan, normally for 6-12 months with a high interest rate, used to fill the gap between buying a new property and either the sale of the old one or obtaining a long term loan.

Building consultant

An expert experienced in the design or construction of a building. Building consultants can complete a report on a property listed for sale prior to purchase. You should ask if the consultant has building indemnity insurance to cover any serious omissions about building defects not covered in their report.

Building indemnity insurance

Insurance taken out by a building work contractor for work costing $12,000 or more and requiring council approval. It covers owners for uncompleted or faulty work in the case of insolvency, death or disappearance of the building work contractor.

Building work

Work of constructing, altering, renovating or demolishing a building, fencing, pools, spas and paving.

Building work contractor

A professional who is qualified and licensed to undertake building work - includes builders, carpenters and insulation installers.

Business day

Any day except Saturdays, Sundays and public holidays.

Buyer's advocate

An agent who acts for the buyer by sourcing suitable properties and representing the buyer during the purchase process.

C

Capital value

This is the value of an allotment of land, taking into account any improvements that have been made to it. This value is set by the Valuer-General and is reviewed each year.

Caveat

A note on the certificate of title that an interest in the land is claimed by a third party.

Certificate of compliance

Issued by a registered worker - eg a building inspector, to show that a project meets all regulations and relevant standards.

Certificate of title

The legal document showing who owns the property, the size of the land and if there are any limitations on the land - eg easement, caveat, mortgages. Also referred to as 'title'.

Chattels

Moveable personal property or furniture. As a general rule, all moveable items are excluded from sale unless otherwise specified - eg dishwasher.

Commission

Paid by the vendor to their agent when the property is sold. Commission is usually a percentage of the property's selling price and is negotiated between the seller and their agent.

Common property

Areas of a property used and jointly owned by all property owners in the group - eg laundry room in a group of units.

Community title

Type of title for a group of units or apartments that divides land into lots and common property.

Company title

Type of title for a group of units or apartments. A company is the registered owner of the land and the company's shares are held by the owners of each individual unit or apartment.

Comparison rate

A tool that allows the true cost of a loan, including the cost of interest rates, fees and charges, to be compared with other loans using a single figure percentage.

Consumer credit insurance

Optional insurance for borrowers to guard against losing their property should they default on mortgage repayments. It safeguards the loan if repayments can not be made due to sickness, accident or unemployment.

Contract of sale

Legal document usually prepared on the vendor's behalf by an agent, solicitor or conveyancer that outlines the details of the sale. This becomes legally binding once signed by both the vendor and the buyer.

Conveyancer

A person who prepares documentation, gives advice and represents vendors and buyers in the preparation and settlement of land transactions. This can also be done by a legal practitioner.

Conveyancing

The transfer of ownership from the vendor to the buyer, usually performed by a conveyancer or legal practitioner.

Cooling-off period

The period of time in which a buyer can opt out of a contract of sale. The cooling-off period ends two clear business days from the making of the contract or the service of the vendor's statement to the buyer (whichever is later).

Cost-plus clause

A provision for the builder to recover the cost for materials and performing specified building work plus an addition amount not to exceed 15% of that cost. Cost-plus clauses are not commonly used in South Australia.

Covenant

An agreement that creates an obligation on the person who holds the certificate of title to the land, either to do or not do something - eg cannot build more than one property on a block of land.

D

Deposit

A non-refundable percentage of the purchase price of a property, usually 10%, paid by the buyer when the contract of sale is signed and exchanged. Deposits are usually held in a trust account by an agent, solicitor or conveyancer acting on behalf of the vendor.

Deposit bond or guarantee

Offered by some lenders as an alternative to a cash deposit.

Disbursements

Additional charges made by solicitors and conveyancers on top of their fees - eg for postage, phone calls, government charges.

Display home

A property constructed by a building company for the purpose of allowing the public to view the design and layout of a property available to construct as part of a house and land package in a new development. Usually these are located in a display village with other display homes.

Display village

A group of display homes constructed for the purpose of allowing the public to view the different types of houses they can choose to have constructed as part of a house and land package in a new development.

Domestic building

Building work undertaken for personal, domestic or household use - eg kitchen renovation.

Door-to-door selling

A salesperson selling goods or services by going from place to place, making telephone calls or otherwise looking for consumers. The consumer then meets the trader face to face and enters into negotiations with a view to entering into a sales contract.

E

Easements

A right held by a person to make use of the land belonging to another - eg an easement held by SA Water to maintain pipes.

Encroachment

The use or intrusion onto another person's property without consent, usually by a structure.

Encumbrance

A third party's right that obstructs the way property is used or transferred - eg mortgages.

Energy efficiency package

Refers to a package of practical environmental measures that emphasises environmental and affordability considerations.

Estimated selling price

The price an agent estimates a property will sell for. For residential properties,it must be recorded on the sales agency agreement between the agent and the vendor as a dollar amount. A range cannot be used.

Exclusion of rights

Any purported exclusion, limitation, modification or waiver of a right conferred, or contractual condition or warranty implied, under the Building Work Contractors Act 1995 is void.

F

First home owners grant

A federal government incentive providing eligible first home owners with a non-means-tested, one-off payment.

Fittings

Items that can be removed without damaging the property - eg lighting or air conditioning . These items must be listed in the contract of sale if the buyer wishes them to remain at the property.

Fixed interest rate

An interest rate that remains unchanged for a set period.

Fixed price contract

A domestic building work contract that does not include a rise-and-fall or cost-plus clause. Also called a fixed price lump sum contract.

Fixtures

Items that are attached to the property and can't be removed without causing damage - eg built-in wardrobes. These are usually included in the sale but it may be a condition in the contract of sale that they are removed by the vendor. The buyer can include a condition in the contract of sale that states the vendor will then be responsible for repairing any damage the removal of a fixture may cause and to reinstate the surface - eg paint over any marks with the same colour paint.

Footing

The base, usually concrete, on which a structure is constructed.

Form one (building)

Information that the building contractor must provide outlining conditions of the contract, cooling-off rights, building indemnity insurance and payments.

Form one (selling)

Information that the vendor must provide to prospective purchasers advising of any restrictions on the property - eg easements, caveats, outgoing rates and any other notices. Also called a Vendor's statement.

Foundation

The base, usually concrete, on which a structure is constructed.

G

Goods and services tax (GST)

A consumption tax of 10% levied on the final consumer of goods and services. The supplier of the transaction is responsible for collecting GST and sending it to the Australian Taxation Office.

Gross income

Total income before income tax and expenses are deducted.

H

Harsh and unconscionable

A term or condition of a contract that a court has found to be unfair, unjust or extremely one-sided.

Heritage listed

A property or place protected under legislation as it holds particular natural, cultural or historical significance to the State. Heritage listed properties are selected and assessed by local councils and added to a register. There may be limitations on what renovations or developments can occur - eg can not be demolished.

Holding deposit

The amount paid to the vendor's agent, solicitor or conveyancer by the buyer when making an offer on a property. It is not compulsory and is refunded if the offer is rejected.

House and land package

A package that consists of the land and a house design. These are usually sold in new developments and there may be number of house designs you can choose from.

I

Interest only loan

Throughout the term of the loan only the interest is paid off. The loan itself, the principle, is repaid at the end of the time limit of the loan.

J

Joint tenants

Two or more people purchase a property and hold equal shares in it. If one dies their share is automatically passed on to the surviving owners.

L

Land agent

A person who is registered and authorised to act for another during the selling and buying process - generally employed by the vendor to act on their behalf. Also known as a real estate agent.

Lease agreement

An agreement or contract for the rental of a property between a landlord and tenant.

Lender

A financial institution or person who lends money to the buyer to cover the purchase of a property.

Licensed tradesperson

A qualified professional who holds a license showing they are legally qualified to undertake the work they are employed for - eg builder, electrician, gas-fitter.

Licence number

The unique number assigned to a qualified professional or company that is licensed.

M

Memorandum of transfer

A document recording the change of ownership of a property.

Minor domestic building work

Domestic building work that would cost less than $12,000 under a contract with a building work contractor.

Moiety title

In a moiety title, sometimes referred to as a cross lease, the ownership of a unit comes from being the registered owner of a share of the land the group of units sits on. The owner is leasing the right to occupy their unit, along with the right to use common areas, from the other unit owners.

Mortgage

Type of loan taken out by a buyer to cover the payment for a property. Involves a written contract giving the lender certain rights of over a specific property - eg house being bought by the borrower as security for the loan.

Mortgage guarantee insurance

Paid by the borrower to protect the lender should they default on mortgage repayments. Normally applies if the borrower's loan exceeds 80% of the value of the property. Also known as mortgage insurance.

Mortgagee

The organisation that lends money to a borrower by a mortgage agreement, usually a financial institution.

N

Net income

Income remaining after income tax and mandatory levies - eg Medicare levy, have been deducted.

Notional value

The value of a property based on its actual use rather than the highest and best potential use.

O

Off the plan

Buying a property before it has been built - usually based on an architect's plans and models.

Outgoings

Any costs incurred by the vendor on top of an agent's commission - eg advertising costs. These are usually negotiable between a vendor and the agent.

Owner-builder

A property owner who undertakes the management of their own domestic building work, including the coordination of contractors.

P

Passed in

Refers to a property put up for auction that does not sell, usually because it has not reached the vendor's reserve price.

Practical completion

The stage at which a home is fit for use by the owner and is handed over by the builder after providing a statement of compliance to the local council.

Prescribed time

This usually refers to the date in which a building owner may end a domestic building work contract. This is the end of five clear business days after a building work contract has been made or, if there has been an issue around compliance with a requirement of a domestic building work contract, the time of completion of the building work under the contract.

Preliminary work

Work carried out at the site before the start of a building work contract but not usually included in the contract - eg preparing the site for a foundation to be laid.

Prime-cost item

Certain goods and services included in the contract that may be of a higher standard and cost - eg kitchen stove. You may have to pay an additional cost and a surcharge of up to 15% to cover the cost of the purchase, delivery and installation of the item.

Principle

Total amount of a loan without interest or other associated charges.

Private certifier

An experienced and registered professional who can assess proposed developments against the required codes and regulations.

Private treaty sale

The sale of a property by a vendor acting on their own behalf or with an agent through private negotiation and contract.

Provisional sums

The amounts determined as best estimates by the building work contractor for performing certain work under the contract.

R

Refinancing

The process of changing the type of loan or lender.

Rebates

Discounts received usually for bulk purchases. Any undisclosed rebates received by an agent must be passed on to the vendor.

Reserve price

The minimum price a vendor will sell their property for. For a residential property this amount must be recorded in the auction record.

Rise-and-fall clause

A contract condition that stipulates the price for building work may change to reflect changes in the cost of labour and materials.

S

Sales agency agreement

A legally binding contract signed by the vendor and their agent detailing various aspects of the agreement - eg commission and advertising costs.

Sales representative

A person employed by a registered land agent to sell real estate.

Settlement

The occasion when ownership of a property passes from the vendor to the buyer and the balance of the sale price is paid to the vendor.

Significant tree

A tree protected by legislation, usually due to its age or size. Council approval must be obtained before a significant tree can be removed, destroyed or otherwise damaged.

Site value

This is the value of an allotment of land without taking into account any improvements that have been made by it. This value is set by the Valuer-General and is reviewed each year.

Solicitor

A legally qualified person who undertakes legal work and provides legal advice for a fee. Solicitors may specialise in conveyancing and property law.

Specifications

The detailed lists of specific building materials, appliances and fittings to be used in the building or renovation - eg particular type and colour of bathroom tiles.

Stamp duty

State government tax that is based on the sale price of a property. This is paid by the buyer when the property's ownership is transferred.

Statement of compliance

Document signed by the owner and building work contractor certifying the work has been carried out to relevant building standards and in accordance to the specifications and plans approved by the local council before development began.

Statutory warranty

A warranty included in legislation that can not be waived, limited or modified under a building work contract.

Strata title

A type of title for a group of units or apartments in which each unit or apartment is individually owned. All owners are jointly responsible for common areas.

Subcontract

The contract between the building works contractor and another contractor engaged to perform specific parts of the building work contract - eg an electrician.

Subdivision

The process of dividing land currently on one title into two or more separate titles, usually for sale or the development of extra properties.

Surplus material

Any material - eg timber, left over after a building contract has been completed which can be kept by the building work contractor.

Surveyor

Qualified professional who is able to establish boundaries of property - eg in the case of an encroachment dispute, and can conduct a building inspection.

T

Tenants in common

Each owner owns a set share in the whole property. One owner can sell their share or leave it to someone else in a will. If one dies the share will not automatically pass to the other owner or owners.

Title

Refers to the certificate of title. This is the legal document showing who owns the property, the size of the land and if there are any limitations on the land - eg easement, caveat, mortgages.

Torrens title

The system of title by registration in a central register of land.

V

Valuation

The estimate of the value of a property by a qualified valuer, usually for a fee. Valuations can only be undertaken by a qualified valuer. An agent can only perform an appraisal of the property.

Variations

Documented changes to a building work contract requested by either the building works contractor or the property owner for a price determined by the conditions of the contract.

Vendor

The person selling the property.

Vendor's statement

Information that the vendor must provide to prospective purchasers advising of any restrictions on the property - eg easements, caveats, outgoing rates and any other notices. Also called a 'Form one'.

W

Wrapping

A type of vendor terms contract where the property price and interest rates are usually well above the market rate. Penalties for defaulting can be severe. These contracts should be entered into with caution.

Z

Zoning

The permissible use of an area of land as stipulated by the council. Zones are residential, commercial or industrial.


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Page last updated 11 August 2016

Provided by:
Department of Planning, Transport and Infrastructure
URL:
http://www.sa.gov.au/topics/planning-and-property/buying-a-home-or-property/property-contracts-finance-and-taxes/contract-terms-and-conditions
Last Updated:
11/08/16
Printed on:
25/11/17
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