Buying your first home is a monumental decision - one of the largest financial commitments you’ll make in your lifetime. Beyond securing funding and navigating the market, enlisting the help of a qualified lawyer is crucial to ensuring a smooth transaction.

In our three-part series, Key considerations for purchasing your first home, Tom Brodie and Michelle Ansin break down the essential steps in your journey to homeownership. From sorting out your finance and understanding the importance of retaining a lawyer, to navigating the completion of settlement and gearing up for moving day, we’ll provide the guidance you need to confidently take each step toward your new beginnings as a first homeowner.  

Part 2: The essential role of a lawyer

You wouldn’t buy a car without first seeking guidance from a qualified person, so why would you enter a contract to purchase property without also seeking specialist advice.

Lawyers provide invaluable guidance in navigating the potential pitfalls that may arise during a property purchase through conducting due diligence on the property prior to confirmation of any conditions and resolving any legal disputes that may arise. By having a legal expert involved, buyers can reduce risks and ensure that their investment is secure, ultimately contributing to a smoother and more successful home purchase.

The importance of hiring a lawyer early

Once you’ve completed your initial steps of clarifying your budget and selecting your preferred area to buy, the next step is to find a lawyer experienced in real estate transactions.

Reach out to friends and family for recommendations—who did they use, and what was their experience? Was the lawyer responsive, approachable, and effective in resolving issues? Retaining a lawyer early in the process can significantly ease your journey from initial excitement to final settlement.

Guiding you through the home buying process

A lawyer serves as your guide through the entire home buying process, from the moment you enter into a Sale and Purchase Agreement to the final registration of the property in your name. They help you navigate crucial steps, including:

• Understanding the title: Your lawyer will clarify what you are purchasing, including rights, restrictions, and the overall legal framework of the property.
• Satisfaction of conditions: They will assist in confirming that all conditions of the SPA are met before finalising the purchase.
• Ownership structures and asset protection: Your lawyer can advise you on the most suitable ownership structures and how to protect your assets throughout the transaction.

Understanding Sale and Purchase Agreements (SPAs)

There are two primary types of SPAs: the auction SPA and the standard negotiable SPA. Both types include similar provisions related to deposit payments, settlement dates, and vendor warranties, but they differ significantly in their application.

Auction SPAs

If you bid successfully at an auction, the SPA becomes unconditional immediately. You are bound to complete the purchase without the opportunity to requisition the title or insert any conditions. This approach demands thorough legal checks and financing discussions before the auction, which can be costly if you are still reviewing properties in a competitive market.

Negotiated SPAs

Conversely, negotiated SPAs allow for the insertion of conditions - such as finance approvals, Land Information Memorandum (LIM) reports, and building inspections -before committing to the purchase. This flexibility can provide greater protection for buyers, offering time to review documentation and assess the property’s condition before binding yourself to the agreement.

A common practice is to include a due diligence condition, which allows a broader scope of assessment. Standard conditions, while beneficial, may be more limited in their application for exiting the SPA if issues arise.

Setting timeframes in a Sale and Purchase Agreement

All conditions in an SPA come with timeframes for satisfaction, typically ranging from 10 to 15 working days. However, you can negotiate these timelines. It’s advisable to discuss achievable deadlines with your lawyer before signing to ensure that all necessary checks can be completed.

Legal review after signing

Once you have signed the SPA, your lawyer will conduct a thorough review, examining the title and the LIM report. Understanding the type of property you are purchasing is essential:

• Freehold land: Grants you the right to develop and use the land, provided you comply with local regulations.
• Cross-lease properties: Involves shared ownership of the land, complicating redevelopment opportunities.
• Unit titles: Governed by a body corporate that manages common areas and sets rules for property use.
• Leasehold land: You do not own the land outright and pay annual rent, which can affect long-term value and usage.

Additionally, the title may contain various registered interests that can affect your ownership rights: restrictive covenants, easements, and other encumbrances. Your lawyer will help you understand these obligations and their implications.

Importance of LIM reports

LIM reports provide critical information from the local council regarding the property, including compliance with building regulations (code compliance certificates), potential hazards, and environmental concerns. Understanding this data is vital to making an informed purchase, as it can significantly impact how you use or develop the property in the future.

Conclusion

Navigating the complexities of buying a home requires more than just financial planning; it necessitates legal expertise. By enlisting a qualified lawyer early in the process, you equip yourself with the knowledge and support needed to make informed decisions, ensuring that your journey to homeownership is as smooth and successful as possible.

The final article in this series looks at the last step in the home buying process; settlement. If you have any questions about engaging a lawyer or you would like legal assistance to buy your first home, please contact Tom Brodie, Michelle Ansin or our team of property experts.