Property settlement is the process by which the ownership of the property is passed on legally from the seller to the buyer. 

It is comprised of the property inspection, review for title issues, insurance requirements, payment of the balance of the agreed purchase price, payment of taxes and fees, turnover of property keys or security codes, and other regulatory requirements that require compliance.

As a standard practice the buyer has to be present during the settlement procedure, often accompanied by the buyer’s legal and financial representatives.

Here’s how property settlement is observed;

Final inspection of the property

As a requirement to fulfil the settlement, the property must be in the condition or situation as it is described in the contract of sale. The final inspection takes place during the daytime along with the seller or an authorised agent. The inspection must take place closest to the scheduled time for the settlement.

The gives the buyer time and opportunity to raise or point out issues that may need to be addressed by the seller as quickly as possible.

Title check

This ensures that the title for the property is in order before the legal turnover. This may include disputes on liens that the property may have incurred before the settlement or if there are ownership interests that are associated with the property.

Any issue or discrepancy found on the property title must be called out and addressed during this time so that the transfer of ownership is without hitches or legal impediments.

Insurance requirements

In some areas such as New South Wales, it is mandated that the risk of loss passes during settlement, earlier, or on the day the seller hands over ownership of the property to the buyer.

Generally, buyers don’t need insurance coverage during the period when the contracts are exchanged until the day of settlement unless they assume possession first.

It must be noted that before settlement, the insurance paid for by the seller takes effect first and if coverage is not sufficient to respite the property to what is stated in the contract the buyer may seek to adjust from the purchase price or take back the amount from the proceeds of the sale. In the same way, the buyer is also empowered to file a claim against their insurance coverage for the property.

Arranging payment 

Generally, it is a common practice for buyers to allow their lawyers to hold the remainder of the purchase price in escrow until the settlement date and released to the seller.

All rates and charges can be adjusted between the buyer and the seller, with the seller responsible for settling all rates up to the time of the settlement and the buyer assumed responsibility after the handoff.

Taxes and other duties

The Goods and Services Tax (GST) and stamp duties are paid by any or both of the parties, depending on the agreement between the seller and buyer.

Some areas require territory and state stamp duty on certain transfers of land and dealings with interest in land, interests in a company, partnership, or trust. Tax computations may vary by area and can change without prior notice.

Dealing with surprises

Take note that not everything is perfect during the transaction process and surprises may arise just before the settlement date. 

Common issues that usually arise are problems with finances and failure to remove a condition stated in the contract.

If the buyer or seller is unable to vacate the property on the date of settlement,  a Notice to Complete is usually to the moving party. This gives them 14 days to comply and fix the issue for the settlement to take place.

If a tenant refuses to vacate the property during the settlement, it is usually dealt with legally based on existing rules and policies about tenants and landlords.

The official handover

Oftentimes the buyer is not present during the settlement, thus it is important to organise who delivers and receives the keys to the property, as well as the security codes for houses with security devices installed.

Once completed, the settlement is complete and the property is turned over to its new owner.