Section 64 of the Property, Stock and Business Agents Act 2002 (NSW) Exchanging of Contracts by Real Estate Agents in New South Wales By Dan Lynch 1 The Contract for Sale of Land in New South Wales is an extremely important document. It sets out the terms and conditions between the Vendor and Purchaser upon which the sale of land will proceed. Most notably, the Contract creates legally enforceable rights and obligations between the parties to the Contract. Given the important role that an agent can play, it is of fundamental importance that the agent is aware of the following:1. What is an Exchange of Contracts and what does it Involve? 2. Can the agent participate in the exchange of Contracts?; 3. Are there any prohibitions or limitations when participating in the exchange process?; 4. Are there any risks to an agent when participating in the exchange process?; 5. What should the agents’ be aware of with regard to the payment of a deposit when exchanging Contracts?; and 6. What else should an agent worry about? 1. What is an Exchange of Contracts?
If you were to think of a Contract as having a lifespan, then the exchange of Contracts would be the birth of the Contract. It is the creation of Contractual rights and obligations and, in New South Wales, is the most orthodox method for parties to enter into Contracts for the sale and purchase of land. The exchange of Contracts involves both the Vendor and the Purchaser each signing an identical Contract and essentially swapping, or exchanging it, for the other party’s signed Contract. The result of the exchange is that each party has a written statement recording the terms of the agreement signed by the other party to the agreement. 2. Can the agent participate in the exchange of Contracts?
The Property, Stock and Business Agents Act 2002 (NSW) [the Act] enables a Real Estate Agent to participate in the exchange or making of Contracts for the sale of Residential Property.2 Residential Property under the Act is deﬁned as having the same meaning as in Division 8 of Part 4 of the Conveyancing Act 1919 (NSW) 3[the Conveyancing Act] . This is reproduced as follows:-
66Q Meaning of “residential property” (1) For the purposes of this Division, "residential property" is: (a) land on which are situated (or in the course of construction) not more than two places of residence, and no other improvements, or (b) vacant land on which the construction of a single place of residence alone is not prohibited by law, or (c) a lot or lots (including a proposed lot or lots) under the Strata Schemes (Freehold Development) Act 1973 or the Strata Schemes (Leasehold Development) Act 1986 , comprising not more than one place of residence alone, whether constructed or in the course of construction, and including any place used or designed for use for a purpose ancillary to the place of residence. (2) Residential property does not however include: (a) land or a lot that is used wholly for non-residential purposes, or (b) land that is more than 2.5 hectares in area (or such other area as may be prescribed). (3) For the purposes of this section, "place of residence" means a building or part thereof used, or currently designed for use, as a single dwelling only, and includes
Therefore, if the land is less than 2.5 hectares in size (25,000 square metres), and is land on which there is situated no more than two places of residence, or if vacant, where the erection of a single place of residence is permitted, then the property is “Residential Property” within the meaning of the Act. Accordingly, the following types of properties would not be residential property:• A townhouse complex consisting of three townhouses (although if each individual townhouse were to be sold separately, each townhouse would be residential property within the meaning of the Act); A 10 acre farm; or A 3 hectare industrial complex.
The following types of properties would be considered residential:• • • A 5 acre...
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