Definition
Settlement is the final stage of a property transaction where the legal ownership of the property is transferred from the seller to the buyer. At settlement, the buyer pays the remaining balance of the purchase price, the seller receives the sale proceeds, and the property title is formally transferred to the new owner.
In New South Wales, settlement usually occurs several weeks after the exchange of contracts, depending on the settlement period agreed in the Contract for Sale. Once settlement is completed, the buyer becomes the legal owner of the property and is entitled to take possession according to the terms of the contract.
Where Settlement Applies
Settlement occurs in nearly all property transactions across New South Wales and represents the final step in completing the sale process.
Common situations where settlement takes place include:
Residential Property Sales
Most houses, apartments, and townhouses purchased through private treaty or auction proceed to settlement after contracts are exchanged.
Investment Property Purchases
Investors acquiring rental properties complete the purchase at settlement when ownership transfers to them.
Off-Market Property Transactions
Even when properties are sold privately without public marketing, the transaction must still proceed through settlement.
Commercial Property Transactions
Commercial property sales also follow a similar settlement process involving transfer of ownership and payment of funds.
What Happens During Settlement
Settlement is usually handled by the buyer’s and seller’s solicitors or conveyancers, and many transactions in NSW now occur electronically through systems such as PEXA (Property Exchange Australia).
Key steps that occur at settlement include:
Payment of the Purchase Balance
The buyer’s lender or legal representative transfers the remaining purchase funds after accounting for the deposit already paid.
Discharge of Existing Mortgages
If the seller has a mortgage on the property, it is repaid and removed from the title as part of the settlement process.
Transfer of Property Title
Legal documents are lodged with the land registry to transfer ownership of the property to the buyer.
Adjustment of Rates and Taxes
Council rates, water rates, and other charges are adjusted between the buyer and seller according to the settlement date.
Once these steps are completed, the transaction is considered settled.
Typical Settlement Timeframes
The settlement date is usually agreed when the Contract for Sale is signed and exchanged.
Common settlement periods in NSW include:
- 30 days after exchange of contracts
- 42 days after exchange (a commonly used timeframe)
- Longer settlement periods for off-the-plan or special arrangements
The exact timeframe may vary depending on the agreement between the buyer and seller.
What Happens After Settlement
Once settlement is completed, the buyer officially becomes the owner of the property.
Typical next steps include:
Transfer of Keys
The buyer receives the keys to the property, usually through the selling agent.
Title Registration
The buyer’s ownership is recorded with NSW Land Registry Services.
Property Possession
If the property was sold with vacant possession, the buyer may move into the property or begin preparing it for occupancy.
For investment properties with existing tenants, the buyer becomes the new landlord and assumes responsibility for the existing tenancy agreement.