After weeks of contracts, finance approvals, inspections and conveyancing searches, settlement day is when a property transaction is completed.

For buyers, it is the day they complete the purchase and can ordinarily collect the keys to their new property.

For sellers, it is the day they receive the sale proceeds, discharge any existing mortgage and transfer ownership to the buyer.

Although settlement is often described as a single event, considerable preparation takes place beforehand.

In Queensland, most straightforward conveyancing transactions are now completed electronically, with solicitors, conveyancers and financial institutions coordinating the transfer of funds and registration of the necessary documents.

1. What Is Property Settlement?

Property settlement is the process by which the buyer completes the purchase and the seller completes the sale in accordance with the contract.

At settlement, the transaction generally involves:

• payment of the balance of the purchase price;
• discharge of the seller's existing mortgage, where applicable;
• payment of relevant settlement expenses;
• transfer of ownership;
• lodgement of the transfer and associated documents; and
• the buyer becoming entitled to possession of the property.

Settlement day is the occasion when the seller receives the remaining purchase price, transfers title and hands over possession and keys.

The precise arrangements depend on the contract and the circumstances of the transaction.

2. What Happens Once the Contract Becomes Unconditional?

A contract may initially be subject to conditions such as finance or building and pest inspections.

Once those conditions have been satisfied or waived, the transaction generally proceeds towards settlement.

Your solicitor will continue preparing the legal and financial aspects of the purchase or sale.

This can include:

• completing conveyancing searches;
• preparing or reviewing transfer documents;
• liaising with the lender;
• confirming the settlement date;
• calculating settlement adjustments;
• arranging transfer duty;
• confirming funds required;
• preparing the electronic settlement workspace; and
• addressing any outstanding contractual requirements.

If you are still considering a property purchase, our article Buying Property in Queensland: What to Know Before You Sign a Contract explains the earlier stages of the process.

3. What Is Electronic Settlement?

Electronic settlement allows participating legal representatives and financial institutions to complete a conveyancing transaction through an electronic lodgement network.

Rather than physically exchanging bank cheques and paper documents at a settlement venue, the parties coordinate the financial settlement and electronic lodgement of the relevant instruments.

Queensland Revenue Office provides procedures for assessing and paying transfer duty in transactions completed through an electronic conveyancing network.

Electronic settlement is designed to coordinate the financial and registration components of the transaction.

4. What Is PEXA?

PEXA is an electronic conveyancing platform used to facilitate property settlements.

It allows participating parties to prepare documents, coordinate settlement funds and arrange electronic lodgement.

A typical electronic settlement may involve:

• the buyer's solicitor;
• the seller's solicitor;
• the buyer's lender; and
• the seller's lender.

Not every transaction can necessarily be completed electronically. The available method depends on the type of transaction and applicable requirements.

For most buyers and sellers, their solicitor manages the settlement process rather than requiring them to attend personally.

5. What Does the Buyer's Solicitor Do Before Settlement?

The buyer's solicitor will ordinarily prepare the transaction for completion by:

• reviewing relevant searches;
• confirming the contractual position;
• checking the title;
• preparing transfer documentation;
• calculating transfer duty;
• reviewing settlement adjustments;
• liaising with the buyer's lender;
• confirming the funds required from the buyer; and
• coordinating settlement arrangements with the seller's solicitor.

The buyer may also need to sign documents, verify their identity and provide information required by their solicitor or lender.

Responding promptly to requests can help prevent delays.

6. What Does the Seller's Solicitor Do Before Settlement?

For sellers, preparation may include:

• liaising with the existing mortgagee;
• arranging discharge of the mortgage;
• confirming the mortgage payout figure;
• reviewing the settlement statement;
• calculating rates, water and other adjustments;
• confirming the seller's payment directions;
• coordinating with the buyer's solicitor; and
• arranging completion of the electronic settlement.

If the seller has an existing mortgage, the lender will generally need to receive sufficient funds to discharge it as part of settlement.

Sellers should begin the mortgage discharge process early rather than waiting until the final days before settlement.

7. What Happens to the Seller's Mortgage?

A seller can ordinarily sell a property that is subject to a mortgage.

However, the buyer will generally expect to receive title free from the seller's mortgage, unless the contract provides otherwise.

The seller's lender therefore needs to participate in the settlement process.

At settlement, the required mortgage payout is generally deducted from the sale proceeds and paid to the lender.

The mortgage discharge is then dealt with as part of the conveyancing transaction.

Queensland's land title legislation provides for the execution and registration of mortgage discharges, including electronic conveyancing documents.

The seller receives the remaining proceeds after the required payments and adjustments have been made.

8. How Does the Buyer Pay the Purchase Price?

The buyer's settlement funds may come from:

• their own savings;
• proceeds from another property sale;
• a home loan; or
• a combination of these sources.

The buyer's lender will generally provide the approved loan funds for settlement.

The buyer must also contribute any additional funds required to complete the purchase.

These may include:

• the balance of the purchase price not covered by the loan;
• transfer duty;
• registration fees;
• electronic settlement fees;
• settlement adjustments; and
• other transaction costs.

Your solicitor should provide a settlement funds calculation so you know what must be available before settlement.

Do not assume the deposit and approved loan will cover every amount payable.

9. What Is a Settlement Statement?

A settlement statement sets out the financial calculation required to complete the transaction.

It generally begins with the purchase price and then accounts for matters such as:

• the deposit already paid;
• council rates adjustments;
• water adjustments;
• body corporate levies, if applicable;
• rent adjustments, if applicable;
• other contractual adjustments; and
• amounts required to complete settlement.

The resulting figure establishes the amount payable at settlement, subject to the particular transaction and any final changes.

The buyer's solicitor and seller's solicitor ordinarily agree on the relevant settlement calculations before completion.

10. What Are Settlement Adjustments?

Settlement adjustments allocate certain property expenses or income between the buyer and seller.

The general principle is that each party should bear the relevant amounts attributable to their period of responsibility, subject to the contract.

Common adjustments include:

• council rates;
• water access and usage charges;
• body corporate levies;
• rent; and
• other relevant outgoings.

The seller is responsible for council rates up to and including settlement day, with the buyer responsible from the following day.

The actual calculations must be made under the particular contract.

11. How Are Council Rates Adjusted?

Council rates are commonly assessed for a period that extends beyond settlement.

For example, the seller may have paid a council rates account covering three months, but settlement occurs halfway through that period.

An adjustment may be required so the buyer bears the portion attributable to the period after settlement.

Alternatively, if rates remain unpaid, the settlement statement may need to account for the outstanding amount.



The treatment of unpaid amounts depends on the contract and the arrangements for payment to the relevant authority.

Example: Rates paid in advance

Assume:

The relevant consumption period and charges then need to be considered under the contract.

If the special reading occurs before settlement, the contract may require an estimated calculation for the remaining period.

Where the water authority uses tiered pricing, the applicable tariff structure can also affect the result.

A seller and buyer should not assume that dividing the latest water account by the number of days will necessarily produce the correct adjustment.

14. What if the Water Meter Reading Is Before Settlement?

A special meter reading is often obtained several days before settlement.

That creates a period between the reading date and settlement for which actual consumption may not yet be known.

Depending on the contract, the adjustment may use the consumption rate established by the available readings to estimate usage for the relevant remaining period.

For example, if 60 kL was consumed over 30 days, the average usage would be:

      60÷30=2 kL per day

If the relevant remaining period were five days, estimated consumption would be:

      2×5=10 kL2

This is an illustration of the arithmetic, not a universal Queensland contractual formula. The actual calculation must follow the contract and the water authority's applicable charges.

15. How Are Body Corporate Levies Adjusted?

For a unit or townhouse in a community titles scheme, body corporate levies may need to be adjusted at settlement.

These can include:

• administrative fund contributions;
• sinking fund contributions; and
• other amounts payable under the contract.

If the seller has paid levies for a period extending beyond settlement, an adjustment may be required.

Outstanding levies or special levies can require separate consideration.

The body corporate certificate and conveyancing searches can assist in identifying amounts relevant to the transaction.

16. What Happens if the Property Is Tenanted?

Where a property is sold subject to an existing tenancy, rent may need to be adjusted at settlement.

For example, if the tenant has paid rent in advance covering days after settlement, the buyer may be entitled to an adjustment for the relevant period.

The parties may also need to address:

• tenancy documentation;
• bond arrangements;
• rent arrears;
• property management arrangements; and
• any other matters required by the contract.

The position is different where the seller is required to provide vacant possession.

17. When Is Transfer Duty Paid?

Transfer duty, commonly called stamp duty, is an important purchasing cost.

Queensland Revenue Office explains that duty generally applies to transactions involving the purchase or transfer of Queensland land, and that duty assessment and payment are required as part of completing the transfer.

In electronic conveyancing, the assessment and payment arrangements are coordinated with the electronic settlement process.

Your solicitor will calculate or arrange assessment of the applicable duty and account for it in the funds required to complete the purchase.

See here to accessthe State Revenue Transfer Duty Estimator.

Buyers should not assume transfer duty is included in their home loan.

18. What About Registration Fees?

Registration fees are separate from transfer duty.

They relate to registration of the relevant dealings with Titles Queensland.

Depending on the transaction, fees may be payable for:

• the transfer;
• a new mortgage;
• discharge of an existing mortgage; and
• other registrable documents.

Electronic conveyancing platform fees may also apply separately from statutory registration fees.

See here to access the Titles Queensland Fee Calculator.

These amounts should be included in the buyer's or seller's settlement calculations as appropriate.

19. What Is the Buyer's Final Inspection?

A buyer will commonly arrange a final inspection shortly before settlement.

The purpose is to check the property's condition and whether the seller has complied with relevant contractual obligations.

The buyer may wish to confirm that:

• the property is in the expected condition;
• included fixtures and chattels remain;
• excluded items have been removed;
• agreed repairs have been completed;
• the property is vacant where required; and
• no unexpected damage has occurred.

If there is a problem, contact your solicitor immediately.

Do not assume that the buyer can automatically delay settlement or withhold part of the purchase price.

The available rights depend on the contract and circumstances.

20. What Does Vacant Possession Mean?

Where the contract requires vacant possession, the seller must provide possession in accordance with that obligation.

Potential problems can arise if:

• tenants remain at the property;
• another person continues occupying it;
• substantial belongings remain;
• rubbish has not been removed; or
• the seller is not ready to vacate.

Sellers should organise removalists and moving arrangements well before settlement.

If vacant possession may be difficult to provide, obtain advice early rather than waiting until settlement day.

21. What Actually Happens on Settlement Day?

In a typical electronic settlement, the following events are coordinated: