The legal distinction between residential and non-residential property affects various legal and procedural aspects of a property transaction under the Conveyancing Act 1919 (NSW). Here is a brief explanation of the legal differences between both.
How the Residential vs Non-Residential Distinction Affects the Conveyancing Process
Under the Conveyancing Act 1919, property transactions are governed differently depending on whether the property is residential (e.g., homes, units, townhouses) or non-residential (e.g., commercial offices, industrial buildings, vacant commercial land). This distinction has important implications for both parties involved in the transaction.
1. Contract Structure
The structure and contents of a sale contract will vary significantly:
Residential Contracts are usually standardised, using prescribed formats (e.g., the standard Contract for the Sale and Purchase of Land used in NSW), and must include specific disclosure documents such as:
- A title search
- Zoning certificates (e.g., Section 10.7 Planning Certificate)
- Sewerage diagram
- Strata plan (if applicable)
Non-residential contracts, while subject to legal requirements, tend to be more complex and negotiable. They may include detailed clauses about:
-
Existing lease agreements
-
Permitted uses under zoning laws
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Environmental risks or contamination reports
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Outgoings like land tax and maintenance
Example:
A buyer purchasing a house in Sydney will receive a contract with mandatory certificates and diagrams, whereas someone buying a retail shop in a business district might need to negotiate terms related to tenant leases or landlord responsibilities.
2. Cooling-Off Periods
Residential Properties: Buyers are typically entitled to a 5-business-day cooling-off period after exchanging contracts (unless the sale is via auction or the buyer waives it by signing a Section 66W certificate). Buyers have time to change their minds without losing the full deposit.
- If the buyer withdraws, they usually forfeit 0.25% of the purchase price.
Non-Residential Properties: There is no statutory cooling-off period. Once contracts are exchanged, both parties are generally bound to proceed unless the contract provides otherwise.
Example:
If Lisa purchases a residential unit in Bondi and decides to back out during the cooling-off period, she'll only lose a small fee. However, if she purchases a warehouse in Alexandria, there's no such option—backing out could lead to a breach of contract.
3. Disclosure Obligations
Residential Vendors are legally required to provide certain prescribed documents and disclose known defects, easements, encumbrances, and zoning information.
- Failing to provide mandatory documents may allow the buyer to rescind the contract.
Non-residential vendors are subject to general disclosure obligations, but there's a greater emphasis on the principle of "buyer beware". Buyers must conduct more thorough due diligence.
Example:
A seller of a home must disclose any unapproved building works. In contrast, a person selling an office block isn't legally required to provide detailed planning reports unless requested—and it's up to the buyer to investigate.
4. Settlement Terms
Residential Settlements typically occur 42 days (6 weeks) after contracts are exchanged, unless otherwise agreed. This timeframe is standard across NSW and allows time for finance approval, inspections, and documentation.
Non-residential settlements may have longer or more flexible settlement periods, depending on commercial needs. Parties often negotiate the timeframe based on:
- Tenant vacating timelines
- Financing arrangements
- Commercial lease handovers
Example:
John buys a suburban home, and the standard 42-day settlement applies. Emma, who buys a café with an ongoing lease, negotiates a 90-day settlement to align with the end of the tenant's lease term.
