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Settlement Fees Have Changed

New Regulations With Regard to Conveyancing Fees!

abode-987096_1920On 3 February 2016, the legislative requirement for the maximum scale of fees was revoked. Settlement agents are now able to set their own fees for transactions which occur after this date.

All fees for settlement services must be disclosed to the client in writing prior to entering into any agreement.  Agents must not receive a fee above the disclosed amount unless there is a significant change in the scope of the work.

Removing the cap and deregulating fees will allow service providers greater flexibility to cater for the differing needs of their clients and the varying complexity of work involved.

As with any other purchase, consumers should do their homework and shop around for the best deal to suit their circumstances before engaging an agent.

Costs disclosure

Prior to being appointed to act by the client, settlement agents are now required to provide their client with a costs disclosure which sets out the maximum amount the settlement agent can charge for their services.  This amount must include all fees, commissions, charges and general office disbursements (eg photocopying, postage, stationery, telephone calls, facsimiles, courier costs etc) that the settlement agent will charge the client for their settlement transaction.

The settlement agent will not be entitled to receive payment for a service that exceeds the amount disclosed to the client unless:

  • There is an unforseen, significant change in the scope of work required to provide the service; and
  • The settlement agent informs the client in writing of the change; and
  • The client agrees to the licensee continuing to provide the service; and
  • The additional amount is reasonable in the circumstances.

Statutory and other costs

The maximum amount disclosed to the client must not include statutory or other costs payable by the settlement agent on the client’s behalf.  These costs include:

  • Transfer duty (previously known as ‘stamp duty’)
  • Any other tax, duty, fee, levy or charge;
  • Fees payable to bank and other financial institutions; or
  • Commissions charged by a real estate agent, developer or any other third party.

It is considered good business practice for settlement agents to provide clients with details of these costs even though these statutory costs are not required to be included in the maximum amount disclosed to their client .

Clients should ask about these additional charges, if they have not been disclosed upfront, so that they are fully informed of the total cost of their settlement transaction.

In particular, transfer duty can be a significant cost in addition to the purchase price. It is advisable to calculate the duty on a property so you can make sure you have sufficient funds to pay it prior to settlement. If you are a first home buyer you may be eligible for a reduced duty rate. Further information about the first home owner grant is available on the State Revenue website.

When does the Remuneration Schedule still apply?

If a contract was entered into before 3 February 2016 the maximum remuneration schedule still applies. The maximum remuneration schedule outlined the maximum amount of fees a settlement agent was able to charge for services. Some of these fees were established on an hourly rate.

Professional indemnity insurance and disbursements

It is the department’s view that professional indemnity insurance is not a disbursement and a proportion of the insurance premium should not be charged to clients as a disbursement for their transaction.

PEXA Fees

Those settlement agents who use the Property Exchange Australia LTD’s (PEXA) version of the national electronic conveyancing system should factor in general PEXA user fees, as administrative overheads, into the maximum service amount they disclose to the client.

Transition period

Whilst fee deregulation and the new cost disclosure requirements commence on 3 February 2016, the Department will allow the industry three months to adjust to and comply with the changes

Helpful agencies

Information about stamp duty is available from the Office of State Revenue. Information about transfer fees is available from Landgate.

 

Still unsure about what this means for you and your new home? Contact Sue on 9239 0101 or 1300 SETTLE for our competitive quotes.

 

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