Buying Property in Victoria: A Practical Guide

Understanding When You Are Bound

There is no single universal moment at which a contract of sale becomes binding. Whether and when a contract exists depends on how offer and acceptance are executed and communicated, the mode of sale, and the contract terms:

• Private treaty. A contract is typically formed when both parties have signed and the signed contracts have been exchanged or otherwise communicated in accordance with their terms. Signing an offer does not, on its own, create a binding contract until the vendor accepts and acceptance is communicated as the contract contemplates.
• Auction. A contract is generally formed on the fall of the hammer, with the successful bidder required to sign the contract at that time.
• Expressions of interest and pre-contract conduct. Emails, offer forms and heads of agreement can create binding obligations depending on their wording and the parties' intention. Purchasers should treat pre-contract documents with the same care they would apply to a formal contract.

Contract Review

The standard contract of sale published jointly by the Law Institute of Victoria and the Real Estate Institute of Victoria is widely used but is frequently varied by special conditions. A contract review typically covers:

• title particulars, plan of subdivision, easements, covenants, caveats and existing mortgages;
• planning zone and overlays, planning permits, building permits and occupancy status;
• services (water, sewerage, gas, electricity, telecommunications) and what is not connected;
• chattels, inclusions and exclusions;
• settlement date, place, adjustments and default interest; and
• special conditions, including finance, building and pest, sale-of-existing-property, deposit release, GST, nomination and vendor warranties or limitations.

Vendor statements and searches are disclosure tools, not guarantees of condition, lawful use or future development. A contract review usually produces a short list of variations to seek from the vendor and identifies risks that inform whether to proceed.

Section 32 Vendor Statements

Sections 32–32K of the Sale of Land Act 1962 (Vic) require the vendor to give the purchaser a signed statement before the purchaser signs the contract, disclosing prescribed matters. The statement is a disclosure document and does not warrant the condition of the property, its lawful use, boundaries or future development.

Where a vendor supplies a statement that does not comply with sections 32A–32H, or supplies false information, the purchaser may have a right to rescind under section 32K. That right is subject to statutory requirements and exceptions — including whether the vendor acted honestly and reasonably and whether the purchaser is substantially in as good a position as if the section had been complied with — and is not a blanket right to walk away. Rescission should not be attempted without advice.

Cooling-Off

Section 31 of the Sale of Land Act 1962 (Vic) provides a three clear business day cooling-off period for many residential contracts, exercised by written notice with payment of the statutory penalty (0.2% of the purchase price or $100, whichever is greater).

Cooling-off does not apply where any of the following apply on the facts:

• the contract is made at a publicly advertised auction, or within three clear business days before or after such an auction;
• the purchaser is or is acting on behalf of a body corporate;
• the purchaser is an estate agent or a corporate body of which an estate agent is an officer;
• the land exceeds 20 hectares and is used primarily for farming; or
• the purchaser has previously signed a contract for the sale of the same land in substantially the same terms.

Whether cooling-off is available in a given case turns on the facts and should be confirmed before service of any notice.

Finance

There is no automatic finance condition. A finance condition only exists if the contract expressly contains one, and it usually specifies the lender, loan amount and date by which unconditional approval must be obtained. If approval is not obtained by that date and the contract requires it, the purchaser must give written notice strictly in accordance with the contract to end the contract; missing the notice deadline can convert a conditional contract into an unconditional one.

Pre-approval is not unconditional approval. Final approval remains subject to valuation of the specific property, updated serviceability assessment, lender policy and, if the deposit is below 20%, lenders mortgage insurance. Purchasers should not assume any particular loan-to-value ratio or timeframe for final approval.

Deposit

The deposit amount, timing, form (cash, bank guarantee or deposit bond) and where it is held are contractual and negotiable. There is no universal 10% rule.

Release of the deposit to the vendor before settlement is governed by section 27 of the Sale of Land Act 1962 (Vic). The vendor must serve a statement in the prescribed form with supporting evidence about any mortgage or caveat against the land, and the deposit is not released until 28 days have passed without the purchaser lodging a valid objection, or any objection has been resolved. Release is not automatic and is not always in the purchaser's interest — particularly where mortgages, caveats or unpaid rates suggest the vendor's equity is uncertain.

Building and Pest

Whether a purchaser can inspect the property before signing or between signing and settlement depends on the contract and any access rights the vendor grants. Building and pest inspection conditions are not standard and only exist if drafted in.

Inspection reports are limited by their scope and by the non-invasive nature of visual inspections; they do not guarantee the absence of latent defects. Purchasers wanting greater protection should consider more detailed inspections and contract conditions that address the risk.

Owners Corporation

Where the property is a lot on a plan of subdivision affected by an owners corporation, the vendor statement must include an owners corporation certificate under the Owners Corporations Act 2006 (Vic) and the section 32 regime. The certificate typically discloses fees, insurance, the current maintenance plan and fund, any special levies, and known defects or disputes.

The certificate is not a condition warranty. Purchasers should read the rules, the most recent statements and minutes, and any maintenance plan carefully. Building defects, planned works and levy exposure can materially affect the financial position after purchase.

Planning and Building

Planning permits (under the Planning and Environment Act 1987 (Vic)) and building permits and occupancy permits (under the Building Act 1993 (Vic)) are distinct approvals. A property may have a planning permit for a use or development without a corresponding building permit or occupancy permit, or may contain works carried out without permits.

Council records should be reviewed for any orders, notices or non-compliance. Future development is not guaranteed — any redevelopment will require its own approvals against the planning scheme and building regulations in force at the time.

Settlement, Risk, Insurance and Possession

Settlement is the day the balance of the purchase price is paid and the transfer is registered in the purchaser's name. Most Victorian residential settlements occur electronically on PEXA between the parties' lawyers, the incoming and outgoing lenders, and Land Use Victoria.

The passing of risk, entitlement to possession, and responsibility for insurance are governed by the contract terms and, in some respects, statute. General condition provisions in the standard contract commonly allocate risk in a particular way, but that allocation can be varied by special condition. Prudent purchasers arrange insurance from the earliest point at which they may bear risk under the contract, without relying on the vendor's cover.

The lead-up to settlement typically involves:

• completing pre-settlement enquiries with the council, water authority and owners corporation;
• preparing a statement of adjustments for rates, water and owners corporation fees;
• signing transfer documents and verifying identity for PEXA;
• a pre-settlement inspection; and
• the lender being ready to draw down on the day.

Land Transfer Duty and Concessions

Land transfer duty is levied under the Duties Act 2000 (Vic) on the greater of the price and market value of the property, on a sliding scale. A number of concessions and exemptions may reduce or eliminate the duty payable, including:

• the principal-place-of-residence concession;
• the first home buyer duty exemption or concession for eligible purchases below prescribed thresholds;
• the pensioner concession or exemption;
• the off-the-plan concession, which for a temporary period applies more broadly to residential dwellings; and
• family farm and other targeted exemptions.

Eligibility criteria and thresholds are subject to change. The current position should be confirmed with the State Revenue Office or a lawyer before signing, and eligibility should never be assumed.

Foreign Purchasers

Two separate regimes apply to foreign purchasers:

• Victorian state duty and land tax. Foreign purchasers of residential property are generally liable for the foreign purchaser additional duty under the Duties Act 2000 (Vic) and, if they hold the land at 31 December each year, the absentee owner surcharge under the Land Tax Act 2005 (Vic).
• Federal FIRB approval. Under the Foreign Acquisitions and Takeovers Act 1975 (Cth) and related regulations, foreign persons generally require prior approval from the Treasurer, administered by the Foreign Investment Review Board, before acquiring an interest in Australian residential land.

Whether a person is a foreign purchaser and whether FIRB approval is required turn on citizenship, residence, visa status and entity structure. Specific advice is essential before signing.

Land Tax Adjustments

Section 10G of the Sale of Land Act 1962 (Vic) prohibits contracts of sale of land below a prescribed price threshold from requiring the purchaser to pay or reimburse the vendor's land tax. Contracts above the threshold, and certain non-residential contracts, sit outside the prohibition on their own terms. The threshold is subject to indexation.

Land tax is distinct from the absentee owner surcharge, the vacant residential land tax and the windfall gains tax under the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Act 2021 (Vic), each of which has its own liability and adjustment rules.

Nomination and Substitution of Purchaser

Whether a purchaser can nominate a substitute or additional purchaser depends on the contract. Nomination is not universally free of duty consequences. Under the Duties Act 2000 (Vic), nominations can attract additional or double duty in circumstances involving land development after the contract date, or where the substituted purchaser is not a related party in the required way. Advice should be obtained before nominating.

Off-the-Plan Purchases

Off-the-plan contracts have their own risks and protections:

• disclosure obligations for plans, specifications and changes to them;
• sunset clauses and, under the Sale of Land Act 1962 (Vic), statutory limits on a vendor's ability to rescind under a sunset clause without the purchaser's written consent or Supreme Court permission;
• deposit protections, with deposits generally required to be held in trust;
• registration of plan, issue of title and readiness for occupation; and
• the temporary off-the-plan duty concession, which for a time expanded eligibility for the off-the-plan concession to a broader range of buyers of dwellings on a plan of subdivision. Dates and eligibility should be checked against current State Revenue Office guidance before assuming the concession applies.

Auction Purchases

Auction purchases are subject to important limits. Contracts formed at a publicly advertised auction, or within three clear business days before or after such an auction, are excluded from the section 31 cooling-off right. Finance and inspection conditions are not automatic and rarely accepted by vendors before an auction.

All pre-purchase due diligence — contract review, section 32 review, inspections, finance and deposit arrangements — needs to be completed before bidding. Our companion guide on buying property at auction in Victoria addresses this in detail.

Default and Remedies

The consequences of default — including default interest, rescission notices, forfeiture of deposit, resale of the property and claims for damages — are governed by the contract, statute and, in some respects, equitable relief. Outcomes are not automatic. In particular, a purchaser at risk of default should obtain advice before missing settlement or issuing any notice, as steps taken or omitted at that stage can significantly affect the available remedies on both sides.

Common Mistakes to Avoid

• Signing or bidding without legal review. Once a contract is on foot, options narrow. Contracts subject to auction exclusions cannot be cooled off.
• Assuming cooling-off applies. The statutory exclusions are wider than many purchasers expect.
• Treating pre-approval as final approval. Pre-approval does not oblige the lender to fund the specific property.
• Overlooking the section 27 deposit release regime. Objection rights exist for a reason, particularly where the vendor's equity is uncertain.
• Ignoring the owners corporation information. Special levies, planned works and disputes can materially affect the financial position after settlement.
• Underestimating duty and surcharges. Concessions, the foreign purchaser additional duty and the absentee owner surcharge can each move the figure materially.
• Choosing an ownership structure without advice. Joint tenancy, tenancy in common, partnership, company and trust holdings have different legal, taxation and succession consequences.

When to Get Legal Advice

Legal advice is most valuable before signing or bidding — when the contract can still be varied and the purchaser can still decide whether to proceed. A pre-purchase legal review generally addresses the section 32 statement, the contract, any special conditions, cooling-off, finance, deposit release, adjustments and settlement risks in context.

For sellers, see our companion guide on selling property in Victoria, and for property issues arising from separation, our article on caveats over property after separation.

Buyers should also be aware of ongoing State Revenue Office obligations once a property is acquired — particularly the Victorian absentee owner land tax surcharge for buyers who spend time overseas — and, where the property is part of an owners corporation, the issues covered in our guide to owners corporation disputes in Victoria.

Frequently Asked Questions