Property & Conveyancing

Topics

Buying
(Residential, Rural, Commercial, Strata, Community Title)

As a buyer (purchaser), you need to satisfy yourself that you know exactly what you're buying ... defects and all.

A defect could be as simple as a broken door handle or as serious as a lack of legal access to the property. Pest and building reports will often uncover structural issues and you may need to consider the potential cost of repairs when negotiating the final purchase price with the Agent. If you want them fixed, you may need your solicitor to negotiate special conditions that require the seller to fix those defects at the seller's expense before settlement.

If you're buying a farm or rural land, does the property have a legal right of access or is that dirt track everyone assumes is a public road actually running over the neighbour’s land? A friendly neighbour today might not mind (or even realise) but if they die tomorrow or decide to sell their land, the next owner may not want you driving across their land.

Where does the water come from? Is the water being used for stock and domestic only or is it also being used for irrigation? Is the water source actually on a neighbouring property or public land? If water is being pumped from a river or bore and the pipes cross over another property (even if only by a few meters), is there a Water Access Licence? Is there an easement?

Selling
(Residential, Rural, Commercial, Strata, Community Title)

As a seller (vendor), you are generally required to disclose information that you know about the property that a purchaser could not reasonably be expected to find out for themselves (don't stress, we'll work through these requirements with you).

When selling residential property (property less than 2.5 hectares (about 6 acres) and not commercial), a skeleton contract (usually referred to as a listing contract or marketing contract) that includes certain documents prescribed under legislation must be prepared before the Agent commences marketing the property. Once a buyer is found and you accept an offer, a full contract with additional documents and special conditions is prepared for review and signing by the parties.

If you're selling non-residential property such as a farm or business, there is no legal requirement to prepare a listing contract before the Agent commences marketing the property. That said, Agents will usually request a listing contract with all the usual searches to assist them in marketing the property. Whether you agree is really a matter for you to decide with the Agent.

Buying & Selling Simultaneously

Upsizing? Downsizing?

Buying and selling property at the same time is pretty common for existing homeowners.

Perhaps you've made an offer on your next dream home and you'll be relying on funds from the sale of your current home.

Have you considered what will happen if your sale falls over (for whatever reason) and you can't complete your purchase? You risk losing your deposit and could even be sued for further damages.

In this scenario you need your solicitor to prepare (among other things) special conditions that make your proposed purchase conditional not only on the sale of your existing property, but on completion of the sale of your property.

First Home Buyers

So your finance has been pre-approved and you've found a property you'd like to buy. That's fantastic! But what happens next?

As a first home buyer there is a lot to think about. How are you going to pay the deposit? What is the difference between pre-approval and final (unconditional) approval? What about stamp duty?

Lets say you want to purchase a home for $500,000. Stamp duty will be around $18,000 and needs to be paid within 3 months of exchanging contracts. A standard 10% deposit will be $50,000. You may be entitled to a stamp duty exemption if you satisfy the current eligibility requirements for the first home buyers assistance scheme however you will still need to have sufficient funds available for the deposit, home insurance and any shortfall on settlement (the shortfall is the difference between what the bank lends you and the final purchase price plus things like stamp duty, lenders mortgage insurance, loan establishment fees, adjustments, lodging fees and legal fees).

Unfortunately there is sometimes a mistaken belief that when a bank says they will lend you an amount close to (or equal to) the full purchase price, that you can use the loan funds to pay the deposit. Even if the total loan amount is enough to include the deposit, most banks will not release loan funds until the day of settlement whereas the deposit needs to be paid when contracts are signed and exchanged. Usually you need to pay the deposit from your own funds and (if your bank agrees) your bank may pay any surplus loan funds directly to you at the time of settlement (often to a mortgage offset account). In this situation you might consider negotiating a lower deposit (say 5%) or a deposit bond.

A deposit bond is a guarantee from a bond provider (for a fee) that, if you default on the contract, the bond provider will pay the deposit amount to the vendor (seller). A deposit bond of $50,000 is likely to cost you around $600 - $800.

Another misunderstood area is the difference between pre-approval and unconditional finance approval. See the section below for further details about finance approvals.

We can help you work out if you're eligible for a stamp duty exemption, negotiate deposit options and prepare the necessary application(s).

Finance
(Pre-approval & Unconditional Approval)

Pre-approval is where the bank assesses your income and assets and determines the maximum amount they are willing to lend you. However, pre-approval does not guarantee the amount they will actually lend you for a specific property. Once you find a property you want to buy, your lender will usually do a valuation on that property and then provide you with a loan offer specifically for that property. Bank valuations tend to be conservative and it is not uncommon to discover the bank will not lend you as much as you thought they would for a particular property.

If you're relying on finance from a lender, it is usually best to either wait until you receive an unconditional loan offer or make your offer to purchase the property subject to unconditional finance approval. Whether entering into a conditional contract with a finance clause is in your best interest really depends on your circumstances (there are strong arguments both ways). On the one hand, if you enter into a conditional contract and finance is ultimately declined, you may incur all the usual legal expenses for work done up to that point, costs for pest and building inspections and bank fees for any valuations they arranged. On the other hand, if you wait for unconditional approval before proceeding (meaning most of the legal work will not commence until your finance is unconditionally approved), you may minimise your legal costs (in the event that your finance is declined) however there is always a risk that the property could be sold to someone else while you're waiting for unconditional finance approval. Even if you pay a deposit to the Agent, there is usually nothing stopping the vendor accepting other offers until you exchange contracts.

We can work through these issues with you and negotiate special conditions in relation to your finance.

House & Land Packages
(newbuilds and off the plan)

Arguably the two most common types of house and land packages are Separate Contracts (also referred to as Split Contracts) or a Single Contract.

Separate Contracts (Split Contracts)

In this scenario, you buy the land from the property developer under a separate contract for the land (land contract) and you enter into a second separate contract with a builder to construct the home (building contract). Even though an Agent may be marketing the sale as a house and land package, they are usually acting for the property developer and merely introducing you to a builder. Whether the builder completes construction satisfactorily, on time, or at all is between you and the builder. Any disputes or claims about construction will be between you and the builder (including if the builder goes bankrupt, dies etc).

Single Contract

This is very similar to a traditional off the plan purchase. A single contract of sale includes both the land and construction. The developer carries most of the risks as the building contract is between the developer and the builder. Settlement only takes place when construction is completed. If the building works are not completed within the terms of the contract, you may be entitled to rescind the contract and get your deposit back (whereas with separate contracts you will already own the land before building works commence).

So which method is best?

This really depends on your personal circumstances. A separate building contract may carry greater risks and inconvenience however there may be a considerable saving in stamp duty (which will only apply to the land). A single contract that includes the house will attract stamp duty on the total purchase price (including the house). Stamp duty is payable within 3 months of exchange of contracts so be prepared that you may need to pay the stamp duty prior to settlement.

In either scenario, a lot can happen between exchanging contracts and construction actually commencing. Before entering into the contract, it is a good idea to do company searches on the developer and builder to identify the directors and owners and their credit ratings. Depending on what is revealed, a bankruptcy check on the directors and shareholders can help identify if there are any Court proceedings against them. And don't forget to ask the developer and builder for references from (and contact details for) purchasers who have already used their services.

Rural
(Intergenerational Transfers)

Thinking about transferring the family farm to the next generation? We can help.

If you currently own land that is used for primary production and you wish to transfer that land (or part of it) to a family member (or family members), a stamp duty exemption may be available if certain conditions are met.

Firstly, the land is used for primary production.

Secondly, you are a member of the family of the person you are transferring the property to.

Thirdly, at the time of the transfer, the land is being used for primary production in connection with a business carried on by the person you are transferring the property to or a member of that person's family.

Fourthly, the person to whom you are transferring the property will continue using the land in connection with the business after the transfer.

From a conveyancing perspective, eligible intergenerational transfers are relatively straight forward however we must stress that you should seek tax advice from your accountant or a suitably qualified financial advisor to determine whether there are any Capital Gains Tax (CGT), Income Tax or Goods and Services Tax (GST) consequences. If the land is held by a Self Managed Super Fund (SMSF) or a Company, you should also seek tax advice on any requirements to transfer the land out of those entities at market value.