Contract
Subject to Finance
Stamp Duty
Is a Buyer eligible for a concession on stamp
duty
What does Time of the Essence mean
Tenure of Ownership
Whose Risk is the Property
at
Landlord Protection Insurance
Cooling Off Period
Body Corporate
Building and Pest Inspection
Report
Searches
Additional searches that
a buyer may consider appropriate include
Contract
The Real Estate Institute of Queensland ("REIQ")
in conjunction with the Queensland Law Society have published Contracts
adopting standard terms and conditions for most types of property
transactions. It is accepted within the real estate industry and the
legal profession that, where possible, a standard REIQ Contract will
be used.
An REIQ contact will not typically be available for new developments.
In these circumstances a contract is usually designed specifically
for that development.
Whether the contract is a 'standard' REIQ contract or one designed
for a specific development, it is recommended that before a contract
is executed, legal advice is sought.
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Subject to Finance
It is recommended that, where necessary, a contract be made conditional
upon a buyer obtaining finance to assist with the purchase of real
estate. The usual finance clause of the standard REIQ contract places
an obligation upon a buyer to take all reasonable steps to obtain
finance. It is important that buyers be aware that where a contract
is conditional upon finance approval this is not an "out" for a hesitant
buyer and that there is an overriding obligation upon a buyer to seek
finance approval.
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Stamp Duty
By law, both a seller and buyer can be held liable to the Commissioner
of Stamp Duties to pay any stamp duty that is dutiable on a contract
of sale.
However, it is usual practice in Queensland that it is the buyer's
responsibility to pay any stamp duty that may be assessed on a contract
of sale.
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Is a Buyer eligible for a concession on stamp duty
As to whether or not a buyer is eligible for a concession on stamp
duty depends upon a buyer's individual circumstances.
For example, a principal place of residence concession is available
to a buyer if it is purchasing residential property as the buyer's
principal place of residence, and
- the buyer will reside in the property within
six (6) months of acquiring it; and
- the buyer will remain in that property
for at least six (6) months.
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IF the property is the first property owned by the
buyer, then, if the purchase price of the property is $160,000 or
less, the buyer will be eligible for an even greater concession
on stamp duty.
The value of the property impacts upon the amount of any entitlement
to a concession e.g. if the price paid is greater than $160,000.00,
then a buyer will not be entitled to concession as a result of it
being the first property purchased.
This information is not to be taken as legal advice and is intended
as a guideline only. The matter of how much stamp duty a buyer will
pay will be addressed by the buyer's lawyer.
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What does Time of the Essence mean
It is usual that a contract will expressly make time of the essence.
This means that it is important that a party strictly observe all
time limits that are set down in the contract. From a buyer's point
of view, the time limits may be with respect to approval of finance,
the date for obtaining a building and termite inspection report
or the settlement date. If a buyer fails to strictly comply with
the time limits imposed in a contract then a seller has certain
rights, including the right to terminate the contract and forfeit
the deposit. It is possible that a seller may agree to extend certain
time limits if necessary. This is something that is open for negotiation
with a seller.
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Tenure of Ownership
If there is more than one buyer of the property, then the buyers
will need to decide what will be the tenure of their ownership of
the property,i.e., whether they will hold the property as joint
tenants or as tenants in common.
Joint Tenants means that if either party deceased, then the remaining
party would have the right as the surviving tenant to receive a
transfer of the deceased's share in the property. This is regardless
of any bequest made by the deceased party in a will.
In contrast, Tenants in Common means that if either party deceased,
then, the deceased's party's share would be distributed in accordance
with the deceased's Will or, if there is no Will, then in accordance
with the law. The surviving party does not have any right to the
deceased's share in the property unless provided for in the deceased's
will.
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Whose Risk is the Property at
In accordance with the standard terms and conditions of an REIQ
contract, the property is at the risk of the buyer from 5pm on the
next business day following the date of the contract. It is recommended
to buyers that they take out a cover note over the property as soon
as they have signed a contract to purchase that property.
Where a buyer is purchasing a unit or other property that is a lot
in a community titles scheme, the Body Corporate will, in most cases,
have taken out insurance to cover the full replacement cost of the
building. This insurance does not include the interior of any of
the lots in the community titles scheme.
The buyer should discuss this issue with their lawyer as soon as
a contract is executed.
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Landlord Protection Insurance
Where a property is to be used as an investment property, a
buyer should consider taking out Landlord Protection Insurance .
Depending on the policy, this type of insurance should protect a
property owner against those times when the property is vacant.
A buyer can find out more details about this type of insurance cover
from an insurance broker.
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Cooling Off Period
In Queensland, it is not standard practice that a buyer will
be given a cooling off period within which a buyer can elect to
terminate the contract. On the basis that the Property Agents and
Motor Dealers Act 2000 is given effect in July 2001, a cooling off
period will automatically apply where the contract arises out of
an unsolicited invitation (such as tele?marketing) to attend a property
information session. In those circumstances, there will be a five
(5) business day cooling off period within which a buyer has a right
absolutely to terminate a contract. In all other cases, it is a
matter that would need to be negotiated with a seller of the property
as to whether or not they would be prepared to grant a cooling off
period.
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Body Corporate
A body corporate is made up of all of the unit/lot owners in
a building complex. As a member of a body corporate, a lot owner
will have certain rights and obligations, including the right to
vote upon any decision of the body corporate.
One of the most important obligations on a lot owner is to contribute
to the costs of the body corporate. These costs typically are in
the form of regular levies.
A seller is required, by law to provide to a buyer a Disclosure
Statement, which sets out things such as -
- The amount of levies that are due and
payable to the body corporate; Particulars of the
- insurance that has been put in place by
the body corporate; and
- The unit entitlement that is allotted to
the property being purchased.
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A buyer should make sure that they are aware of
the amount of levies that they will be required to contribute before
signing the contract. It may also be appropriate for the contract
to be conditional on the buyer conducting a due diligence of the
body corporate records. These matters should be discussed with the
buyer's lawyer before the buyer signs a contract.
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Building and Pest Inspection Report
Before signing a contract, a buyer should ensure that its obligation
to purchase the property is conditional upon the buyer satisfying
itself that the property is structurally sound and is not infested
with pests. Such a condition usually will require the buyer to obtain
a building and pest inspection report
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Searches
As part of the conveyancing process the buyer's lawyer will arrange
for certain searches to be undertaken in respect of the property.
Unfortunately, there are limited circumstances where a buyer can
rely upon the results of those searches to terminate the contract,
seek compensation or have recourse to any other remedy against a
seller. It is advisable that, if a buyer has any particular concerns
about a property, then, before signing a contract, the buyer should
address those concerns with the buyer's lawyer. The lawyer can then
deal with the specific concerns by inserting a special condition
in the contract or by making other recommendations.
It is recommended that a buyer undertake the following searches
-
- Title A copy of the title to the property
should be obtained. This will confirm that the seller is
the owner of the property and will also reveal any encumbrances
that are registered on the title, such as mortgages, that
will need to be released at settlement; any easements that
benefit or burden the land; and any other dealings that
may be registered against the title.
- Plan A copy of the relevant plan will confirm
the positioning of the lot being purchased and, if the property
is a strata title property, it will also confirm any exclusive
use areas or areas that form part of the title, for example,
a storage area.
- Local Authority Rates Information
Search The information that is obtained from a search of
the local authority records will vary between each local
authority. It is usual however that the following matters
would be revealed :
* the amount of rates;
* whether the current rates are outstanding; if there
are any arrears of rates and * if there is, any interest
that may have accrued on the rates;
the history of any water meter and if there are any
water charges to be incurred. |
- Department of Transport - A Department
of Transport search will reveal if the department has any
proposal to resume any part of the land to be purchased
or any proposal to realign the road which is likely to affect
the land.
- Land Tax Department - A Land Tax Department
search will reveal if there is any land tax outstanding
with respect to the land. This is important as any land
tax that remains outstanding forms a charge against the
property, even after settlement.
- Body Corporate Records Search A thorough
investigation and compilation of a report should be undertaken
with respect to the records of the body corporate. This
will, importantly, reveal the following matters -
* any levies that are outstanding
with respect to the lot to be purchased;
* any notices or causes of action that may have been
undertaken by the body corporate against that lot;
* any proposals by the body corporate to undertake
any major repair or works to the building which is
likely to mean a special levy to lot owners;
* the amount of the sinking fund;
* any other matter that may be relevant with respect
to the lot to ensure that a buyer is fully cognisant
of the body corporate. |
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It may be appropriate that a condition of the contract
be included that entitles the buyer to satisfy themselves with respect
to the body corporate records. This is a matter that should be discussed
with a lawyer prior to signing a contract.
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Additional searches that a buyer may consider appropriate include
- Building Records Search A search of the
building records will provide details of all applications
and approvals given to construct improvements to the land.
This may be of particular relevance where any alterations
or additions have been carried out to ensure that council
requirements have been met.
- Survey Plan A Survey Plan will confirm
such things as
* whether the fences are on the true
boundaries of the property; and
* whether any structures from adjoining neighbours
encroach onto the land that is being purchased or
whether any structures on the land that is being purchased
encroaches onto the neighbours land. |
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There are other searches that it may be appropriate
to undertake depending upon the location of the property or because
of any specific concerns that a buyer may have.
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