This article provides an overview of purchasing properties in New South Wales to provide purchasers with knowledge of what to expect when buying a residential or commercial property.
If you are borrowing money to buy a house, it is prudent to ensure that you already have a loan approval prior to entering into a contract to purchase a property. The old adage “let the buyer beware” is especially relevant in purchasing a house. It is advisable to obtain a Building Inspection Report and a Pest Inspection Report prior to purchasing a house. It is not always obvious on inspection by the naked eye whether the building has structural defects or has termites or borers. Sometimes a survey is provided by the Vendor and is disclosed in the Contract for Sale. A survey is useful:
At times, a Building Compliance Certificate from the Local Council is included in the Contract for Sale. The procedure for obtaining a Building Compliance Certificate is as follows: The Council would first send a Building Inspector to inspect the property and, if the inspector has no objections, then they will issue a certificate. The certificate does not state that the building is approved by Council or complies with Council Ordinances but would state that the Council will not issue any notices to demolish or alter the building for a period of seven (7) years.
If you want to purchase an apartment, it should be noted that under the Strata Titles legislation, the Owners’ Corporation (Body Corporate) is responsible for the general upkeep of the building and the common property.
This means that you may need to pay a sum of money for communal issues even when you are not affected nor caused such issues. In this respect the Owners’ Corporation will hold records of any structural defects, repairs, expenses, major works, strata levies and other relevant information of the building.
A search of those records know as a Strata Inspection Report should be carried out by an independent inspector prior to entering into a Contract to purchase an apartment.
When you live in a strata apartment, there are many rules and regulations which occupants and owners must abide by, these rules and regulations are known as By-Laws. It is advisable to make yourself aware of the By-Laws, as some buildings even regulate things such as the type of curtains and blinds you may have. If you wish to do renovations within your apartment, it may be necessary to obtain the Owners’ Corporation’s approval first, otherwise the Owners’ Corporation’s insurances may not cover you if damage is later caused as a result of the renovations. The Owners’ Corporation can create by-laws which can confer rights of exclusive use or special privilege to particular apartment owners over certain common property.
When considering purchasing a commercial property, unless you are purchasing for your own occupation, the important consideration other than capital appreciation of the property, is the lease on the premises.
Briefly, some of the leasing details you need to check before committing to the purchase are as follows:
Buying “off the plan” means that you are purchasing even before the building has been constructed. If you plan to purchase “off the plan” you must be aware of all the risks associated with it, as you are purchasing a property without having been able to inspect and assess the finished construction. You must closely check the conditions of the contract of sale. This is better done through a lawyer’s advice.
To provide greater protection to Purchasers, Contracts entered into from 1 December 2019 come with a ten business day cooling off period (as opposed to five business days for constructed homes). Additionally, deposits and any instalments must be held in a trust account (generally by the Vendor’s selling agent) and cannot be released to the Vendor before settlement. The Purchaser’s consent is also required before a developer can end a Contract using a sunset clause, otherwise the developer will need to apply to the NSW Supreme Court to terminate the Contract.
The Vendor is required by legislation to give certain information to the Purchaser of the property prior to the Purchaser entering into the contract. This is known as Vendor Disclosure. There are many situations to which a Purchaser or Vendor may be able to rescind a contract; an example is a breach of the Vendor warranty, where the Purchaser can rescind the contract by notice in writing. It is advisable to seek legal help when deciding whether to rescind a contract. Following exchange of contract, the following steps should be taken in readiness for settlement:
The main cost of purchasing properties, apart from the price, is the transfer (stamp) duty payable to Revenue NSW. Charges payable to your lawyer would include disbursements for searches and enquiries (before exchange and after exchange of contract stage). If you are a first home buyer, you may be eligible for transfer (stamp) duty concession or exemption under the First Home Buyers Assistance Scheme.
A full exemption with no duty payable can be applied for new homes under $800,000 or existing homes under $650,000. A concessional duty rate can be applied for new homes valued between $800,000 and $1 million; and existing homes valued between $650,000 and $800,000.
The First Home Owner Grant of $10,000 can be applied for in a purchase of a “new home” valued under $600,000. A “new home” is defined as:
To be eligible for the above benefits, a Purchaser must be an Australian citizen or permanent resident and must live in the property for at least six months in the first year of purchase.
Generally only Australian citizens and Australian permanent residents can purchase residential properties in Australia. Foreign persons who want to buy urban property in Australia must first obtain the Federal Treasurer’s permission to do so. This is done by applying to the Foreign Investment Review Board (FIRB), who advises the Treasurer. For more information relating to Foreign Acquisition, please refer to Comasters’ article titled “Foreign Investments in Australia”.
© Comasters 2001. Revised July 2022.
Important: This is not advice. Clients should not act solely on the basis of the material contained in this paper. Our formal advice should be sought before acting on any aspect of the above information.
Comasters Law Firm and Notary Public is a commercial legal practice in Sydney. We conduct matters in a range of legal areas. Whilst based in Sydney, Comasters maintains close links with business people across the Asia Pacific region.