The tips, traps and legal risks – Part One
Buying property in Victoria can be a complicated process. In addition to the personal and commercial considerations, buyers must be aware of their rights and obligations. Part one of this fact sheet focuses on the buyer’s right to information, entitlements and tax implications.
1. Vendor’s Statement
Before signing the sale of contract, the vendor must provide you with a statement of matters affecting land pursuant to section 32 of the Sale of Land Act 1962. This is known as a ‘vendor’s statement’ and the purchaser's solicitor should check this against any mortgages over the property, covenants, easements, local council zoning restrictions and other important information. Failure of the seller to provide this statement can result in rescission of the contract depending on the legal implications of the failure to comply.
2. Due Diligence Checklist
Prospective purchasers must be aware of the ‘Due Diligence Checklist’. A copy of the ‘Due Diligence Checklist’ can be found on the Consumer Affairs Victoria website and is an important document that purchasers must consider before buying property. According to the checklist, many people engage a lawyer to help them understand the contract and ensure the sale goes through correctly.
3. Right to rescind the contract
As the purchaser, you have a right to rescind the contract of sale in a number of situations. For example, where the seller provides you with false information. At the same time, the right to rescind does not apply if a court finds that the seller acted honestly and reasonably. In our experience, buyers assume a right to rescission for simple breach of contract which is a dangerous assumption to make without proper legal advice.
4. Stamp duty
Purchasers of residential property must be aware of the land transfer duty (stamp duty) and the recent changes in this area. It is also important that the stamp duty figures and applicable concessions are correct to prevent costly drafting mistakes. For instance, any foreign residents wanting to buy property in Victoria must pay an additional stamp duty surcharge of 3 per cent. This applies to any contract of sale entered on or after 1 July 2015. Foreign purchasers must also take into account any fees imposed by the Federal Government to assess applications for foreign nationals to invest in the Australian residential property.
5. Land tax
Purchasers of commercial or investment properties over the $250,000 mark must pay land tax. From 1 January 2016, Victorian land that belongs to an owner that does not ordinarily reside in Australia will incur a 0.5 per cent land tax. This tax applies to individuals, corporations and absentee trusts. Owners that pay land tax, must also lodge a notice of acquisition. While these requirements may seem straightforward, any mistake or failure to comply results in hefty costs and possibly fines down the track. Therefore, it is important that purchasers obtain proper legal advice when considering investment or commercial property.
Disclaimer: This article contains general information only and is not intended to be a substitute for obtaining legal advice.