Planning to purchase a property?  Be aware on Tips and Traps

Purchasing a property is a significant milestone, marking a major financial investment and a new chapter in personal growth. However, navigating the complex buying process can be daunting, especially for first-time buyers.

Properties can be broadly classified into two main categories;

1. Residential properties are real estate properties purchased for living (residential) purposes.  It can be a property for a Primary resident (owner-occupied homes), secondary residences ( Vacation homes), or rental properties ( income-generating properties)
2. Investment properties are defined as real estate that is purchased to earn a benefit on the said investment either through rental income, future resale of the property, or both. They can be Commercial properties (office, retail spaces, warehouse), industrial properties (factories, manufacturing facilities), Agricultural properties (farmlands), rental properties (apartments, condos), Real estate investment Trusts, etc.

The laws that apply to a property purchase vary based on the location, type of property, and other factors. However, we would like to list some common laws that may apply when you purchase a property in Victoria, Australia.

1. Property Law – governs property rights, ownerships, and transactions and regulates land transfers, registrations, land titling & registrations, sales, and conveyancing process. Further respective laws govern and regulate Owners Corporations and Strata schemes, residential tenancies, and property-related disputes.
2. Contract Law- It regulates sale /purchase agreements, Contracts of Sales, Deeds of family arrangements, etc.
3. Planning and Environmental Law – It regulates Planning zones, usage of particular lands, property developments, and maintenance.
4. Tax law- There are various taxes applicable for the properties including but not limited to Land tax, GST, Capital Gain withholding Tax (CGT), Foreign resident withholding tax, and other relevant taxes, based on the nature and amount of the investment.
5. Estate Administration Law- This will be applicable when the property owner passes away or becomes incompetent, in Bankruptcy, or when the property is held in a Trust.

Here’s the comprehensive checklist of things to consider when you purchase a property;

• Location – if it’s a residential purpose, consider its proximity to work, schools, public transport and amenities, safety, and quality of the neighbourhood. You must consider Zonings and land-use regulations for any purpose.
• Property Type – Single dwelling, Townhouse, apartment, farmhouse, etc.. and age and overall condition of the property
• Legal Considerations- This includes but is not limited to the Title search, Insurance, Contract terms and contingencies, Local laws and regulations, Covenants, Caveats, Easements etc.
• Physical inspection- Physical inspection of a property is very crucial, before signing the COS, and at least 7 days before the settlement. you must inspect the condition of the property (foundation, roof, plumbing, and electrical), environmental concerns including pests, mould, and asbestos, and any required repairs or renovations.
•  Re-sale Value – It is worth considering future price forecasts and the desirability of the location and property type.
• Stamp duty concessions – Stamp duty concessions will save you money if you are eligible. Victorian government has introduced various duty concessions for Citizens and PR holders. (First Home Buyers, Pensioners, and Regional buyers may be eligible based on their circumstances, property price and nature of the property)

Furthermore, you must be aware of the associated costs of the investment. It is never limited to the property price and consists of various additional costs including the following, based on the nature of the property and your financial status;

• Property price
• Stamp duty (based on State Revenue Office assessment)
• Transfer fees payable to the respective Land Registry (Vary on the property value and applicable concessions)
• Applicable taxes,
• Professional fees (Conveyancers or Legal Practitioners)
• Disbursements – to apply various property certificates and utility certificates, PEXA fees, ASIC fees, PPSR search fees, Company search fees, etc.
• Owners corporation / Strata schemes fees (if applicable)
• Foreign purchasers are subject to additional stamp duty and taxes
• Relevant costs if obtaining a loan (Insurance fees, Professional fees to obtain a solicitor certificate, bank fees, loan charges, interests, etc.)
• Other costs (clearance certificates, building and pest inspection fees, lost title application cots, etc.)

Recommendations

1. Consult a legal practitioner or Conveyancer before you pay or sign any legally binding documents/Contracts.

2. It is always a good idea to discuss with your Accountant, and or tax adviser before investing for a property.

3. Physical inspection is crucial sometimes, before signing the Contract of Sale, and before the settlement.