Buying Property in Victoria By Andrew Lord

Index Chapter 1 – Introduction Chapter 2 – Legal Procedures 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11

Vendor’s Statement Contract Note When is the Contract made? Cooling-off period Deposit Moneys Date of Settlement Transfer of Services/Collection of Keys Apportionment of Rates and Taxes Legal Costs and Disbursements Check Title Search Caveats

Chapter 3 – Insurance Chapter 4 – Matters Relating to Title 4.1 4.2 4.3 4.4 4.5 4.6

Concept of Title Requisitions on Title Joint Ownership Survey Easements Restrictive Covenants

Chapter 5 – Physical Aspects 5.1 5.2 5.3 5.4 5.5 5.6 5.7

Availability and Location of Services State of Repair of Buildings Condition of Property Furniture, etc., included in Sale Other Enquiries Inspection prior to Settlement Check List/Moving Tips

Chapter 6 – Use and Development of the Property 6.1 6.2 6.3 6.4 6.5

Town Planning Legislation Building Approvals House Builders’ Liability Provisions of the Local Government Act 1958 and House Contracts Guarantee Act 1987 Historic Building Register Environment Protection Act 19706.6

6.7 6.8 6.9 6.10

Rating of Properties Formerly Used for Charitable Purposes or Properties With Urban Farm Land or Farm Land Partial Rate Exemptions Oral Conditions State Land Tax Fencing Rural Properties

Chapter 7 – Foreign Investment Review Board

© Andrew Lord 2010 This document is Copyright. Subject to the Copyright Act, no part of the document may in any form or by any means (electronic, mechanical, recording, copying or otherwise) be reproduced or transmitted without the prior written consent of the author. Enquiries should be addressed to: Andrew Lord c/o- Lord Commercial Lawyers, Level 2/405 Little Bourke Street, Melbourne Victoria 3000 Australia

About The Author Andrew Lord is a Director of Lord Commercial Lawyers. He has over 20 years experience as a commercial lawyer. He is an expert on property, leasing, sale and purchase agreements, corporate governance and intellectual property. To find out more about Andrew log onto our website at www.lordlaw.com.au.

Chapter 1 – Introduction This memorandum has been prepared for the information of clients who are purchasers of residential property in Victoria. It is necessarily written in general terms, and specific advice should be sought on any particular question that arises. The memorandum deals with the following: (1)

Legal procedures.

(2)

Insurance.

(3)

Matters relating to title.

(4)

Physical aspects.

(5)

Use and development of the property.

Chapter 2 – Legal Procedures 2.1

Vendor’s Statement

Whilst we shall investigate the vendor’s title and obtain the usual rating and planning certificates from the relevant authorities, a preliminary safeguard is given to all purchasers of land by the statutory requirement that a vendor must give to a purchaser before he enters into the contract, a statement (called a Vendor’s Statement or Section 32 Statement). The Vendor’s Statement must contain information including mortgages, easements or covenants, planning or zoning restrictions, amount of rates, taxes, charges and other similar outgoings (including interest thereon), particulars of any building approval granted in the last 7 years, particulars of any notice, order, declaration or report or approved proposal affecting the land, a list of services available to the property, whether the services have been connected, the name of the authority providing the service and particulars of any quarantine order or order made under the Stock Diseases Act 1968. In addition, a copy of the certificate of title or other evidence of the vendor’s right of power to sell the land must be annexed to the Vendor’s Statement. If the Vendor supplies false information to your detriment, you may be entitled to rescind the Contract at any time before becoming entitled to possession or the receipt of rents and profits. The information contained in a Vendor’s Statement is meant to operate as a preliminary safeguard to you in ascertaining the nature of the vendor’s title to the land. However it can also be very dangerous, for you may be notified of matters which are to your detriment and following execution of the Vendor’s Statement and Contract you are bound to complete the purchase notwithstanding you may not understand the Statement. It is therefore preferable that we are provided with the Vendor’s Statement and Contract prior to their execution. It is also prudent to carry out the usual searches at the Land Titles Office and make applications to the relevant authorities for certificates relating to rates and planning to ensure that the information supplied by the vendor is complete and accurate. 2.2

Contract Note

A Contract Note can be and usually is a binding and enforceable Contract. You should not sign one or in any way bind yourself to purchase a property until we have conducted important pre-contract enquiries on your behalf. If the Contract Note, or any other Contract, is only signed by you and not by the vendor or vendor’s legally appointed agent, it is merely an offer and normally can be withdrawn at any time prior to the vendor’s acceptance of that offer. If you wish to exercise this right then please inform us immediately. You should always obtain from the vendor or his agent a copy of the Contract Note signed by the vendor (and not merely by you) so that you may ascertain, if necessary with our assistance, whether there is a binding Contract. Notwithstanding the protection offered by the Vendor’s Statement to a purchaser, in our view various enquiries should be made on your behalf before you become legally bound. Unfortunately these presently take approximately 2-3 weeks. It often occurs that the vendor or his agent threatens to sell to another person before

necessary enquiries can be completed by us or even before we are instructed in respect of the purchase. In that situation if the cooling off period referred to below does not apply, you must decide whether or not to take the risk of being bound by a Contract prematurely in order to avoid losing the property. If the agent brings pressure to bear and you are prepared to accept the risk, a Contract Note may be signed containing conditions making the purchase conditional on your solicitors approving the vendor’s title and the property being in an area zoned residential by the planning authorities. We would recommend that such conditions be inserted. Of course the Contract Note or Contract should contain all the other conditions upon which you desire to rely e.g. obtaining finance through the lending institution of your choice or the sale of your present home or receiving a satisfactory architect’s report on the state of any building erected on the property. If the Contract Note has been signed, it is important that we be informed promptly, as requisitions (enquiries) on title should be delivered to the vendor or his solicitors within 21 days of the date of the Contract date. You should also instruct us whether you wish to have a caveat lodged to protect your interest in the land until the sale is settled and you take title to the property. We recommend that a caveat should be lodged. 2.3

When is a Contract made?

Whether or not the parties sign a Contract Note, often (but not always) a formal Contract is prepared by the vendor’s solicitor. The formal Contract sets out more fully various provisions incorporated by preference to a Contract Note. It is the prerogative of the vendor to require a purchaser to execute a formal Contract where a Contract Note has been prepared. The formal Contract should embody the terms of the Contract Note (if there is one) and in any event should set out the terms of the agreement reached between the vendor and you. Throughout this memorandum, the word “Contract” includes a Contract Note and any legally binding informal arrangements. Contracts are said to be “exchanged” when the purchaser or his solicitor exchanges a copy of the Contract signed by the purchaser for an identical copy signed by the vendor. Upon exchange being completed, the Contract is made or comes into force. Before then, neither the purchaser or the vendor is legally bound, unless he or she has signed a Contract or some other sale document which is legally binding upon him or there has been some part performance of the Contract. If difficulties occur in this area then we shall advise you of the legal situation. 2.4

Cooling-off period

There is a statutory cooling-off period in relation to a Contract for the sale of “land and chattels” (excluding land used primarily for industrial or commercial purposes, land which is more than 20 hectares in area and which is used primarily for farming) at a price not exceeding $250,000.00. Every Contract for the sale of such land must contain a note advising the purchaser that the purchaser may at any time before the expiration of three clear business days after the purchaser has signed the Contract give notice to the vendor that the purchaser wishes to terminate the Contract. Where the prescribed form of notice is given to the vendor, the Contract is terminated and all moneys paid by the purchaser are to be refunded to the purchaser except for the sum of $100.00 or 0.2% of the purchaser price (whichever is the greater) which may be retained by the vendor. Failure on the part of the vendor to bring to the notice of the purchaser the right to terminate the Contract will empower the purchaser to terminate the Contract before the purchaser

becomes entitled to possession or to the receipt of rents and profits. There are, however, a number of exceptions to the application of the cooling-off period: • A sale at or within three clear business days of a publicly advertised auction; • Where the purchaser is an estate agent; • Where the purchaser is a body corporate; • Where the purchaser has received independent advice from a solicitor before signing

the Contract – the nature of the independent advice required is not clear; and • Where the vendor and purchaser have entered into an earlier Contract in substantially

the same terms. If you wish to withdraw from the Contract please let us know as soon as possible within the allotted time for cooling-off. 2.5

Deposit Moneys

The Sale of Land Act 1962 (“the Act”) requires the following arrangements to be carried out in relation to deposit moneys: (a)

Where the deposit moneys are received by the vendor – The deposit must be paid by the vendor, within seven days after receipt, into a special purpose bank account in a bank in Victoria nominated by the vendor, in the joint names of the purchaser and the vendor. Generally, except where there has been a default, an account established by this means may be drawn upon only with the signature of both the vendor and the purchaser, or the personal representatives of the vendor and the purchaser.

(b)

Where the deposit is received by the vendor’s agent or solicitor – The deposit moneys are held by the agent or solicitor as stakeholder. That is, the moneys are held by the agent or solicitor pending the outcome of one of four events listed in paragraph (c) below and until one of those events occurs neither the vendor nor the purchaser may call upon or receive the moneys.

(c)

Release of the deposit moneys – The deposit moneys may be released to the vendor or as the vendor directs – (i)

in the case of a cash transaction, when the purchaser becomes entitled to a transfer of the property into his name (e.g. at settlement);

(ii)

in the case of a terms contract, the purchaser becomes entitled to possession of the property or to the receipt of rents and profits;

(iii)

if either party defaults then the deposit moneys generally will be delivered to the party not in default; or

(iv)

by the purchaser authorising or being deemed to have authorised the solicitor or agent to release those deposit moneys to the vendor or as the vendor directs.

You can only give the authorisation referred to in sub-paragraph (iv) above after the vendor has given you particulars in writing of – (A)

any mortgage over the property being sold including financial details of the amount outstanding, the interest rate, whether the vendor is in default and whether the mortgage lender has consented to you assuming the vendor’s obligations; and

(B)

any caveat lodged in respect of the land.

In addition, the Contract must not be subject to any condition enuring for your benefit; (e.g. the Contract being subject to your obtaining finance) and you must have accepted title or be deemed to have accepted title which normally occurs after our enquiries are complete and requisitions on title have been satisfactorily answered. After these steps have been taken, you must signify in writing that you are satisfied with the particulars given by the vendor and that the particulars in relation to any mortgage reveal that the purchase price is sufficient to discharge the mortgage or mortgages over the property. Your statement should be given within 28 days of receipt of the particulars from the vendor. If you have not given notice in writing of – (A)

(B)

any mortgage over the property being sold including financial details of the amount outstanding, the interest rate, whether the vendor is in default and whether the mortgage lender has consented to you assuming the vendor’s obligations ; and any caveat lodged in respect of the land.

In addition the Contract must not be subject to any condition enuring for your benefit (e.g. the Contract being subject to your obtaining finance) and you must have accepted title or be deemed to have accepted title which normally occurs after our enquiries are complete and requisitions on title have been satisfactorily answered. After these steps have been taken, you must signify in writing that you are satisfied with the particulars given by the vendor and that the particulars in relation to any mortgage reveal that the purchase price is sufficient to discharge the mortgage or mortgages over the property. Your statement should be given within 28 days of receipt of the particulars from the vendor. If you have not given notice in writing within that time and have failed to notify the vendor that you are not satisfied with the particulars and the reasons why you are not satisfied, then the Act deems that you are so satisfied, and the deposit moneys can be released after the 28 day period has expired. 2.6

Date of Settlement

Where there is a cash sale, the purchase is completed and the matter “settled” when the vendor hands over the title documents and keys to the property being purchased in exchange for the balance of the purchase moneys. Where the sale is subject to a lease, when the vendor hands over the title documents and the purchaser receives the keys or the

rent from that date. Where a purchaser is buying on terms, preliminary settlement takes place when a purchaser is entitled to possession of and keys to the property (normally on payment of the balance of deposit moneys). Final settlement is effected upon payment by the purchaser of the residue of purchase moneys, and in return the purchaser receives the title documents to the property. If the whole or part of the price is being supplied by you it is necessary for a bank cheque or a personal cheque to be received by us in time for the proceeds of the cheque to be collected by our bankers. Please note that, depending on the location of the branch of the bank at which you operate your account, personal cheques can take 5-10 days to be cleared. Alternatively, you may present to us a bank cheque or cheques for the relevant amount on or immediately prior to settlement. The date of settlement is fixed by the Contract, but may be varied by agreement between the parties. The most common periods are 30, 60 or 90 days between exchange of Contracts and settlement. It is possible that settlement will be delayed by the vendor. A purchaser’s ultimate remedy then is to rescind the Contract, which he would rarely want to do, or sue for specific performance of the Contract and for damages. If this situation should develop then we shall advise you on the courses of action which are available to you. If the purchaser delays settlement, the vendor has similar remedies available to him, but in any event he will be entitled to demand interest on the overdue moneys in accordance with the terms of the Contract or the Contract Note. If you are anxious to settle your purchase and to take possession by a certain date (e.g. because you have to give up possession of your previous home), you should instruct us clearly on this before you become bound to purchase under any Contract. 2.7

Transfer of Services/Collection of Keys

The vendor and purchaser should themselves arrange for the transfer of gas, electricity and telephone services. Meters should be read on the day of settlement. You are entitled to the keys to the property at settlement and these are normally collected from the vendor’s agent or arrangements are made with the vendor direct. If you require us to collect keys at settlement, please advise. You may consider it appropriate to change the locks following settlement. 2.8

Apportionment of Rates and Taxes

Usually rates and taxes will be apportioned, pursuant to the Contact, as at the date of settlement. This means that the vendor pays a share of the rates and taxes calculated up to the date of settlement (e.g. the vendor pays the rates and taxes for the period until the purchaser becomes entitled to possession) and the purchaser pays his share of the rates and taxes in respect of the balance of the respective assessment periods. Immediately following settlement the purchaser is required to pay all current municipal rates and charges. If you are a pensioner you may be entitled to a reduction in rates in future years and you should contact the rating authority.

2.9

Legal Costs and Disbursements

The largest expense for a purchaser is normally stamp duty, which is a tax on the transfer of land instrument, the document which formally transfers title of the property to the purchaser, and is payable to the State Government. Stamp duty is payable on the value of the land and the chattels which is generally the total Contract price. The Commissioner of State Revenue will require a statutory declaration from the vendor before the transfer will be stamped setting out the total sale price and stating that the amount represents the true value of the property and chattels. There are various Government rebates and/or benefits (both Commonwealth and State) available to “first home buyers”. The eligibility for, and extent of, these rebates and benefits has been frequently varied. If the value of the house and land is less than $111,000 and if you believe you may be entitled to one or more of the rebates and benefits, please discuss the question with us and we will be pleased to advise you further. Normally these rebates and/or benefits are only available after you have purchased the property and have paid the total purchase price and Government fees. Further disbursements, other than stamp duty, will include the cost of title searches, enquiries made with public authorities and the fees to register your interest in the land at the Land Titles Office. Where a mortgage is involved, it is a normal requirement that the legal costs and disbursements of the mortgagee (lender) be paid by the mortgagor (borrower). 2.10 Check Title Search Prior to the date upon which you and the vendor have agreed to settle this transaction (see paragraph 6 above) we will attempt to conduct a check title search of the title to the property you are buying. A check title search is to ensure that there have been no documents lodged at the Land Titles Office relating to the title (e.g. a caveat, a mortgage or an instrument of transfer) which will adversely affect your interest in the property. If a check search is not completed we shall inform and advise you further. 2.11 Caveats We have suggested that a caveat should be lodged with the Registrar of Titles as soon as possible. A caveat is a direction to the Registrar of Titles forbidding him from registering any dealing affecting the property without first notifying you of that dealing and giving you an opportunity (to be exercised within 30 days of the notice being given) to contest that dealing in a court of law. The courts have held that you may lose or have your interest in the property postponed to another (such as a subsequent purchaser or a mortgagee) unless you lodge a caveat.

Chapter 3 – Insurance It is, in our opinion, important that you have adequate insurance cover. If, prior to settlement of a cash Contract or preliminary settlement of a terms Contract, a dwelling-house is so destroyed as to be unfit for occupation as a dwelling-house, the purchaser may rescind the Contract by notice in writing to the vendor of the vendor’s solicitor within fourteen days after the purchaser becomes aware of the destruction or of damage to the house. However, this will not assist the purchaser where the damage is not sufficient to render the house unfit for occupation as a dwelling-house and the purchaser may, in those circumstances, remain obliged to pay the whole purchase price notwithstanding the damage. In addition, between the making of a Contract for the sale of land and the purchaser becoming entitled to possession or receipt of the rents and profits (i.e. settlement of a cash Contract or preliminary settlement of a terms Contract) any policy of insurance maintained by the vendor in respect of damage or destruction to the land and improvements sold shall, to the extent the purchaser is not entitled to the benefit of any other policy of insurance, enure for the benefit of the purchaser as well as for the vendor. However, this will not assist a purchaser if – (a)

the insurer can establish that a prudent insurer would not have insured the purchaser against the risk covered by the policy;

(b)

the vendor has not insured; or

(c)

the vendor’s insurance is inadequate.

For these reasons, we recommend that you obtain your own insurance cover immediately upon entering into the Contract. The cover should be in your name as purchaser and the vendor as owner. If both names are not placed on the insurance policy and the improvements are destroyed prior to settlement then you risk the insurance company disallowing the claim. The policy should be in your sole name after settlement or, if you mortgage the property, that of you and your mortgagee/lender. We suggest you ask the proposed lender to advise its insurance requirements.

Chapter 4 – Matters Relating to Title 4.1

Concept of Title

The concept of “title” is basic to all property transactions. It is our responsibility to investigate the title offered to ensure that you obtain the title the vendor has contracted to sell. A good title should afford protection against any interference to the property other than as a result of the encumbrances you have contracted to accept. However, a number of authorities created by Acts of Parliament (e.g. Vic Roads, Melbourne Water, State Electricity Commission, Gas & Fuel Corporation) have power to resume land compulsorily or to acquire limited rights over it (known as “easements” – see (5) below) despite the wishes of the owner, but subject to the payment of compensation in most cases. 4.2

Requisitions on Title

As a purchaser you have the right to make requisitions on title in respect of the property and in respect of the particulars included in the relevant Contract. Requisitions are demands and enquiries addressed by a purchaser to a vendor in relation to some specific matter arising out of or some objection taken to the title to the property. Enquiries are made of the vendor in connection with matters which will affect the title but which may only be known to the vendor. Under the usual Contract, these must be delivered within 21 days after the day of sale. One of the usual questions relates to Section 42 of the Transfer of Land Act 1958. This section lists those matters which will still affect the title to the property after it has been purchased by you. Even if no express reference is made to those matters in the Transfer of Land, the Contract or on the Certificate of Title. These matters are: (a)

The reservations, exceptions, conditions and powers (if any) contained in the Crown grant of the land;

(b)

The rights subsisting under any adverse possession of the land;

(c)

Any public rights-of-way;

(d)

Any easements howsoever acquired subsisting over or upon or affecting the land;

(e)

The interest of a tenant in possession of the land;

(f)

Any unpaid land tax, and also any unpaid rates and other charges.

The Contract normally provides that a purchaser will buy subject to the restrictions referred to in paragraph (a). In relation to paragraph (b) a person holds land adversely to the owner of that land if the occupation is inconsistent with the rights of the true owner and if a person exercises acts of ownership in respect of the property without the permission or consent of the owner. For example, a person who, without the authority of the owner, takes possession of land and

treats it as their own or where boundary fences have been placed not upon the actual boundary between the adjoining properties but, say, one metre inside a person’s title boundary. In the second example, if the fence remains in that position without the owner on whose property the fence is located, taking action to recover possession then, after a period of fifteen or thirty years depending on the circumstances, the owner may lose his right to recover the land. 4.3

Joint Ownership (also known as tenancy)

If there is to be more than one purchaser they must decide whether to purchase as joint tenants or as tenants in common in specified shares. Joint tenants hold the interest in the property together. Upon the death of a joint tenant, the title automatically passes to the surviving joint tenant(s). The interest of a joint tenant cannot be willed. Conversely, tenants in common each hold separate interests in the property. These separate interests can be transferred to another person or left to another person in a will. Purchasers selecting the latter mode of ownership are advised to make wills which deal explicitly with their respective shares in the property. 4.4

Survey

When we send you a copy of the plan of the land on the Certificate of Title, you will be advised to carry out your own checks of the general location and the dimensions of the property. If those checks do not rule out any irregularity, you should have a survey made by a licensed surveyor. A survey by a licensed surveyor may also provide evidence of compliance with building regulations and if specifically requested, restrictive covenants and information as to the position of easements. 4.5

Easements

An easement over or under your land is a right which others are entitled to enjoy. The most common examples are easements for sewerage, drainage and rights-of-way. Such easements (if there are any) should be noted on the Certificate of Title to the land, but there are exceptions. For example, Melbourne Water may have laid sewers or drains under the land which are not within registered easements. Similarly, the land you propose to purchase may have the benefit of easements over adjoining land, such as where it is necessary to gain access to the rear of the property along a lane way. 4.6

Restrictive Covenants

A restrictive covenant is normally an obligation to a neighbouring owner or owners which binds an owner not to do certain things on the land, for example, not to build with materials other than brick or stone or not to carry on specified activities on the property. If you are prepared to accept the land with a covenant, a lender who is to take a mortgage of the land as security may, depending on the terms of the covenant, regard it as detracting from the value of the land, particularly if there has been some breach of the covenant. We should immediately be advised if you consider that a restrictive covenant has been breached.

Chapter 5 – Physical Aspects 5.1

Availability and Location of Services

If you are buying land which is not in a fully developed area, you should take particular note of the representations by the vendor in the Vendor’s Statement as to the availability of services (water, sewerage, gas, electricity, telephone) which are presently available and connected and whether the road or roads (if any) abutting the land are made and formed and, if unmade the proposed level of the road in relation to the land being purchased. We shall, in most cases in the Melbourne Metropolitan area, receive from Melbourne Water a statement disclosing whether or not the property is affected by any drains or sewers administered by Melbourne Water which are not located within an easement registered on the title. It is not uncommon to find that such a drain runs across the land. This may be detrimental if you have any plans for erecting a new building or extending an existing building on the property or installing a swimming pool. If such a drain or sewer is disclosed, we shall obtain from Melbourne Water a diagram of its precise location. Consideration should be given by the purchaser to drainage to and from the land. This becomes particularly relevant when the land is below the level of the road, or is likely to receive the run-off from higher land. 5.2

State of Repair of Buildings

Generally speaking it is the purchaser’s responsibility to be satisfied as to the condition and state of repair of the property before signing any Contract. There is no warranty as to the quality or suitability for a particular purpose of the land or buildings purchased in a contract. A purchaser may only rely on express warranties or representation made by the vendor inducing the purchaser to contract. Where practicable, a useful precaution is for you to arrange a precontract inspection by an architect, builder or engineering consultant. There is an Architect’s Inspection Service conducted in Melbourne. A purchaser will normally not have recourse against the vendor in respect of patent or obvious defects in a building which the purchaser should have found on making a reasonable inspection of the property, e.g. missing heating ducts. On the other hand, the onus is on the vendor to reveal latent defects (defects not obvious from a reasonable inspection of the property) of which the vendor is aware. 5.3

Conditions of Property

You will have inspected the property and will be aware of any unusual characteristics concerning the property. For example, the dwelling house not appearing to accord with the Building Regulations, persons other than the vendor being in occupation or using the property or the property being subject to drainage difficulties. You should immediately advise us of all unusual characteristics. 5.4

Furniture, etc., included in Sale

Most house Contracts include in the sale additional items such as blinds, curtains, light fittings, fixed floor coverings, and sometimes refrigerators and furniture (“chattels”). Fixtures, i.e. items annexed to the property for the better enjoyment of the property, including plants growing in the ground (not pot plants) do not need to be listed in the Contract, as fixtures are deemed to be part of the land. If any difficulties occur as to what is or is not a fixture then please speak with us so that we may advise you on this matter.

You should ensure that we are given full details of all chattels and fixtures (if there is any doubt as to their mobility) to be included in your purchase, as those items should be specified in the Contract. 5.5

Other Enquiries

Unless otherwise indicated in our correspondence, we will make enquiries with Vic Roads, Ministry of Housing, the local municipality, Ministry for Planning and Environment and Melbourne Water (if applicable), and any relevant regional authority to ascertain whether there is anything deleterious directly affecting the land so far as such public authorities are aware. If there is, we shall draw it to your attention as soon as we are notified of it. Such enquiries should also elicit what rates and taxes have been assessed or are assessable on the land. The enquiries do not usually provide information concerning either proposed changes which will affect the property or details of proposed or actual restrictions or benefits affecting neighbouring properties which may indirectly affect the amenity of the property you propose to buy. For example, a proposed freeway may involve the acquisition of the nextdoor property for that purpose. For this reason you should make general enquiries with the local council concerning the locality. The Council may also advise you of any by-laws that may affect you or your use of the property. There are a number of Acts and Regulations imposing some form of control over various types of buildings and development orders and by-laws which impose added controls. If there is anything which might be regarded as unusual either in respect of the property itself or your proposed use of it, please let us have appropriate details so that we can advise you in respect of any of the Acts or Regulations which may be applicable. It is to be noted that our enquiries will not elicit information about buildings erected without a permit unless the building is the subject of a notice from the responsible authority. An inspection by you or an architect or engineer on your behalf will reveal whether the buildings have been erected in accordance with the plans lodged with the responsible authority. However, if you have already entered the Contract and there are discrepancies, we suggest you should telephone us before consulting the responsible authority. 5.6

Inspection prior to Settlement

The property should be checked by you immediately prior to settlement to ensure that the dwelling house is in order and that all the chattels which the vendor has contracted to sell remain on the property. Usually the Contract gives you a right to inspect the property within 7 days of the settlement date. Unless we hear from you to the contrary we shall assume that a final check has been carried out by you and has proved satisfactory. If you have any difficulty in obtaining access to the property then you should speak with the agent who will normally be able to arrange access to the property prior to settlement. If you have any difficulty in this regard then please advise us in good time prior to the time arranged for settlement. 5.7

Check List/Moving Tips

A house hunters inspection check list and moving tips are attached for your information.

Chapter 6 – Use and Development of the Property 6.1

Town Planning Legislation

All urban land is affected by town-planning legislation seeking to control the use and sometimes the development of land. Thus, land used for a dwelling will normally be zoned for residential purposes, and this will usually prohibit its use for most commercial or industrial purposes. Zonings can be changed. We recommend that you should discuss any proposed changes with the town-planning officer of the relevant council and inspect plans that the council and the Ministry for Planning and Environment may have for the locality, both present and future. The zoning information available to us will almost invariably only evidence the present position as it affects the property you propose to buy. It will not normally reveal future proposals or the zoning of the surrounding area. You should instruct us precisely as to the use or uses to which you intend to put the property. For example, if a dwelling is being purchased, you should inform us if you intend to carry on any business from it, and if so, the nature of the business, so that we may advise you whether this is permitted by the relevant zoning. You should also inform us whether you propose to alter or redevelop an existing building on the land, as this can in some cases give rise to planning considerations. Unless we are advised to the contrary we will assume that the property is being purchased solely for residential purposes and that you do not propose to alter or redevelop it. 6.2

Building Approvals

Regulations made under the Building Act, namely the Building Regulations, require the prior approval of the local council to be given to much building work (including renovation or rectification works) carried out on dwellings. These Regulations deal in some detail with building standards. If a house or any improvements to a house requiring a permit have been erected without, or in breach of, the requisite building permit, the council may have the power to order the demolition of the house or the improvements (as the case may be). Councils are authorised to issue a certificate under the Building Regulations (called a “Occupancy Permit”) which certifies that the building has been approved by the local municipal council’s co-ordinator as suitable for occupation. As the certificate is only given after the building has been completed and inspected, it can be in the main assumed that the building inspector has been satisfied that the building has been built in accordance with the Regulations in force at the time of the construction. It follows that such a certificate is a valuable document for a purchaser to obtain, particularly when the house is new or shows signs of recent renovations or additions. However if the building was erected some time ago it may be difficult or impossible to obtain the certificate and again a discussion with the responsible officer at the council may assist you. 6.3

House Builders’ Liability Provisions of the Local Government Act 1958 and House Contracts Guarantee Act 1987

The Local Government Act 1958 gives certain protection to the owner and a purchaser from an owner of a dwelling-house constructed by a “recognised” builder on or after 15 October 1974, from loss or damage suffered by reason of certain “defects” which appear within six years after the date of issue by the municipality of the Occupancy Permit in respect of the dwelling-house.

The House Contracts Guarantee Act 1978, which supersedes the Local Government Act 1958, extends the protection provided to purchasers of new houses and also provides for protection in respect of certain building works undertaken on residences. If you consider the house you are purchasing was – (i)

Erected on or after 15 October 1974 and before 1 May 1988; or

(ii)

Erected or had building works undertaken on it after 1 May 1988

please instruct us accordingly so that the appropriate searches and enquiries can be made. When it is ascertained that you have the relevant legislative protection we shall forward to you advice concerning the protection which is given to the owner of the house. 6.4

Historic Building Register

If the house you are buying is historic, it may be registered on this register. If so, you will be prevented from altering it without the prior consent of the Historic Buildings Preservation Council. You should advise us immediately if there is a possibility that the house is regarded as historic. 6.5

Environment Protection Act 1970

Although unlikely in the case of residential property, it is possible that a licence has been issued by the Environment Protection Authority restricting the emission of waste and noise from the property you are proposing to buy or that the property is listed on the State Register for contaminated sites. You should make enquiries of the vendor in this regard and advise us immediately if there is a possibility that the property may be listed on the Contaminated Sites Register. 6.6

Rating of Properties formerly used for charitable purposes or properties with urban farm land or farm land partial rate exemptions

If the property was formerly used for some charitable purpose (e.g. as a school, private hospital, church or church-related functions) and was exempt from rates or taxes, cessation of that exemption could result in the property being assessed retrospectively (normally for 5 years) for rates or taxes not levied during the period of exemption. If you should have any knowledge or suspicion that the property has ever been used for a charitable purpose, you should advise us immediately prior to the execution of any Contract so that appropriate enquiries can be made of the relevant authorities. 6.7

Oral Conditions

The Contract should contain all the terms and conditions upon which you and the vendor have agreed. You should not rely upon any oral agreements or undertakings given by the vendor or his agents unless they are also included in the written Contract. 6.8

State Land Tax

We will seek a certificate from the State Revenue Department of the amount of land tax, if any, charged upon the property. It often happens that a certificate will be received stating that the property will be subject to land tax and if the amount of land tax stated in the certificate is paid within 28 days of settlement, the Commissioner of State Revenue will take no action against you or the property at any future time to recover moneys owed on the

property you are purchasing. Unless otherwise instructed we will deduct any unpaid amount shown in the certificate which relates to the present or any previous period from the purchase price and pay it to the Commissioner. Thus, where necessary, we shall adjust on the basis that the unpaid land tax is paid and we shall pay the amount shown in the certificate to the State Revenue Department. 6.9

Fencing

If there is no fence between the property you are buying and land owned by another, or there is a need for a new fence, then you may be entitled to require the adjoining owner to pay one-half of the cost to erect a new fence and, of course, the adjoining owner would have similar rights if the purchaser desires the fence be constructed. You or the adjoining owner may have a similar right in respect of the cost of repair if the fence is in need of repair. Your rights in this matter are generally governed by the Fences Act 1958. If you require any assistance to determine your rights and liabilities in this area please advise us. 6.10 Rural Properties If you are buying the land outside the metropolitan area, you should particularly note the following: (a)

whether any closed road licences, grazing or water frontage or irrigation licences and the like are or should be acquired with the land;

(b)

whether any order has been imposed on the property by the Land Protection Division of the Soil Conservation Authority or any other Authority;

(c)

the availability of water supply to the property, the method of supply of water and the arrangements necessary for continuation of supply, for example agreements with the adjoining owners, irrigation authorities or other statutory authorities;

(d)

the availability of services to the property and if electricity, telephone, gas, water or sewerage are not connected, the cost to connect the property to those services and if connected whether the services brought to the property across a neighbour’s property;

(e)

the chattels and equipment (for example, farm equipment, hay bales and vehicles) being purchased should be clearly specified and valued;

(f)

whether the vendor is or should be able to harvest all crops prior to settlement and the vendor’s responsibility to maintain the property or plant certain crops.

Chapter 7 – Foreign Investment Review Board Foreign investors need to be aware that they need to comply with the requirements set out by the Foreign Investment Review Board (“FIRB”). The FIRB examines applications by foreign investors proposing to invest in Australian assets. Following an application, the FIRB will establish whether such proposals are consistent with Government policy. As a foreign investor, it is possible to invest in Australia. Typically, you will need to obtain prior approval for the acquisition of residential property. This includes vacant land and accommodation facilities. This is irrespective of their value or the nationality of the investor. Further, a foreign person living in Australia on a long stay, temporary resident visa will also need approval to buy property. For residential properties, an individual investor will need to complete an R3 Form, and a company or trust will need to use a C1 form. This form will require the investor to declare whether they are a citizen, and where they currently reside. If the investor is a trading corporation, you will need to attach the names and addresses of all shareholders. If the corporation is acting as a trust, details will also need to be provided. If the investor is a student, copies of a student visa, passport and enrolment details will need to be provided. There is a limit to the value of the property a student can buy. If it is an established residence, then there is a limit of $300,000. Also the student would be required to live there and is unable to rent out the property. The other restriction is that upon the visa expiring, they would be required to sell the property. If it is a new building or buying off the plan then there is no limit but you still required approval from FIRB. Typically an FIRB approval certificate for new buildings or buying off the plan will be attached to the contract. Such an application will typically take between 30 to 90 days. You can enter a contract prior to approval, however the contract must be conditional on approval being obtained. If you enter into a contract without approval or such a condition, you will be in breach of Government policy. Such a breach could result in the forced sale of the property.

Please note this memorandum has been prepared exclusively for the client to whom it is sent. The paper is a summary and it does not purport to cover the field exhaustively. It should not be regarded as a substitute for a detailed examination of the legislation or the law as it applies to particular circumstances.