Homeowners

To buy or sell first? Part two

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If you are looking to buy a new home and sell your existing home you've most likely wondered whether you should buy or sell first.

There are several things to consider when making this decision so you are best prepared for the journey. In part two here we'll look at things to consider when buying first.

Buying first

Pros

  • There is less pressure to just ‘get’ a new home so you can settle on time – you can really shop around
  • You have greater certainty that you will only have to move once
  • In a quickly rising market you may be able to achieve a higher sale price and secure a better price on your new home

Cons

  • Bridging finance may be required if you do not sell your existing home in time for settlement
  • You won’t have a clear budget for your new purchase
  • You will need to ensure you have a cash deposit sufficient to cover the purchase or be prepared to obtain a deposit bond

Deposit Bond

When buying a property, first you will need consider options for payment of the deposit.  The traditional method of payment of a deposit is cash.  However, when cash is not available like when your equity is tied up in your existing home, a deposit bond maybe a suitable option.

There are private companies that issue deposit bonds and banks can issue the equivalent being a bank guarantee.  Each issuing institution will have different fees and criteria so you will need to investigate these and ensure you comply.

Your conveyancer and mortgage broker can assist in this process.

Bridging Finance

When buying first your ability to cover the mortgage of two properties will be a main consideration.  Bridging finance is an option worth discussing with your mortgage broker.  Bridging finance loans have:

  • shorter terms of between 6 and 12 months;
  • fixed and variable rates are typically still offered;
  • higher interest rates; and
  • Lenders Mortgage Insurance may still apply if the loan is more than 80% of the total value of both properties.

Extended Settlement

As noted above, a longer settlement period of approximately 10-12 weeks (or longer if you are moving to an area where properties are scarce) maybe a necessary consideration.

The downside of an extended settlement is you may need to accept a sale price that is lower than you originally expected in order to sell in time to achieve settlement.

Contingency Plan – Conditional Purchase

A last resort to overcome the cons is to make your purchase dependant on the sale of your home.  As noted above, this can be negotiated be your conveyancer or solicitor.  Keep in mind that a vendor does not have to agree to this request.

Other Considerations

If settlement of both your sale and purchase have been timed perfectly there are some last minute considerations that need to be covered to ensure settlement goes well.

  • Timing for final inspection

When buying property you are entitled to a final inspection of the property within 48 hours prior to settlement.  This is also relevant for the people buying your property.

  • Timing for settlement

If settlement has been timed perfectly it will occur at the same time on the same day.  Otherwise, settlement may need to occur a few days apart to allow funds to clear and cheques to be drawn.  Settlement is most likely going to occur after 2pm as many banks have this requirement.

Do you have to attend settlement – the short answer here is no.  Your solicitor to conveyancer will arrange attendance by a settlement agent on your behalf.

  • Timing for moving out/moving in

So, settlement has been set for the same time on the same day.  Great news – you only have to move once.

Now it is time to co-ordinate moving.  The best option tends to be hiring a removalist with a truck large enough to fit all of your furniture and possessions in, in one go.  This will allow you to pack up and vacate the property easily prior to settlement.

  • Moving into new property including the collection of keys

Once you have moved out of your old home, you will be waiting for the keys to move into your new home.  In order for you to collect the keys , your solicitor or conveyancer will call the agent and let them know settlement has been finalised, this will happen within 30 mins to 1 hour of the set settlement time.  This call will enable the agent to release the keys to you and you will finally be able to move into your new home.

If you're thinking of selling first, have a read of part one here.

If you would like more information on the process of buying and selling please contact Kylie Fuentes our licensed conveyancer in Picton.

To buy or sell first? Part one

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If you are looking to buy a new home and sell your existing home you've most likely wondered whether you should buy or sell first.

There are several things to consider when making this decision so you are best prepared for the journey. In part one here we'll look at things to consider when selling first.

Selling first

Pros

  • You are in a better position to negotiate your sale price
  • You will know what your limit is on purchase price when buying your new home
  • The need for bridging finance is less likely
  • You can plan ahead and extend the settlement period to allow you to secure your new home

Cons

  • In a quickly rising market your new home may be more expensive than you planned for
  • You may need to consider temporary accommodation if you have not secured a new home by settlement on your sale
  • Possibility of storage fees or double the removalists fees
  • If permitted under your contract you may use the deposit paid by the purchaser towards the deposit payable on your new home

Negotiating power

A main benefit in selling your existing home first is that you will know exactly what you can spend on a new home.  This will help you budget your family expenses and make the right move for you and your family.  By selling first, you also put yourself in a better position to negotiation the best sale price as you are not under pressure to achieve settlement on a certain date.

Extended settlement

In this scenario however, a good option is to have a longer settlement period of approximately 10-12 weeks (or longer if you are moving to an area where properties are scarce).  This will allow time for the cooling off period on your sale to come to an end and for you to secure a new home to move into.  This will also reduce the likelihood of needing temporary accommodation and extra moving costs.

Releasing your deposit

Many people looking to move on in the property market may be hesitant due to access to funds for a deposit, especially if your deposit funds are tied up in the equity in your home.  By selling first you can overcome this issue.  Ensure when your Contract is prepared that it allows you to use the deposit being paid by the purchaser prior to settlement.  By having this provision in your Contract you will be able to access these funds for your purchase.

Leaseback

If an extended settlement will not work for your buyers you could raise the option of a leaseback provision.  By doing this you effectively extend your moving out date until you secure a new home.  This is useful if your existing home is one investors are likely to be interested in as they will have a guaranteed tenant from the settlement date.  The details of this kind of provision are usually negotiated at the time of exchange.

Contingency plan – Conditional Sale

A last resort to overcome the cons is to make your sale dependent on you purchasing your new home.  Your conveyancer or solicitor can insert a clause into the Contract that stipulates that settlement is not triggered until you have secured your new home which will allow you to line up settlement allowing you to only have to move once.  Keeping in mind this may reduce the number of buyers interested in your existing home.

Contingency plan - Renting

If the above options do not suit your needs or your purchaser you may need to consider a short term rental until you have secured your new home.  If you do consider this option, when looking at rentals be very clear that it is short term situation and check what the termination costs are if you move out earlier than the lease expiry date.

If you're thinking of buying first keep an eye out for part two where we'll outline further considerations to help you prepare for the journey.

Ready to discuss your next buying or selling property transaction? Talk to the team at Coutts Solicitors & Conveyancers.

First home buyer benefits and your spouse

First home buyer benefits

Some of the most common questions we receive in relation to obtaining first home buyer benefits are:

  • “If my spouse has purchased a property before, can I still claim first home benefits?”
  • “If my spouse purchases this property and I purchase a property later, can we both receive first home benefits?”

A spouse is a husband or wife and in relation to the term “de facto”, the Office of State Revenue uses the definition found here under Section 4AA of the Family Law Act 1975.  You should ensure you fall into either of these categories and if you are unsure, it is best to check before you enter into a Contract for Sale.

There are currently two benefits available to first home owners:

  • First Home New Home Scheme
  • First Home Owner Grant

First Home New Home Scheme

This scheme provides an exemption from stamp duty on properties up to the value of $550,000.00 and concessions on properties valued between $550,000.00-$650,000.00, you must meet the following eligibility criteria:

  • The Contract and Transfer must be for the purchase of the whole of the property.
  • All purchasers must be ‘eligible purchasers’.
    • An ‘eligible purchaser’ is defined as a natural person (i.e not a company or trust) at least 18 years of age who has not, and whose spouse/de facto has not:
      • At any time owned (either solely or with someone else) residential property in Australia other than property owned solely as a trustee or executor;
      • Previously received an exemption or concession under First Home New Home.
    • At least one eligible purchaser must occupy the home as their principal place of residence for a continuous period of six months, commencing within 12 months from the date of settlement.

First Home Owner Grant

To receive this grant you must meet the following eligibility criteria:

  • Each applicant is a natural person and not a company or trust.
  • Each applicant must be at least 18 years of age.
  • All applicants and/or their spouse/de facto have not owned a residential property, jointly, separately or with some other person, in any State or Territory of Australia before 1 July 2000.
  • All applicants and/or their spouse/de facto have not previously owned a residential property jointly, separately or with some other person in any State or Territory of Australia, and occupied that property for a continuous period of at least 6 months.
  • Each applicant has entered into a contract for the purchase of a new home or signed a contract to build a home on or after 1 January 2016. In the case of an owner builder, laying of the foundations commenced on or after 1 January 2016.
  • The total value of the property does not exceed the cap amount of $750,000.00.

This must be the first time an applicant and/or their spouse/de facto has received a first home owner grant and at least one applicant must occupy the home as their principal place of residence for a continuous period of six months, commencing within 12 months from the date of settlement.

Basically the short answer is that, as ALL applicants for each first home benefit must NOT have either jointly or solely owned a property previously, you will not be entitled to any first home benefit if your partner has previously owned a property.

The Office of State Revenue will assess each application on a case by case basis so if you feel that you have circumstances that don’t quite fit into any of the above criteria, we can submit an application on your behalf for individual assessment.

If you would like to speak to Carina about first home buyer benefits please contact us.

Article written as an update to the original entry posted in June 2016. Updated 30 September 2016.

Changes to The State Revenue Legislation Amendment Act 2016

As a Licensed Conveyancer  at a Law Firm, I deal with many clients, from first home buyers to investors and businesses. The State Revenue Legislation Act  effects a large portion of my clients and determines what they can do, the grant amounts they will receive and the tax they need to pay. So when The NSW Office of State Revenue or OSR,  announced changes to the act with The State Revenue Amendment Act 2016, I realised many of my clients would be unaware or confused by the changes. So for those people or businesses undertaking a transaction with the OSR,  and to help you understand the changes, I have summarised the changes to the act below. The changes include:

  • To be classified as a "Substantially renovated home" for the purpose of the First Home Owner Grant and First Home New Home Exemption or Concession from Duty, the home must now be created by renovations that remove or replace all, or substantially all of the building.
  • To be classified as a "home built to replace demolished premises" for the purpose of the First Home Owner Grant, the home must be built on the same land that the demolished premises stood.
  • Unoccupied land which is eligible for the principal place of residence land tax exemption that is occupied by a person other than the owner can now be exempt for a period of up to 4 years from when that person stops using the land for residential purposes.
  • Wages that are paid to a person by a body corporate wholly owned by at least 2 local councils, for activities carried out for those councils, are now exempt from payroll tax.
  • After a successful objection or review, the chief Commissioner must now pay interest on a refund made to a taxpayer.
  • Enterprises may now voluntarily report amounts which are not classified as unclaimed because the total is $100 or less. The amount must be paid to the Chief Commissioner and can be claimed by the owner of the money.
  • The Chief Commissioner may now allow an owner of unclaimed money whose right to the money has expired to still claim the money.
  • References to anything done or held by a trustee of a unit trust scheme as trustee in respect of corporate reconstruction transactions and corporate consolidation transactions that are exempt from duty now extend to include anything done by or held by a custodian of the trustee of a managed investment scheme.

For more information on the The State Revenue Legislation Amendment Act 2016 click HERE.

If you need legal advice in relation to a property or business transaction. Coutts can give you the advice you need. 

Can I sell my home to a buyer with 5% deposit?

If you have your house on the market, you are selling at a time where  property prices and mortgages are high, buyers will need to offer a deposit to purchase, but the current market conditions mean it is uncommon that a buyer will have a 10% deposit. However, the Contract for Sale of Land stipulates that a 10% deposit must be paid on exchange of Contracts. So this leads many people to question " Can I sell my house to a buyer with a 5% deposit? " and if so, how is this done? and is there any risk? The simple answer is yes you can and yes it does come with a risk, but there are ways to minimise the risk.

You can accept any deposit you wish under the Contract for Sale as long as it is agreed to by all parties, but here is the catch…

  • If you agree to accept a 5% deposit and if you ever had to terminate the Contract on your buyer, then you would have to try and recover the balance of the 5% due to you under the Contract. This would be done through litigation (going to court), which is an expensive process with no guaranteed outcome.
  • If you do not feel comfortable agreeing to a 5% cash deposit, you can always ask your buyer to obtain a 10% deposit bond. A Deposit Bond acts as a substitute for the cash deposit between signing a Contract and settlement of a property. At settlement the purchaser would then pay the full purchase price including the deposit. A Deposit Bond can be issued for all or part of the deposit amount required, up to 10% of the purchase price.

Thus, it is safer to ask for a 5% cash deposit together with a 5% deposit bond, which would total your whole 10% deposit.

Ideally, it is up to you whether you agree to accept a 5% deposit, just remember that it does come at a risk. Even though you are lead to believe it is “common practice” you are entitled to the 10% deposit under the Contract for Sale, you do not need to accept the 5% even if there is a “special condition in the Contract” as if you do accept the lesser deposit,  that is most likely all you will get if the Contract is terminated.

If you are thinking of selling your property you will need a contract of sale before you market your property. This can be done by a licensed conveyancer. Contact Coutts Solicitors & Conveyancers.

What to do if a tenant has breached the lease

So your tenant has breached the Lease and you want to know what to do next? Under what circumstances has your tenant breached the Lease?

  • Have they breached a fundamental obligation under the lease;
  • Are they behind in rent (i.e more than 14 days in arrears); or
  • Failure to comply with notice served by the landlord for a breach under the Lease.

Repudiated the Lease

If the tenant has breached a fundamental obligation under the lease, then this may be deemed repudiation by the courts.  A fundamental obligation under a lease may include:

  • Abandonment of the premises;
  • Abandonment of premises including a failure to pay rent and other covenant breaches;
  • Gross breaches of covenant for quiet enjoyment.

If you, the landlord, then wish to treat the breach as a repudiation you can then terminate the lease.  To terminate the lease the landlord needs to serve a notice specifically stating the breach leading to repudiation and then state the date the lease will come to an end.  After this date the Landlord can re-enter the premises.

Rental Arrears

If the tenant is in arrears by more than 14 days the Landlord can proceed with re-entering the Premises.  The items left at the premises by the lessee under clause 12.3 of the Lease become the property of the lessor and you can charge the lessee for the cost of making good the premises (back to the state and condition that the lease required the property to be kept in) and for the removal of the remaining items.

Under clause 12.6 you must do all things to avoid increasing any losses including by selling the items left by the lessee and applying any security deposit or bank guarantee to the arrears.

Failure to comply with Notice

The Landlord must ensure they serve a notice clearly stating the particular breach complained of.  If that breach can be remedied, then the Landlord can require the Tenant to remedy the breach.  If the Landlord has the right to claim compensation or the breach then the notice must state the amount of compensation being sought.

Once that notice is served the tenant has until the date stated (which must be a reasonable period of time in the circumstances) in the notice to remedy the breach or pay the required compensation then the Landlord can act on their right to re-enter the premises.

If the tenant does not comply with the notice within the period of time required then the Landlord gains the right to re-enter the premises.

If you would like to know more or seek specific advice on a particular situation please contact Kylie Fuentes at Coutts Solicitors and Conveyancers.

What is a Put and Call Option?

A Put and Call Option is an agreement, usually between a landowner and a Builder. The agreement allows the landowner to allocate certain blocks to the Builder for their exclusive right to sell to third parties, for an ‘option fee’. The benefit to the landowner is that they have a guaranteed sale because even if the Builder doesn’t find a third party, the ‘put’ option allows them to make the Builder purchase the lot. The benefit to the Builder is that they get to package the land up as a house and land package, guaranteeing their build on that block of land. The risk to the Builder is that if they do not find a third party to purchase the block of land, they are required to.

There is also such thing as just a Call Option. The difference here is that the landowner no longer has the option to require the Builder purchase the lot however if the Builder doesn’t nominate a third party to purchase the lot, they may forfeit their option fee.

Option Deeds entered into between landowners and Builders include certain terms and conditions. Usually the most crucial is the Call Option expiry date. The Call Option expiry date is the latest date that the Builder has to nominate a third party to purchase the land. In most cases, in order to nominate a third party purchaser to purchase the land, the Builder must ensure that a both building and land contracts have been entered into by the Call Option expiry date.

If you would like advice on Put and Call Option deeds please contact Melina Costantino, expert in Conveyancing for Builders and Developers at Coutts Solicitors & Conveyancers.

6 steps to recover financially from a Separation or Divorce

In Australia today around 1 in 3 marriages can be expected to end in divorce. With 77% of Australian couples also living together before getting married (and let’s face it - some don’t go the distance) the real impact of  relationship breakdowns is likely to be much higher than the statistics lead us to believe. 

There is no doubt moving on from any long term relationship, be it marriage or de facto, can attract a heavy emotional toll. But the financial impact can also be far reaching and long lasting.

Finances are often left on the back burner as you focus on the emotional health of yourself and your family. Perhaps it is the fi rst time you have had sole responsibility for your finances? Or maybe you feel overwhelmed and don’t know where to start?

The key is to take action early. Here are some steps to get back on track financially after a separation or divorce…

1. Check your credit rating

A vital first step is taking control of your financial future! Check to see if your credit report contains any errors or if any of your partner’s information is listed. If so, have it rectified. There are two main credit reporting agencies - Veda and Dun & Bradstreet

2. Identify your creditors

Make a list of all your creditors, both secured and unsecured. Your secured creditors are those where assets are used as security for the loan, eg house or car. Negotiation of both the assets and the outstanding loans will be required by both parties.

3. Separate all joint accounts

A time consuming but crucial step is to unravel all your joint accounts, including credit cards. Even if the separation is amicable it is best to separate all accounts to avoid future issues.

4. Create a budget

An unavoidable result of separation is a change in lifestyle. An important step in making this adjustment is creating a comprehensive budget separating discretionary and mandatory expenses. To stick to your new budget you may need to make tough decisions on discretionary spending. Of course, if you have children then child support may also come into the equation – one party may be paying child support while the other receives it. Remember that child support payments will cease or may be amended at some point in time. This should be factored into future planning for both parties.

5. Decide on your housing options

In most cases the family home is either sold or refinanced. At least one partner will need to find somewhere new to live. While renting may be a viable short term option, in the long term most people wish to buy a home. You will need expert advice on how to best refinance your home or secure a loan for a new home. If refinancing or applying for a new loan it is important that all required identity documentation reflects your new marital status and/or any change of name.

It is essential you contact your mortgage broker to discuss the process BEFORE lodging any loan application documents.

6. Prepare a Financial plan for the future

• Start an emergency fund - open a separate savings account for unexpected emergencies. • Update your Will – ensure it reflects the changes that have occurred in your life. • Manage your debt - contact us for a chat about how to reduce your ‘bad’ debt like credit cards and personal loans as quickly as possible. • Plan for your retirement - review superannuation and update beneficiary details if required. • Review your insurance needs - you will need to update policies from married to single status.

This is a guest blog written by Andrew Evans from Mortgage Guy. If you would like to discuss getting your finances on track after a separation or divorce click here to contact Mortgage Guy . If you are thinking of separating from your partner and would like information from the Coutts Solicitors Family Law team click here to contact Coutts Solicitors.

New laws for swimming pool ownership

As of 29 October this year, if you are the owner of a swimming pool, you will need to register it with your local council. We strongly advise that if this applies to you, you register it sooner rather than later, to avoid penalty.  Local councils are implementing a rigorous inspection program to find pool owners that haven’t met their legal obligations.

About the swimming pool register

There is definitely good reason to introduce this register. According to the NSW Government, drowning is one of the major causes of accidental death amongst very young children - who are not old enough to handle falling into water. There are currently over 300,000 backyard swimming pools in NSW, therefore these measures will ensure that many lives are saved.

How to register your swimming pool

Before applying for registration, you will need to have the following information handy:

  • Full address of the swimming pool
  • Property type
  • Surrounding land size
  • When the pool (or spa) was built
  • If the pool barrier has been substantially modified or rebuilt - when that took place.

What this means for home owners

As of 29 April 2014, a certificate of compliance must be attached to the contract if you are selling or buying a property with a pool in NSW. Ensure your Sydney conveyancer looks after this for you to keep you on the right side of the law.  If you need conveyancing advice, do not hesitate to email us at info@couttslegal.com.au

Official RBA cash rate remains at record low

In case you didn’t hear the good news, the Reserve Bank of Australia has decided to leave the cash rate on hold at a record low of 2.75 per cent. In a statement provided by RBA governor Glenn Stevens, the falling Australian dollar was cited as the main reason behind their decision.

The implications for home owners

If you’re a homeowner, you might breathe a sigh of relief that bank interest rates will also remain the same.  In fact, it’s been suggested that interest rates will decrease over the course of the short term – to help our economy adjust to falling levels of mining investment and to help make property purchasing a more affordable option.

JP Morgan economist Tom Kennedy cited that the high Australian dollar was crucial to the RBA's last cash rate cut in May. He went on to say he expects the RBA's next interest rate cut to be in November, followed by another in February 2014.  Either way, it will depend on the performance of the Australian dollar and the impact on consumer prices.

Check with your mortgage provider

We recommend that you touch base with your mortgage provider and check whether the interest rate on your mortgage has changed or remained the same.  It’s always good practice to keep on top of your interest levels - to ensure you’re getting the best deal possible from your lender and to help you keep abreast of your financial obligations.