Buying a property is one of the most important financial decisions you will ever make.
It’s easy to get swept up in emotions when you think you’ve found “the one”, especially when you’re a first home buyer or you’ve been searching for ages. But it’s very important to carefully consider the legal and financial implications before you sign a contract. Thorough research could save you a fortune and ensure you avoid a serious mistake.
From the hundreds of real estate contracts I’ve read during my career, below are my top five legal tips to keep in mind when you’re considering a purchase:
- CAREFULLY INSPECT THE PROPERTY and check the condition of everything before you sign the contract.A standard clause in the contract makes the vendor (or seller) only responsible for delivering the property to you at settlement in the condition it was on the day of sale, fair wear and tear excepted. So if the central heating wasn’t working on the day you signed the contract, bad luck.Turning on all appliances and checking all light fittings beforehand will give you an accurate picture of the state of the property; you may be able to negotiate on price if something like an oven or garage door isn’t working.
- UNDERSTAND THE ZONING OF THE LAND and how it may affect your use of the property.Beware of flood paths or special building overlays, especially if there is a basement car park involved. It is prudent not to purchase a lower basement level car park in a flood zone (keep in mind that some apartments are sold with particular car parks allocated). The zoning of the land can prevent commercial or business activities being conducted. If you’d like to run a business from home, whether it’s a professional service, childcare, wholesaling or anything else, always check if the planning scheme will allow it. You may require a permit or your proposed use may even be prohibited. Check with the local council if you’re in any doubt.
- BEWARE OF WATER EASEMENTS. It is illegal to build on top of water drains and sewerage pipes without the permission of the water company.Look carefully at the water easement plan in the contract. You will not be allowed to build anything, even a deck, on top of a water easement and even if permission is granted, the water company can destroy any structure if they need access – and you are solely responsible for the cost.Look out for garages, carports and decks on the property: could they be built over water easements? If so, has permission been given? If not, the Council and water company could come knocking in the future and you’ll be responsible, not the previous owner, unless you negotiate the wording of the contract.
- DON’T BE SEDUCED by display units and rent guarantees.Spacious and well-lit display units are not a representation of your finished off-the-plan apartment. The fine print of the contract will make it very clear that you cannot rely on what you see in a display unit. Rather, carefully check the plans for your chosen apartment that are included in the contract.Use a tape measure to actually measure out the size of the apartment. How does it compare to your current home? What is the orientation of the apartment? Will it have enough natural light? North-facing properties are always preferable.And as for rent guarantees: these often aren’t worth the paper they’re written on. These guarantees are often provided by companies that are financially worthless or are wound up and closed by the time any purchaser may want to enforce a guarantee.Instead, do your homework about the rental market in the area. What rent could you achieve if all or most of the apartments in the building were all released onto the rental market at the same time? Always budget for conservative rent receipts.
- DON’T RUSH, GET ADVICE AND READ THE FINE PRINT. Resist any pressure from the real estate agent to quickly sign the contract. Never sign on the spot without getting advice – if possible, legal advice but at the very least advice from someone experienced in the property market. Remember that real estate agents are looking out for the vendor’s best interests, not yours.If it’s a private sale, take the contract home and ‘sleep on it’. If there’s an upcoming auction, request the contract at least a week in advance, to give you enough time to properly consider everything. Speak to your accountant and lender: can you afford it? Are there tax implications? Read the fine print and never assume that it’s straight-forward. One hour of your life spent checking or consulting with a lawyer may save you an enormous amount of grief and money. Remember, buying a property is a life-changing decision.
Note: the above is general information and should not be considered as legal advice.
KATE ASHMOR | 28 JULY 2014
KATE ASHMOR is president of Australian Women Lawyers(AWL) and a commercial lawyer for the Victorian government.
This article originally appeared on Women’s Agenda.