Reverse mortgages – a good income generation tool?

Reverse Mortgages: Worried About Retirement Saving? Have You Considered Using Your Home Equity?

According to researchers, the next few decades will see millions of people relying on their savings for everyday expenses. The retirement income tools in the market are highly limited, and superannuation alone may not help you live comfortably during your retirement years. Let’s take a look at another income-generation tool that is picking up pace among retirees, reverse mortgages.

How does a reverse mortgage work

Reverse mortgages, as the name suggests, work in the exact opposite fashion as mortgages. In case of a mortgage, homeowners make mortgage payments to a lender on a regular basis, and the home equity strengthens as the debt decreases, as payments are made with time. In case of a reverse mortgage, the homeowner loses equity in the property with time, while the other party makes payments for the same. You have claims over the property and can live in it as long as you please and do not have to make payments during the life of the loan. You will have to repay the entire loan, along with the fee and interest, only when the property is sold, you move to an aged care or pass away. During the life of the loan, you can ask the creditor to pay you in a one-time lumpsum amount, line of credit, periodic income, or a mix of any of these choices. Know that opting for a one-time lumpsum payment on your reverse mortgage plan may affect your pension.

Should you consider a reverse mortgage plan?

Some retirees are not keen on the idea of reverse mortgage, as they think it’s just a scheme to sell off home equity in bouts, meaning they will be living off their kids’ inheritance. You should know that there are upper caps on how much you can borrow against your home equity in a reverse mortgage plan. Of course, the amount that you can borrow depends on the lender that you are partnering with and also your age. To give you an idea about the standard rates, you would be able to draw about 15 to 20 percent on your home equity if you were of 60 years of age. If you were 70, the cap would move up to about 25 to 30 percent. This means, at the end of the reverse mortgage plan, you still have some portion of the equity left for beneficiaries.

Now, you may ask if a reverse mortgage would actually translate to better turnout monetarily in the long haul, considering the fact that you will be paying the compounded interest as well. No doubt, the compounded interest will add up to the overall loan balance, but you also need to factor in the appreciated value of the property over time before doing the math. Of course, this is based on the assumption that the property value will increase over time, which would not be a wrong assumption to make given how the property market has been faring for the past few years.

When trees become an issue

What You Should Know if You Want to Maintain Trees on Your Property?

Lush greenery and tree-lined streets are what everybody dreams to have in their neighbourhood. However, too much greenery can cause problems in a residential area. For example, it’s not uncommon to hear about roots affecting the plumbing or pool filters being blocked by fallen leaves. In fact, worse things can happen. Ever heard of branches falling over parked vehicles? Yes. That’s a possibility too.

So, what do you do if you’re the one who owns the suspected tree that caused all these problems? Tree related disputes are quite common. However, it’s not easy to sort them out. Plus, local councils aren’t too helpful when it comes to such matters. To put it simply, you’ll have to deal with it yourself. But, before you take up arms, make sure you have a thorough understanding of your responsibilities and rights.

The Neighbourhood Disputes (Dividing Fences and Trees) Act 2011

Believe it or not, there is an entire section dedicated to tree-related disputes under the Neighbourhood Disputes Act of 2011. However, the act only applies to trees that grow in specific areas. This includes trees growing on land adjoining your neighbour’s property, on land that has been divided by a road, and on land in urban areas. Trees growing on rural land, government owned land, commercial land and land larger than 4 hectares are not covered by the act.

When Does a Tree Become Your Responsibility?

Well, to answer this question, we must first understand what the act defines a tree as. According to the act, a tree is defined as a perennial, woody plant. However, it doesn’t stop there. The act adds that even if a plant resembles a tree in shape or size, it will be considered as a tree. In other words, a tree could include bushes, shrubs, cactus, and pretty much any plant that is large in size. The act even covers dead trees.

Under the act, you are responsible for the whole tree as long as it’s growing on your property. So, that means, you are responsible even if the tree’s roots interfere with your neighbour’s property.

The next question here is what can be considered as a tree growing on your property? Well, the obvious answer here is that any tree that grows within the limits of your property is obviously your responsibility. But, what happens if the tree grows right on the boundary? Well, according to the act, if the tree covers more of your land than your neighbour’s, then it will fall under your care and maintenance.

However, in rare scenarios where the tree grows perfectly divided among the two boundaries, then both parties are responsible for the tree.

When are You Not Responsible for a Tree?

Well, this is quite simple and obvious. The act clearly states that the owner of the land is the one responsible for the tree. So, if you aren’t the land or property owner, then it is most likely your landlord who will have to take up the responsibility. If your land is owned by an organisation or corporation, then they are responsible for the tree.

Disclosure when selling a property

If you are selling a property that has application to, or an order made by, the Queensland Civil and Administrative Tribunal (QCAT) in relation to a tree on the Land, you are required to disclose this to the buyer.

Icon Legal can provide further advice in relation to trees, applications and orders form QCAT.

FAQs for buying a property off the plan

Buying a property off the plan can be daunting.  The frequently asked questions below may assist to answer some questions you may have.

What is the cooling off period?

The cooling off period commences on the day that the buyer or their solicitor receives a copy of the fully signed contract, and expires….. During this cooling off period, a buyer may terminate the contract without any reason.  It’s a consumer protection so if you merely change your mind, you are not bound to the contract. Beware though that a seller has a right to charge you

What is the sunset date?

The sunset date is the date in which a buyer has a right to terminate a contract if the development has not completed and the property contract settled within this timeframe.  So if for any reasons the development is not completed, you are able to get out of the contract from this date.  The sunset date is normally 3 ½ years from the date you enter into the contract, although this timeframe can be extended to 5 ½ years.

When will settlement occur?

It is standard for settlement to be 14 days after registration of the plan.  Once the development is completed and the developer has obtained all the necessary certifications and approvals, the plans will go to the Council and then to the Titles Office.  Once the Titles Office registers the new plan it will send notification to the developer who will then call for settlement.

Can the contract be subject to finance?

This is at the discretion of the seller.  However, until the property is completely the bank cannot carry out a valuation and therefore you can only obtain conditional pre-approval.  The pre-approval will normally expire within about six months, so it’s probable that you will have to start the finance approval again closer to the completion of the development.

What if the development or the property changes?

Prior to signing the contract you will be provided with disclosure documents.  These documents will provide for the current intention of the property.  It is likely that the development of even the unit you are buying may change.  This could be due to a myriad of reasons including requirements from the Council or other authorities.  If the development changes, the developer will provide a ‘further statement’ which will detail the changes.  You will have 21 days to review this and if you feel these changes material prejudice you, then you may have a right to terminate the contract.

Icon Legal can assist you with more information or an in-depth advice on your proposed purchase.

Parenting Cases – The Best Interests of the Child

The Family Law Act 1975 requires the court to consider the best interest of the child as the most important consideration when making a parenting law. When making parenting plans, the parents are encouraged to use this principle.

According to the Family Law Act:

  • Until the children reach the age of 18 years, both the parents are responsible for the welfare and care of their children.
  • The cooperation and shared responsibilities arrangement between the parents should be in the best interest of the child.

The court’s primary considerations

When a court has to decide what is best for the child, the following points have to be considered first.

  • The advantage of having a meaningful relationship with both the parents.
  • The need to protect the child from psychological or physical harm (family violence, neglect and/or abuse).

The court’s additional considerations

The court also has to consider the following points.

  • The relationship of the children with their parents, and with other family members.
  • The child’s point of view, and the factors like the level of understanding and the maturity of the child, that impact those views.
  • The ability and willingness of one parent, for the child to have a meaningful relationship with the other parent.
  • The ability of each parent to meet the needs of the children.
  • The effect, physical and/or psychological, the child may have in accordance with the changed circumstances.
  • The expense, both in terms of money and practicality, that may occur in the child spending time with a parent.
  • The characteristics, like the background, lifestyle, sex, maturity, and so on, of the child, and that of the parents, that the court finds to be relevant.
  • The impact the parenting order may have on the right of an Aboriginal and Torres Strait Islander child, to enjoy his/her culture.
  • The outlook of both the parents towards the child, and their seriousness regarding the responsibilities of parenthood.
  • The preferability of the court order in relation to the child that would least likely lead to further hearings and court applications
  • Whether a parent had taken the opportunity to be involved in any major long-term decision-making with regards to the child’s future.
  • Whether a parent had met their obligations to maintain the child.
  • Whether facilitated the other parent’s involvement in these aspects of the child’s life.
  • Any other relevant information or circumstance that the court thinks is important.

If the court is dealing with the case of a child whose parents have already separated, then it has to take into consideration the circumstances and events since the separation.

If you need any advice regarding parenting plans or separation, Icon Legal can assist you.

 

Buyer’s contract obligations when purchasing a property

There are a number of obligations that are imposed on the buyer of a property, some having immediate effect once the contract is fully signed.  This article only deals with some of the main obligations contained in the standard terms of REIQ or ADL contracts (which are normally used by real estate agents).

The first important concept that a buyer should understand is that Queensland contracts have strict deadlines, which fall at 5pm on the due date.  This is known as time being of the essence.  Once the 5pm deadline passes (even by 30 seconds), you are potentially in default of the contract which could give the seller rights against you.

Another important obligation to be aware of is that the risk of the property passes to the buyer at 5pm on the first business day after the contract date.  Therefore, as a buyer it is strongly recommended that you insure the property immediately after entering into the contract.  Often your financier will also require a copy of this insurance prior to settlement.

If a notice or order from an authority or court is made after the contract date against the property, you as the buyer are required to comply with it.  The seller may do the work if required to be completed prior to settlement, but you will be required to pay the reasonable costs for this work at settlement.

You must ensure that you pay initial deposit and balance deposit on time or you will be in default under the contract and the seller could pursue you for this debt. The seller may also impose interest on the late monies at a rate set by the Queensland Law Society (9.45% as of January 2016).

If the contract is subject to finance and/or a building and pest inspection, you must advise the seller of approval or satisfaction by the due date.  If you miss the strict 5pm deadline on the due date, the seller will have a right to terminate the contract.

If the property is tenanted, you should decide on a property manager.  You do not need to retain the current property manager.  You should arrange for whichever property manager you want to commence managing the property from the day after settlement.

If the property has a pool but there is no pool safety certificate compliance or exemption certificate, the buyer must arrange for an inspection at the buyer’s cost by a due date prescribed in the contract.  Normally a body corporate would attend to any pool certificate requirements if it is shared pool.  We recommend obtaining more in depth advice on this topic.

If you are a foreign buyer under the Foreign Acquisitions and Takeovers Act 1975 (Cth), you must ensure that you have either obtained consent to purchase the property from the treasurer or you are not required to obtain consent, prior to entering into the contract.

You are required to pay the stamp duty payable on the contract.  Your solicitor can advise you of the amount and whether you are eligible for an exemption or concession.

This article does not cover all contracts and not all obligations.  If you are intending to purchase a property, we recommend that you obtain advice on the contract prior to entering into it.  Icon Legal can assist you with this.

Knowing the difference between a JP and a Solicitor

As officers of the court, both solicitors and Justices of the Peace (JP’s) are authorised to witness and certify documents, such as mortgage documents or land title transfers.  However, a JP is not qualified or authorised to offer legal advice.  Therefore, when considering whether a JP or solicitor is required to sign or witness your document, first ask yourself: do you need legal advice?

If you require legal advice, seek out a solicitor.  If not, a JP will be sufficient and won’t cost you a cent. Law firms are entitled to charge for the cost of a solicitor’s time in six minute intervals.

Essentially, a JP is a voluntary witness that is only qualified to carry out basic roles such as:

  • witnessing signatures
  • certifying true and original documents
  • witnessing and administering affirmations or oaths
  • witnessing statutory declarations and affidavits
  • certifying a person’s identity

Their role is also almost interchangeable with that of a Commissioner of Declaration (Cdec). As public servants, they both act as independent and objective witnesses to authorise documents for official use, often giving them legal effect.

Justices of the Peace were first introduced as “Peace Officers” by King Edward III in 1327. They were tasked with handling lessor offences so that judges could place a greater focus on more serious matters. Over the years, although the responsibilities of a Justice of the Peace have considerably grown and developed, their role has remained historically consistent. By conducting lesser routine matters, they have afforded solicitors the ability to concentrate on complex legal matters, which require professional legal training.

JPs and Cdecs are also more often readily available than solicitors and can be found at your local police station, post offices, bank branch, shopping centres or in CBD head offices. A list of qualified Justice of the Peace can also be found online at http://www.justice.qld.gov.au/justice-services/justices-of-the-peace/jps-search for urgent matters after hours.

 

Buying a property with a tenant in place

Often properties are sold with tenants in place.  This doesn’t necessarily mean that the tenant will be in the property from the settlement date.  The real estate agent will no doubt advise you of when the tenant will be vacating the property, but be sure to check the tenancies section of the contract.  This section will let you know if you are buying the property with the tenant in place, or if you will have vacant possession at settlement.

The two main types of residential tenancies are as follows:

  1. Periodic – a tenancy that runs on a month to month basis.
  2. Fixed term – when there is a set term for the tenancy, normally six or 12 months.

If the tenant is on a periodic agreement, and the buyer seeks vacant possession at settlement (that is, the buyer does not want to continue renting the property after settlement), once a contract of sale is entered into, the landlord can give the tenant notice requiring them to vacate the property with 4 weeks’ notice.

If the tenant is on a fixed term agreement, the tenant is entitled to stay until the end of their fixed term.  Therefore the owner cannot force the tenant to leave, even if they are selling the property. Following settlement, the buyer will become their landlord.

If the end of tenancy date falls later than the settlement date, then this tenancy should be noted in the contract of sale, and the buyer is obliged to accept the property with the tenant in place.

Ending the tenancy

A tenancy can be ended by the tenant or the landlord, subject to certain criteria and time frames.  The following time frames relate to the different tenancies without grounds (so the tenant has not breached the tenancy agreement):

  1. Periodic tenancy – this type of tenancy can be ended with four weeks’ notice once the property is under a contract of sale.
  2. Fixed term tenancy – a tenant must be given at least two months’ notice, and the tenancy will only end on the end date of the tenancy agreement or the end date of the notice period (whichever is later).

Regardless of the above, the tenancy can be ended at any time if the tenant and landlord mutually agree in writing.

If the tenant remains after settlement

If you are purchasing a property that will have a tenant in place following settlement, you will need to decide if you would like to continue with the current property manager.  You can engage a new property manager or manage the property yourself if you prefer.

The following will need to be attended to at or following settlement:

  1. Rent adjustments should be made with the seller;
  2. The tenant must be advised of the sale, and directed to pay any future rent and queries to the new owner; and
  3. A form providing notice of the change of landlord should be lodged with the Residential Tenancies Authority. If applicable, this form should also note the change of any property manager.

As the new landlord, you must adhere to your obligations under the tenancy agreement and all relevant law.

If you are looking at buying or selling a property with a tenant in place, please don’t hesitate to contact Icon Legal for further assistance on how to deal with a property with a tenant in place.

Understanding settlement funds

There are a couple of common misconceptions regarding settlement funds.  Many people assume the following for settlement:

  1. that they will only be required to pay the purchase price, less any deposit paid under the contract; and
  2. that their financier will be providing the loan amount and they only need to pay any shortfall of funds.

Unfortunately this isn’t correct and the amount required to be paid to the seller is normally higher and the funds provided by the financier is lower.  This can catch people out by them not expecting such a large shortfall in funds.

What do I have to pay at settlement?

At settlement, any rates, taxes or levies applicable to the property will be adjusted at settlement.  So the buyer will need to make payment of any of these extra costs from the day after settlement to the end of the current applicable period.

As an example, if the contract settles on 1 February, and the current rates period is from 1 January to 31 March, the buyer will need to make payment of the rates from the day after settlement (2 February) to the end of the period (31 March) at settlement.

Fees that may be adjusted and added to the settlement figures are:

  • Water and sewerage access charges
  • Land tax
  • Council rates
  • Body corporate levies
  • Stamp duty
  • Registration fees
  • Legal fees and outlays

What funds will my bank provide?

The actual funds your financier will hand over at settlement, known as the funds available, are the loan amount less any fees.

These fees could include (as a minimum):

  • Loan application fees
  • Government registration fees
  • Mortgage insurance

These fees could amount to a couple of thousand, and therefore your funds available are dramatically reduced at settlement.

For example, you could be loaning $400,000, but after the deduction of necessary fees, your bank may only be providing $389,000 at settlement.

Icon Legal can assist you further with what funds are required for settlement.

The Importance of Having a Will in Place

Often when we mention to a person the importance of having a valid will in place they will say to us, “that’s a bit morbid” or, “I’m far too young for that”. However we can’t stress enough that it’s vital to have a will in place.

This is due to the fact that without a will to set out your wishes and how you would like your assets and belongings dealt with following your death, then your estate will be distributed according to the rules of intestacy instead.

What this means is that rather than your estate being distributed to those you care most about, or a cause that is important to you, it will instead be distributed according to a specific hierarchy that these rules of intestacy dictate. This hierarchy is applied strictly to every person, no matter what their personal circumstances were and do not take into account a person’s wishes in any form.

A few examples from these rules of intestacy include:

  • Where a person is survived by a legal spouse (including where the couple have separated, but not divorced) and there are no children, then the surviving spouse will receive 100% of the estate.
  • Where a person has no spouse and no children (for example, a young adult), then the parents of that person are each entitled to half of the estate, regardless of the relationship that existed, or did not exist, between the person and their parents.

The rules of intestacy can also apply partially to an estate, where one or more assets have not been properly dealt with by a will.

As you can see from the above examples the rules of intestacy may not deal with an estate in accordance with a person’s wishes, but this is how the law will treat an estate where a person does not have a valid will in place.

If you would like more assistance with preparing your will contact Icon Legal on 07 3399 6006, or email enquire@iconlegal.com.au.

Conveyancing tips – changes to Queensland property laws

On Monday 1 December 2014, the Property Agents and Motor Dealers Act 2000 (PAMDA) was repealed and the following four new pieces of Queensland legislation came into force:

  • Property Occupations Act 2014
  • Motor Dealers and Chattel Auctioneers Act 2014
  • Debt Collectors (Field Agents and Collection Agents) Act 2014
  • Agents Financial Administration Act 2014

PAMDA continues to apply to relevant contracts entered into prior to 1 December.

The Real Estate Institute of Queensland released new contracts to comply with the new laws, and the new form of contract must be used for any new contract entered into.

Aside from some practical tidying up of the contract and giving it a cleaner look, there are some changes that are relevant to agents and parties buying or selling property as follows:

  1. Changes to relevant forms:
  • Form 30C Warning Statement no longer exists for residential property contracts. The contract itself now contains the warning about obtaining legal advice and an independent valuation.  It also advises that a statutory cooling off period applies.
  • Form 14 Information Sheet for the Body Corporate and Community Management Act 1997 is no longer required to be attached.
  • Form 32a lawyer’s certificate has been abolished. A buyer can now waive or shorten the statutory cooling off period with written notice to the seller.
  1. Failure to comply with technical requirements are no longer an avenue for a buyer to terminate a contract or seek compensation. Instead, a breach of the new legislation may result in a fine from the government for $22,000 for an individual and $110,000 for a corporation.
  1. The requirement of giving notice to a buyer for vacant land that cannot be lawfully used for residential purposes has been removed (where previously a buyer could terminate a contract for failure to disclose this).
  1. Finally, a practical change allowing notices under the contract to be sent by email is a welcome change.

The new contracts have also tightened up the requirements for them to be completed more fully and accurately.  An example is that it will no longer be acceptable to insert words such as ‘refer to title’ or similar in the encumbrances section.  All title encumbrances must be accurately stated in the contract.

Above are some of the main changes, but many others have also come in effect.  If you would like to find out more, please don’t hesitate to contact us.