Reasons to Set Up a Trust to Buy Your Property

When you purchase a property, you can buy it in your personal name, a company name or even a trust.  The trust must be set up before hand and have a trustee to manage the trust (which could be yourself or a company you own).  Now, why should you undertake a complex procedure like this to buy a property? Well, there are several reasons why savvy investors do this and here are some of them that can help you decide whether you too should follow this strategy.

Asset protection

This is one of the top reasons why people opt for a trust to buy and hold their properties. The assets held by the trust are safe even if you have to declare personal bankruptcy. This means that your creditors can create a lien on your personal assets but not on those held through the trust. The property cannot be taken over in lieu of your debts by any creditor. Of course, there are conditions that apply, namely that the property should have been purchased via the trust a specific number of years before your bankruptcy situation. If you want to make sure that the property is protected for your future generations, this advantage makes a trust a good choice for you.

Fewer complexities in transfer

A trust makes it easy for you to ensure that the property passes on to your heirs quickly and without legal complexities in the event of your death. This is one good reason to consider if you expect someone to challenge the claim of your heirs to your assets in particular. Buying and holding your property through the trust makes your stance clear on what you want to be done with the property, and the procedure for transfer of rights is clear cut too with a trust.

Tax benefits

Of course, the tax benefits are a big plus point for buying and holding property via a trust. It may be possible to avoid a big chunk of taxes including capital gains and stamp duty when the property passes to someone within your family, provided it is held in a trust. This gives a significant financial benefit to your heirs.

Please note that it is important to decide on the buying entity before signing a contract or there could be potential implications, such as stamp duty issues. We also strongly recommend that you seek the advice of an accountant regarding tax and other financial benefits regarding trusts.

If you want more information or help with buying a property via a trust, approach a professional law firm in Queensland, Australia.

 

The benefits of buying a property “Off the Plan”

“Off the plan” properties are those on which titles have not yet been obtained.  It could be that constructions has not yet begun, or that the development needs final certifications or to go the the Council sealing process or title registration. In other words, it is a “plan” on a property offered to potential buyers with the promise of developing/finalising it in the near future. Such properties are attractive when the locality is an infrastructural goldmine with entities such as an airport, a university, schools, or highways in their proximity.

Here are five potential advantages of buying an off the plan property:

  1. Tax savings – If the property you’re eyeing is merely an investment, be prepared to save a lot of dollars in taxes. The depreciation on furniture, fixings, and the building itself will be lower compared to existing buildings.
  2. Lower maintenance – Existing properties need constant maintenance and repairs. If building a home from scratch, that too for yourself, you will ensure it is well-built without needing expensive repairs and additional maintenance costs.
  3. Lower power consumption (and lower bills) – Australian Building Codes require appliances in your “off the plan” home be energy efficient. It means potential savings on all your utilities including gas, electricity, and water. You could be saving money and the environment at the same time. So, it’s a win-win.
  4. Invest now, pay later – You will be paying only 10 percent of the deposit when signing the contract. The rest is paid only after construction is completed. You have enough time to organise your finances for a comfortable pay-off later. You can also use the time to purchase essentials for your future home.
  5. Your choice of living – When buying a property that isn’t yet built you can add your personal touch (subject to the seller agreeing to this) by choosing the colour, tiles, fixtures, and furniture you want. Making it into a home that you want to come to everyday is possible. Personalising an existing building is difficult and can cost you an arm and a leg.

These benefits aren’t without risks. Securing a good off the plan property in Queensland depends largely on the reputation of the developer. Ensure you contact a reliable real estate agent or, if purchasing it yourself, do your research thoroughly. Inspect all paperwork, run it through seasoned sources including your solicitor, and sign the dotted line only when you are convinced of the development’s fulfilment.

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.

Chattels and fixtures – What will be included with the property?

When you decide to purchase a property you will become familiar with the terms fixtures and chattels.

It’s important you have a good understanding of what these terms mean before you sign a contract of sale for the property, as you want to be sure you know what you will be receiving come settlement.

The general rules that applies to fixtures, is that an object will be considered a fixture where it is fixed to the property, or land, by any means other than its own weight. Where this is not the case the object will be considered a chattel.

Some typical fixtures you will find in a property include; the hot water system, cooktop, fixed floor coverings and dishwashers. Any plants that are planted into the soil are also considered fixtures.

Fixtures form part of the property transaction and are included in your purchase of the property, while chattels remain the property of the seller and they will take them with them as part of their sale.

It’s important to be aware though, that while most objects fall under the above general rule, there are exceptions. This is where disputes between a buyer and a seller can arise as to whether an object is to be considered a fixture.

A relevant case is that of Holland v Hodgson. In this case the court considered two circumstances relevant in determining whether an object is to be considered a fixture, or a chattel. The circumstances defined by the court were, the degree to which the object is fixed to the property and the purpose for its fixing to the property.

As detailed above, an object will in most cases, be a fixture where attached to the property by a means other than its own weight. However the court also found that the purpose of the fixing is relevant and that it must be considered whether the object was fixed for the better enjoyment of the land and building, or whether the object was fixed to the land or property for the better enjoyment of the object itself.

Where an object has been fixed to the property for more effective use of the object itself, such as a basketball hoop attached to a garage wall, then it will not be considered a fixture. However if the object is fixed for the better enjoyment of the property, such as a basketball pole attached to an inbuilt concrete court, then it will be considered a fixture.

Brisbane Conveyancing Lawyers

 Exceptions to the general rule:

  • Air-conditioning units installed in the property;
  • A dishwasher;
  • A timber house sitting on house stumps only by its own weight; and
  • A water tank resting on the land only by its own weight.

Examples of chattels which are not included:

  • Pre-fabricated transportable houses that can be moved without causing any damage to the land, despite being connected to sewerage and electricity;
  • A chandelier; and
  • Satellite dishes and antennas connected to the roof of the property.

Some practical tips you can take to protect yourself include quizzing the agent about which items will remain with the property and which the seller will take with them. Make a list of this information. The contract of sale will detail any fixtures that are excluded from your purchase and any chattels that will in included. Check that your list matches the contract before you sign in. Another tip is to take photos of these things in case a dispute later arises.

If you would like further information on what objects will be included in your purchase of a property, contact Icon Legal on 07 3399 6006, or email convey@iconlegal.com.au. We can provide advice to you before you sign a contract of sale.

Unapproved Alterations When Purchasing Property

The old saying of ‘buyer beware’ still rings true when purchasing a house in Queensland.  This is especially important when it comes to unapproved alterations or extensions to a property.

When you’re considering buying a house it is important to be aware of where the risks and responsibilities of the purchase process lie at any given time, as they often shift as the process moves forward. Unapproved alterations and extensions to a property are one these shifting responsibilities.

Prior to signing the contract of sale, it is the responsibility of the seller to ensure that any alterations to the property have the required Council approval.  If no notice has been issued by the Council in relation to the work, then there is no requirement that the seller comply with the required approvals prior to entering into the contract.   Further, the seller is not legally obliged to disclose this material information to a buyer.

Former Queensland Fair Trading Minister Peter Lawlor described the situation as follows:

While a real estate agent needs to verify the material facts when selling a property and encourage the seller to disclose all information, there is no obligation or legal requirement for the agent or seller to conduct building and pest inspections, or conduct council approval surveys prior to listing a property for sale.”

Once the contract is signed, the responsibility for these approvals shifts to you; the buyer, who is left with having to deal with the unapproved structures.

You may think that you are protected under the pest and building inspection clause and you will be able to terminate the contract on these grounds.  This is not the case in Queensland.  These inspections are limited to looking at the structural integrity of the house as opposed to whether it has the required Council approvals.

While standard practice in a transaction is to conduct a building and pest inspection as part of the purchase process, an inspection of Council building approvals is not part of the standard process.  Regardless, once the contract has been entered into, any unapproved structures become the buyer’s issue if no notice has already been issued.  So unless the Council has previously issued a notice to the seller about the alteration, then the seller is under no obligation to make any disclosure to the buyer or to comply with the notice.  Hence the term ‘buyer beware’.

So what should you do?

If you have concerns that the property may have been altered or an extension added then it may be worthwhile seeking legal advice prior to signing the contract.  Don’t fall into the trap of becoming liable for any future notices in relation to the property.  This notice could include a requirement to apply for Council approval, carry out of any rectification works, or potentially to demolish the unapproved alteration to the property.

A lawyer can draft a special condition for the contract, which will make the purchase subject to the outcome of relevant searches; giving you a right of termination should any unapproved alterations or extensions be found.

Call us at Icon Legal on (07) 3399 6006 if you would like advice about purchasing a property.

FloodWise Property Report

The 2011 flood devastated many of Brisbane’s lower lying suburbs and had serious repercussions for the city’s property market.  Many buyers did not want to dip their toe (pardon the pun) into the market and purchase a property anywhere near the river.

While the flooding of 2011 did affect the property market, it has definitely bounced back.  After another year of heavy rain failed to result in any flooding (due to better flood mitigation procedures at the Wivenhoe Dam), buyers are more willing to purchase in the suburbs that were previously affected.

The Brisbane City Council offers a simple tool that aims to allay a buyer’s fear about buying a property (due to the fear of it flooding). To help restore buyer confidence the Brisbane City Council offers a free FloodWise Property Report, which is available as a tool on their website.

The report contains information of the flood height of 2011and various flood events that may occur and the likelihood of it.  It also shows the ground levels of the property and the required minimum habitable floor height. This brief report can provide valuable information to assist you in making a more informed decision of the flooding risks.

Visit flood.brisbane.qld.gov.au/floodwise_property_report to download a report on the property you may be interested in purchasing. It only takes a few minutes and the report is instantly available for download.

Whilst this report may give you an indication of how the property may be affected by flooding, further searches will provide more information about the property.   If you are concerned about flooding of the property, we recommend that you discuss this with your lawyer.

Call us at Icon Legal on (07) 3399 6006 if you would like advice about purchasing a property.