What You Should Know About Zoning

When building you may be unfamiliar with many of the terms used in the construction arena but this should not become a cause for legal disputes that can impair your property ownership at a later date. One of the most important things to know about is zoning.

What is zoning?

Zoning tells you what your land is permitted to be used for. For example, some lands may be meant for agricultural use and they will be subject to zoning regulations that prevent the land from being used for the construction of a manufacturing unit.  So even before you buy your land, it is important for you to pay attention to the zoning regulations that are in force upon it. During construction, zoning laws come into the picture once again because there may be restrictions on what you can or cannot do.

The problem is that zoning laws may affect every aspect of the building process. If you have inherited the property, you may not have faced any zoning issues until now, when you embark on constructing here.

Keep in mind that you may not get permission to build a business space in a residential area. Even within residential areas, there may be restrictions on construction that apply thanks to zoning laws. For example, in heritage overlay zones, you may not get permission to build an additional floor upon an existing building of yours. This may not be a problem in any other residential area.  Checking about the zonal restrictions that apply to your home or land before you start planning your construction makes a lot of sense and saves you from potential legal trouble.

Rezoning

Yes, zoning laws can and are changed often. In particular, this happens when the authorities decide that a specific zoning law is no longer relevant to an area. Such decisions are taken during council zonal meetings. An amendment process is carried out and the zoning change is brought about if the necessary approvals are forthcoming. This makes it important for you to check with the most recent updates when you are trying to find out the zoning rules for your property.

Purchasing Property Through A Self-Managed Super Fund

Since changes to superannuation legislation in 2007, which allowed for self-managed super funds (SMSFs) to borrow money for property assets, there has been a dramatic increase in the number of people setting up a SMSF in order to purchase an investment property.  Whilst there are many benefits to this, there are strict rules which must be followed.

The primary benefit of purchasing property through your super fund is the potential tax benefits.  For example, where an investment property is purchased outside of super and then sold to fund your retirement, the sale will be subject to capital gains tax.  If you were to purchase the same property through your SMSF, the tax burden could potentially be reduced to zero provided the property is sold after your super fund switches to pension phase.  If the property is sold by before you retire a maximum 10% capital gains tax is payable, provided the property has been owned for at least 12 months.  This could result in savings running in the tens of thousands of dollars.

Alternatively if you continue to rent out the property during the pension phase the rental income is only taxed at 15 per cent, rather than your personal tax rate.

It sounds simple right?  Unfortunately there are a couple of negatives that you need to be aware of.  Firstly setting up a SMSF can be a costly and complicated process.  On top of this when borrowing lenders typically will only lend around 65-70% of the purchase price to a SMSF and often charge a higher interest rate.

The loan must also be what is termed a non-recourse loan, meaning that the property itself must be the only asset provided as security for the loan. On top of this a SMSF cannot develop or improve a property that has a mortgage over it, with the loan having to be fully paid out before any improvements to the property can be made.

The property is also subject to the sole-purpose test, meaning that it must be owned purely for the purpose of investing for retirement, so it can’t be lived in, used as a holiday home or rented by a member of the SMSF, or any related parties of a member.

The safest bet is to ensure that you have the capacity to fully pay out the mortgage on the property prior to retirement; otherwise servicing the loan could prove difficult.

It is important to seek financial and legal advice before purchasing an investment property through a SMSF as the ATO watches these types of investments very closely.

Call us at Icon Legal on (07) 3399 6006 if you would like advice about purchasing a property through a self-managed super fund.

Missing and Damaged Fixtures and Fittings

The standard contract of sale includes terms that specify that a property must be delivered to the buyer on the day of settlement in the same condition it was in on the day the contract was signed (save for ordinary wear and tear).  As a buyer this means you should do your due diligence to ensure that this is the case for the property you purchase.

A building and pest inspection, which is a normal part of the conveyancing process, will identify any major structural defects to the house, but you can take some extra steps to ensure what you think you are buying is what you actually receive.

A good tip is to conduct an inspection of the property before you sign the contract and check in careful detail exactly what condition the house is in.  There’s no harm in taking a camera and shooting lots of pictures.  Look for any holes in walls, missing pavers, cracks and especially chattels.  Chattels are the permanent fixtures of the house and should remain a part of the house as ownership changes.  Be sure to clarify exactly what fixtures are to be included with the property, such as a dishwasher, light fittings, blinds and TV aerials.

A lawyer can prepare a special condition to be inserted into the contract detailing exactly what fixtures are included in the sale if you’re in any doubt.

As part of your inspection, ensure that any fixtures are in good working order; try flicking on all the lights, turning on the taps, or starting the dishwasher quickly.  If you find something isn’t working then you should notify the seller’s agent straight away and don’t sign the contract until it’s fixed or you’ve spoken to your lawyer.

Once you’ve conducted this inspection and are satisfied with all the results and any other issues are sorted out, you can sign the contract.  A few days prior to settlement, attend the property again to conduct a pre-settlement inspection.  This is your chance to check over the property before the sale is finalised to ensure everything is as you thought it would be.

Go through the property again as you did before and check that no new damage has occurred and that none of the fixtures are missing.  Remember to check everything is still in good working order.  If you find any issues then raise them with your lawyer straight away.  Usually pre-settlement negotiations by your lawyer can sort a problem out.  If not your lawyer can advise you on your rights, any possible legal action that can be taken after settlement has occurred, or if settlement needs to be delayed.

It’s all about conducting due diligence and liaising with your lawyer to ensure that nothing creeps up on you by the time settlement comes around.

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

Great Start Grant

If you’re a first home buyer it may be worth investigating the possibility of obtaining a Great Start Grant. This grant is an initiative of the Queensland Government designed to help new home buyers afford their first home sooner. It provides first home buyers with a grant of $15,000 towards the purchase of a new home in Queensland valued at less than $750,000.

A new home is a property that has:

  1. not been previously occupied as a place of residence and has not been previously sold as a place of residence; or
  2. been substantially renovated, provided that the sale of the property is a taxable supply as a ‘new residential premises’[1] and that the renovation meets the requirements of a substantial renovation.

For a property to meet the criteria of a substantial renovation, all, or most of the structural and/or non-structural components must be replaced.  For example the foundations have been altered, the interior has been reconfigured with new walls, flooring and windows in place, or the roof has been lifted or replaced.  A substantial renovation can also include non-structural work such as the replacement of the buildings wiring and/or plumbing and the plastering or rendering of a majority of the property’s walls.

To be eligible for the grant you must meet the following criteria:

  1. Be at least 18 years of age;
  2. Be an Australian citizen or permanent resident;
  3. You or your spouse must not have previously owned property in Australia;
  4. The property must be a new home; and
  5. Its value must be under $750,000.

If you meet the above criteria then you should look to apply for a Great Start Grant. In receiving the grant you must move into the new home within a year of settlement and live in it for at least 6 months.

Call us at Icon Legal on (07) 3399 6006 if you would like advice about purchasing a property or more information about the Great Start Grant.



[1] A New Tax System (Goods and Services Tax) Act 1999 (Cth) s 40-75(1)(b).

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.