There are limitless possibilities for the things you might want to check before buying a property in Australia, and this may vary based on why you are buying the property. For example, when buying a house in Sydney you will most likely be looking for different things to a commercial warehouse or rural farmland. We’ve compiled a list of some of the most important things that apply generally to buying property in New South Wales.
1. Check the terms of the sale - what is in the contract for sale of land?
The contract for sale of land will dictate the terms of the sale. This includes things such as the price, the deposit, the settlement period, and any obligations of the parties to the contract, such as who prepares the transfer documents and what happens if settlement doesn’t happen on time. It’s important to have a lawyer review your contract and negotiate the terms of the sale for you before signing a contract. There will usually be significant financial penalties built into the contract if you don’t comply with its timelines. Failing to complete the contract on time can result in consequences such as interest charges, payment of legal and other expenses, and even loss of your deposit.
2. Consider the tax implications on your property purchase
Buying property can have substantial tax implications. Different purchasing entities will attract different taxes, and so it is important to get the right advice up front so that you can buy property in the most tax effective way. Changing entities once a purchase has been made will often incur additional taxes which can eliminate any potential tax savings that might have come from the change in entity.
Some of the most common taxes that apply to property transactions include:
Stamp duty or transfer duty, which is a one-off payment that is required whenever transferring property (such as when purchasing a property from a vendor, or when transferring property between family members). When a property transfer exceeds a certain value, it will also attract an additional premium rate of transfer duty.
Land tax is a tax that is payable annually on the unimproved land value of the property that you own in a particular state. There are certain thresholds and exemptions that apply to different entities and ownership structures, for example a person’s principal place of residence may be exempt from the payment of land tax.
Purchaser surcharge duty and surcharge land tax are taxes that only apply to foreign residents buying property in NSW. If you are not an Australian Citizen, these taxes can be significant and can apply both at the time of purchase, and also on an ongoing basis for as long as you own the property.
Goods and Services Tax (GST) can also apply to some property transactions and will often be seen in relation to the sale of new residential property, vacant land, or commercial property.
Capital Gains Tax can often be payable on the sale of the property, but the amount that is payable will be determined based on what type of entity owns the land. This means that in order to minimise your taxes on the sale of the property, any Capital Gains Tax implications should be considered at the time of purchase.
3. Check the title to see if there is anything affecting the land
It is important to review the title documents to the land to check if anything appears on there that might be detrimental to the sale or to your ownership of the property. This can include things such as easements, rights of way, restrictions on the use of land, or positive covenants which are obligations that run with the land, and which you the property purchaser are going to have to comply with during your future ownership of the land.
Title searches will disclose who the registered owners of the land are, allowing you to check whether the vendor actually is the registered proprietor and thus authorised to sell the land. They can reveal whether someone else has an interest in the land such as a proposed government acquisition, a mortgagee, or someone claiming an interest in the land via a caveat.
4. Obtain consultant reports
Engaging consultants to prepare reports are also a critical part of the process. For many properties, a building and pest inspection report is usually done prior to purchase to check for any structural or other problems with the building, and to determine any pest infestations such as the presence of termites.
In strata properties, you will usually need to engage a strata inspector prepare a strata inspection report which will involve an inspection of the strata scheme’s records to understand what is happening in the building. The inspector’s report will usually include documents such as financial statements, minutes of general meetings, copies of insurance documents, and fire safety statements. The inspector will usually report on any major events in the building such as litigation or disputes that the Owners Corporation is involved in, any major repairs or works being undertaken, any disputes between owners, or anything else that is noteworthy. Often it is also a good idea to obtain legal advice on the strata report once it has been provided by the inspector.
In addition to these searches, depending on what you are planning to use the property for, you may want to engage additional consultants such as town planners or surveyors to provide their advice to you on the property as well.
5. Conduct due diligence searches on the property
There are some matters that can be investigated by way of ordering searches. It’s common practice to undertake rate enquiries and land tax searches to make sure you don’t inherit the previous owner’s outstanding rates or tax bill along with the property.
Further to this however, it is also possible to search for records of building approvals, outstanding notices or orders, and whether various government organisations have proposed acquisitions in the land you are intending to purchase. All of these searches have the potential to uncover problems with the property which can end up costing you tens or even hundreds of thousands of dollars.
6. Review planning and development information
An often overlooked part of the process is checking what is happening in the area around the property. A search of your local council’s development application tracking tool can tell you whether development is taking place near the property you are planning to purchase. For example, you wouldn’t want to pay extra money for a waterfront view, only for someone to build in front of you a few months later and block your views.
In addition, the way the property is zoned may impact what can be built on the land, or what can be built around your land. Planning information certificates will often contain details about the zoning and what types of construction can take place with or without approval in the area.
It’s also important to consider heritage controls, flood maps, bushfire zones, land contamination, and noise from aircrafts or port in the area you are looking to purchase your property.
At Thornton + King, we have team of Law Society Accredited Specialists in Property Law who conduct contract reviews and due diligence on hundreds of property transactions each year. Whether you’re looking to buy your first property, or you’re a seasoned property professional, we’d love to help you through the property buying process.
Give us a call or submit an enquiry now.
