Curious about Titles on Installment Contracts

Hmmmm, I'm looking around for some light to shed….

Ok, lets start with this $1000 up front for their solicitor to work out how to do the paperwork.  All of my buyers have to give me $1000 up front, not so my legal guy can work it out, but because he charges in advance and once upon a time I paid for the paperwork to be done myself, and then the buyer pulled out.  Now, when I say once, I really mean twice (I'm a slow learner!).

As for lawyers, you have three options that I am aware of.  Option 1 is Philip Monardo on (02) 9362 9019.  He is based in Sydney somewhere, but he does all this stuff in QLD as well because no-one else was doing it at the time.  I used Phil for my first dozen or so, and had no real problems. 

Option 2 is Tom Forster on the Gold Coast.  He's really a litigation lawyer, but started investing this way himself, so naturally learnt how to do the legals for it himself.  You can get him on 0428 777 007.

Then there's another guy called Paul Brennan (I think) on the Sunshine Coast.  I don't know a thing about him other than his name sorry.  You'd only need him if Tom was being used by the other party, and you didn't want to use Phil because he's interstate.

As for Stamp Duty….  Two issues here.  While you aren't eligible for the first home exemption, is there some reason why you wouldn't be eligible for the stamp duty concession for PPR?  I think that would make stamp duty closer to $2000 than $8000?  In any case, I've heard "rumours" of people just not paying the stamp duty up front in circumstances like this.  What apparently happens is that as opposed to getting sent to gaol, the OSR just charges you 12% interest until such time that you've paid it off.  The person who taught me this took the attitude that a 12% loan with no security and no need to qualify for was really quite a good deal, and he actually encouraged people to do it that way.  I don't know the specifics about this one because I've never done it – however when my company "owed" the OSR 6 grand last year, going on a payment plan of any description was a major pain in the butt!  However, that was a business entity and not a private person.

If you are trying to buy a house using vendor finance and want to delay stamp duty, then that is effectively achieved via a rent-to-buy.  I don't do those often as a seller for a bunch of reasons (I don't get the 14K FHOG for one!), but it may be an option in your situation – depending on how far into the paperwork you all are.

Sorry it's been a few days for me to answer this one.  If you need me more urgently, find me on facebook

Andrew

A License to occupy is probably more widely used in Qld that Rent to Buy as it avoid all of the Tenancy Legislation associated with RTBC.

It is simply what is states. You hold a License to Occupy the property subject to repayment of a weekly / fortnightly amount.

Interest is added to the agreed amount and repayments are deducted from this amount similar to any wrap arrangment.

There is no stamp duty payable on a LTO as you hold the License however you would not qualify for the FHOG as there is no actual possession until the final payment is made.

Couple of other benefits.

Hi Jean

Without being funny any LTO Contract you draw up the Seller is going to want his Solicitor to redo it.

Better of finding the property and a co-operative seller first rather than working backwards. 

Hi Guys!

A few comments, relevant I hope, based on my 8 years of experience with dozens of Instalment Contracts and Lease options in Queensland:

Mal & Jean, it is correct that you have to pay the Stamp Duty upfront with an Instalment Contract purchase.  However, if you are an owner-occupier and this is your principal place of residence, you should get a rebate to 1% instead of the investors rate of 2%. Read the rules carefully at http://www.osr.qld.gov.au/

If the Stamp Duty is going to kill the deal for you, why not inform the vendor and ask if you can give them a lower deposit so you can afford the Duty?  Alternatively you could ask the vendor if he is prepared to sell it to you with a Lease Option, which does not require the upfront Stamp Duty.

However, the Instalment Contract is more secure for you that the Lease Option.  One reason is that with an Instalment Contract you can put on a once-only caveat that is clearly recognised at law, but with the L/O you may need to renew it every three months, which is expensive.

The comments by others above re the plethora of contracts, some good some not so, are valid.  You really should get it checked over by a solicitor knowledgeable in this area.  I can recommend ours, Aylward Game Solicitors (Mark Game, ph 07 3236 0001) in Brisbane.  I don't know if he charges an upfront fee for a new client, but at least he won't have to go and research instalment contracts at your expense!  He created the ICs we use – both for selling and buying – and we have never had an issue with them.

Re hidden expenses.  Check to see if the vendor or you are paying the rates.  Insurance too.  If you have insurance on a property under an IC that's paid by the vendor be sure you get yourselves noted on the policy as well as the vendor.  If it's a LO the insurer probably won't put you on, but at least ask to see the vendor's policy.  If you are at all doubtful of the arrangements of the vendor, insure the property yourself as well.  You can get pay-by-the-month that won't break the bank.

By the way, I probably shouldn't tell you this but as a vendor I prefer to get my Lease Option customers either refinanced or onto an Instalment Contract as soon as possible, because a much larger proportion of the Instalment Contract payment is ours to keep.  A typical LO payment might be 1/3 or more option fee (going toward the house, and therefore credited back to the client at the end) but a typical IC payment starts at less than 1/10 principle (again, going toward the house, and therefore credited back to the client at the end).  This means for you that you get ahead quicker with a typical LO than an IC.  But please .  If you are confident you can refinance with Westpac within 2 years, this is worth thinking about.

Hope this helps

Hi All,

I've been researching up about titles on instalment contracts recently for NSW.
I'm just curious that if I'm a purchaser and wanting to offer an installment contract for vendor financing, would it be possible for me to rent out the property to someone else and get rental income from them (even though the title to the property will be under the seller's name)?

Or do I have to live in the property only as the purchaser under the instalment contract?

Hi Matt

Paul is quite correct.  It can be written in at the start.

We have both scenarios operating: houses we are buying with an Instalment Contract and reselling via a Lease Option, and houses we are selling with an Instalment Contract and the buyer is renting it out.  But as Paul says… it needs to be in the contract at the start.  Our NORMAL IC stipulates that they can NOT rent it out, so if they want to do that we have to know up front.

Cheers

Mr Fair Go