All Topics / General Property / Onselling before settlement, any advise?

Viewing 16 posts - 1 through 16 (of 16 total)
  • Profile photo of i_suni_sun
    Participant
    @i_sun
    Join Date: 2006
    Post Count: 4

    Hi,

    I've bought an off-the-plan apartment in South Melbourne, Melbourne last year, and it's due for settlement early next year.

    Just recently my partner has been made redundant and I foresee we may have difficultly getting a loan for the IP.

    Selling the IP is an option we are considering now; does anyone has any advise on what is the best way to go about doing this?

    One question I can think of is regarding Stamp Duty; if I do find a buyer, does the buyer have to pay it since it's near completion  ?

    Thanks in advice! 

    Profile photo of PLCPLC
    Participant
    @plc
    Join Date: 2012
    Post Count: 400

    Both you and the buyer will have to pay stamp duty. You are also liable for any CGT.

    Cheers

    Tom

    PLC | Phoenix Loan Consulting
    Email Me | Phone Me

    Melbourne based Mortgage Broker | Making Finance Simple

    Profile photo of jmsracheljmsrachel
    Participant
    @jmsrachel
    Join Date: 2012
    Post Count: 711

    Good old stamp duty, were would we be without it!

    Profile photo of kong71286kong71286
    Participant
    @kong71286
    Join Date: 2009
    Post Count: 261

    Did you have any 'subject to finance' clauses in the contract?

    Profile photo of i_suni_sun
    Participant
    @i_sun
    Join Date: 2006
    Post Count: 4

    Good question, I'll have to double check. So what are the implication if there's one in the contract? Does this mean I'll be able to back away from the contract without penalties? What about the 10% deposit which is under guarantee in an term deposit acct?

    Profile photo of DerekDerek
    Member
    @derek
    Join Date: 2004
    Post Count: 3,544

    You'll probably find the contract you have signed is pretty well water tight and if there are any out clauses they'll be few and far between. The builders/developers of these projects and their solicitors are well versed in these sorts of contracts.

    Get your broker to review your situation in light of your changed circumstances and see if you are in a position to get finance.

    If  the answer is no then seek independent legal advice from someone who is well versed in off the plan contracts.

    I assume your original solicitor was recommended by the vendor – if this is the case it is extremely important you seek independent legal advice.

    Profile photo of i_suni_sun
    Participant
    @i_sun
    Join Date: 2006
    Post Count: 4

    How's that? I've bought this off the plan, hence stamp duty should be minimum right?! (from the purchase date)

    But the buyer would pay the almost full stamp duty, assuming is 90% from settlement?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190
    i_sun wrote:
    How's that? I've bought this off the plan, hence stamp duty should be minimum right?! (from the purchase date)

    But the buyer would pay the almost full stamp duty, assuming is 90% from settlement?

    You are selling a property which is a dutiable transaction. Stamp duty would be assessed the same if it is (a normal sale which it would be)

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of PLCPLC
    Participant
    @plc
    Join Date: 2012
    Post Count: 400

    Yep, it was initially bought from the vendor as a dutiable transaction and stamp duty is applied, and then sold to a subsequent buyer as Terry mentioned which is also a dutiable transaction with stamp duty applied. The government likes to get its hand in the pie whenever it can.

    Though I think there may be a loophole where you can get out of paying stamp duty if it is onsold for no additional consideration (i.e at the same price). Maybe Terry may be able to confirm?

    Cheers

    Tom

    PLC | Phoenix Loan Consulting
    Email Me | Phone Me

    Melbourne based Mortgage Broker | Making Finance Simple

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190
    PLC wrote:

    Though I think there may be a loophole where you can get out of paying stamp duty if it is onsold for no additional consideration (i.e at the same price). Maybe Terry may be able to confirm?

    Cheers

    Tom

    Hi Tom.

    I have never heard of anything like this.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of PLCPLC
    Participant
    @plc
    Join Date: 2012
    Post Count: 400

    Hi Terry,

    My sister bought vacant land last year which was onsold to her before settlement. The person who initially purchased it (about a month or so before) wanted to sell at a minor profit (which my sister accepted), but found out that if they did that, they would be liable for stamp duty which would have meant a loss. However they were informed if they onsold at the same price, then they would not be liable for stamp duty, so it was passed on at the same price. At least that's what my sister was told. I find it strange that the original purchaser wouldn't have sold at the minor profit otherwise.

    I had a look and there is something in the Victorian Stamp Duties Act under Part 4A, 32C (3) which may support this claim. Obviously I'm not a lawyer and may have misinterpreted this.

    Cheers

    Tom

    PLC | Phoenix Loan Consulting
    Email Me | Phone Me

    Melbourne based Mortgage Broker | Making Finance Simple

    Profile photo of i_suni_sun
    Participant
    @i_sun
    Join Date: 2006
    Post Count: 4

    Thanks for sharing Tom ! yes

    I'll check with my solicitor regarding that.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190
    PLC wrote:
    Hi Terry,

    My sister bought vacant land last year which was onsold to her before settlement. The person who initially purchased it (about a month or so before) wanted to sell at a minor profit (which my sister accepted), but found out that if they did that, they would be liable for stamp duty which would have meant a loss. However they were informed if they onsold at the same price, then they would not be liable for stamp duty, so it was passed on at the same price. At least that's what my sister was told. I find it strange that the original purchaser wouldn't have sold at the minor profit otherwise.

    I had a look and there is something in the Victorian Stamp Duties Act under Part 4A, 32C (3) which may support this claim. Obviously I'm not a lawyer and may have misinterpreted this.

    Cheers

    Tom

    Thanks Tom,

    this is interesting

    http://www.austlii.edu.au/au/legis/vic/consol_act/da200093/s32c.html

    I think you may be correct in your interpretation. I don't know of any similar provisions in NSW either.

    The op should check this out with their lawyer. Point this section out to them if they say stamp is payable again.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of moxi10moxi10
    Participant
    @moxi10
    Join Date: 2010
    Post Count: 193

    In most cases the contract is "subject to finance", however there is usually a date, generally only a few weeks after initially signing the contract, by which time the purchaser must notify the vendor that they have organized their finance. Of course, there is no possibility of the banks guaranteeing to loan the money at the anticipated much later settlement date, so my understanding and personal experience leads me to believe that the purchaser has little choice other than to waive the right to the contract being subject to bank approved finance, at which point he no longer has the option of withdrawing from the purchase due to the lack of ability to complete finance. It seems to me to be a flawed system which exposes anyone signing an OTP contract to the risk of not being able to complete finance, even though their situation at the time of signing may have given them justifiable cause for full confidence in their ability to raise finance. The only certainty of completing finance is to have the entire amount in cash, otherwise there is always a risk that finance will not be attainable at settlement time. If I'm wrong about this point, I will be pleased to be corrected.

    Tony

    Profile photo of DerekDerek
    Member
    @derek
    Join Date: 2004
    Post Count: 3,544

    Hi Moxi,

    You are correct – OTP contracts are very often weighted very heavily in favour of the vendor. The issues you raise are pretty close to the mark. 

    In the current market banks are reluctant to lend to large developments unless there are significant number of pre-sales. This means unconditional OTP sales and the purchaser is potentially left high and dry if things go awry. 

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190
    moxi10 wrote:
    In most cases the contract is "subject to finance", however there is usually a date, generally only a few weeks after initially signing the contract, by which time the purchaser must notify the vendor that they have organized their finance. Of course, there is no possibility of the banks guaranteeing to loan the money at the anticipated much later settlement date, so my understanding and personal experience leads me to believe that the purchaser has little choice other than to waive the right to the contract being subject to bank approved finance, at which point he no longer has the option of withdrawing from the purchase due to the lack of ability to complete finance. It seems to me to be a flawed system which exposes anyone signing an OTP contract to the risk of not being able to complete finance, even though their situation at the time of signing may have given them justifiable cause for full confidence in their ability to raise finance. The only certainty of completing finance is to have the entire amount in cash, otherwise there is always a risk that finance will not be attainable at settlement time. If I'm wrong about this point, I will be pleased to be corrected.

    Tony

    I must disagree Tony. Most realestate contracts for the sale of land are not subject to finance. And for an off the plan sale they are virtually never subject to finance and couldn't be.

    Off the plan means the plan of sub-division is not registered therefore finance couldn't be approved until this happens. This would be about 2 weeks before settlement usually. No vendor is going to enter a contract with someone for 2 years with a clause giving them a way out 2 weeks before settlement. They couldn't find another buyer in time at this stage.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

Viewing 16 posts - 1 through 16 (of 16 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.