The 2015 real estate season is about to kick off and you may be in the market to purchase a property, whether for yourself to live in or as an investment. Before you head out to an inspection next weekend, or sign a contract of sale, please keep the following list of tips in mind.
1. List all fixtures/extras in the contract. Anything not physically bolted down is considered a chattel, not a fixture, and could be removed by the vendor. To avoid any doubt, list removable items in the contract. These include dishwashers, free-standing ovens, pool equipment, mirrors, mantel pieces, garden sheds, pot plants and farm equipment. Vendors have been known to remove free-standing dishwashers and ovens before settlement. And be on the lookout for anything you might be buying with the property which is not particularly desirable. I recently reviewed a contract where a daggy sofa bed located in an attic-style room was included in the sale, probably because it was almost physically impossible to remove it!
2. Read the Owners Corporation rules. Owners Corporations, or Body Corporates, own and manage the common property in subdivisions. Each owner pays a contribution to the maintenance of the common property and shared services provided to the owners, such as gardening and caretaking. Some large apartment developments have more than one Owners Corporation, especially where there are carparks, gyms and swimming pools. Every Owners Corporation has rules; if they don’t make their own rules the default legislative rules apply. Always carefully read through the OC rules in the contract, to see if they are something you or your tenant could live with. Last week I read a set of rules that prohibited any pets, no exceptions. Other rules state a limit on the number of pets and even the weight of dogs!
3. Be careful with off-the-plan purchases. Even though the real estate agent may say the building will be finished next year, the contract could actually allow for five years until completion. If you sign it, you’re stuck with it. Remember that you have limited control over fixtures and fittings: aim to specify as much as possible in the contract. The vendor usually has the right to substitute fittings for similar brands and quality, so it’s important to list benchmark brand names. The vendor can also generally make minor variations to your apartment, such as reducing the size by a few square metres. This is risky for one-bedroom apartments: if they are too small, you may struggle to obtain finance. Check with your lender before signing any contract.
4. Be wary of finance on solar panels, newly-renovated kitchens and new swimming pools and spas. These could have been obtained by the vendor on finance or a hire-purchase arrangement. The vendor may not necessarily own them and this will need to be covered off in the contract of sale, particularly in relation to the Personal Property Securities Register, which is a national database of items secured by finance, including vehicles (but not real estate). The last thing you want is for a financier to be overlooked and then your solar panels are repossessed.
5. Consider obtaining building and pest inspections. Older period homes may have hidden issues with foundations and roofing, as well as termite infestation. Spending a few hundred dollars on a building and/or pest report could save you a fortune if you avoid buying an issue-plagued home. Blocks of flats built in the 60s and 70s will now (if they haven’t already) require their windows to be replaced due to rotting. Read the Owners Corporations Annual General Meeting minutes carefully to see if this has already occurred or is on the cards. Look at how much money the OC has in the bank. Will you be required to contribute to major capital works in the future? Look out for the condition of driveway concrete and stairwell carpets too.
Forewarned is forearmed!
Note: the above is general information and should not be considered as legal advice.
25 January 2015
First published in Property Observer, 6 October 2014