With house prices in Melbourne unaffordable for many, buying land and building a house in a new estate is another option.
Here are my top three legal tips:
Understand the sunset clause
The selling agent may say that the land will be ready to settle in six months’ time. But the contract may give the vendor two years or more to complete the subdivision (the “sunset clause”), and there’s nothing you can do to speed that up. Be conservative with your expectations of when the land will be ready; in my experience, most land releases run at least a couple of months late due to bureaucratic delays. Be careful not to lock in a builder too early, or their pricing will change if the land settlement is too far away.
Study your chosen lot carefully
Not all lots in a new estate are equal. Some may have restrictions on how many storeys are permissible. Some may have significant water easements that restrict construction. Study the proposed plan of subdivision carefully and ensure you understand any special conditions in the contract that restrict the way lots can be used. Legal advice about this is essential. There will also be design and building restrictions, to ensure you build a house that is in keeping with the look and feel of the estate. Even things like the size of the fence and letterbox may have strict requirements.
Watch out for hidden charges
If you decide to put the title in someone else’s name (a “nomination”) you will probably need to pay the vendor a fee of several hundred dollars. This will be buried in the special conditions of the contract. There may be additional charges for landscaping, and developers also tend to exclude themselves from any shared responsibility for fencing costs, even if they still own unsold lots in an estate.
Remember to always obtain legal advice on a land contract BEFORE you sign it.