When it comes to weighing up whether to buy or renovate, TV shows like Love It or List It typically hype the tension between cost and profit potential. In real life, it’s not just about the money, nor is the process as quick as it may seem on television.
A host of other issues such as the neighbourhood, whether the property is intended as a family home or an investment, and even sentimental value, will likely play a role.
Above all, savvy property owners should be aware of the legal implications of either choice before choosing whether to buy or renovate.
Renovation – what could possibly go wrong?
Unless you’re just touching up the paint, the answer is “lots.” Pay particular attention to fences, noise, pollution, land use and nuisance. As always, an ounce of prevention is worth a pound of cure.
Adjoining land owners generally share the cost of building and maintaining a fence. Pre-approval by the Council may be necessary, and the Council may regulate height and materials to be used. Intractable disputes may have to be resolved by the Land and Environment Court.
Renovation is messy and noisy, but good site management and time restrictions on the use of power tools may help to avoid disputes. Be aware of recycling, litter and sediment controls and the need for asbestos and lead paint remediation in older properties.
Before any alterations that change the use of land, renovators must apply for consent from the Council. Adjoining owners usually have the opportunity to inspect plans and make objections. A continuing activity or natural occurrence on a property that is unreasonable and preventable, like excessive water runoff, may be a legal nuisance. Renovators should monitor and attempt to address unintended consequences before they become legal problems.
Legal basics of selling and buying
If you list but you intend on staying in the property market, you will also likely buy. Actually, you may renovate, sell and buy. That’s three transactions.
In a sale, the buyer generally has the heavier lift, but since you may do both, this is what you need to know about the buying and selling (or conveyancing) side of things. The conveyancing process typically goes through six steps:
- The seller’s real estate agent or conveyancer prepares the contract of sale. The buyer’s conveyancer reviews the contract and negotiates any changes before the parties sign and the buyer pays the deposit.
- Searches and inspections. Most contracts are contingent on the satisfaction of certain conditions concerning pest inspections financing, and a variety of property searches. The buyer’s obligation is not fixed until all contract conditions are satisfied.
- In residential purchases, prospective buyers may seek a home loan pre-approval to assess borrowing capacity. If you are a buyer, it’s always good to know what you can buy.
- Pre-settlement preparation. Final figures may not be available until settlement. Bank some extra money to cover inspections, financing and miscellaneous items like photocopying.
- On settlement day, buyer, seller and lender exchange legal documents and the remaining purchase price is paid. There may be final adjustments for taxes, rental fees and the release of existing mortgages. See note above about banking a little extra.
- Post-settlement matters. After settlement, the buyer’s lender will notify relevant authorities of the change in ownership and lodge transfer documents lodged with the Land Titles Office.
Ultimately, the choice to renovate or buy is yours. The important thing to remember is that there is much more to consider – including the legal considerations – than just the cost and profit potential.
About the Blogger
Rolf is Managing Partner of Owen Hodge Lawyers. He has been in the legal practice since 1986 and a partner of Owen Hodge Lawyers since 1992. Rolf focuses on assisting clients to proactively manage legal responsibilities and opportunities to achieve competitive advantage.
Rolf concentrates on business planning and formation, directors’ duties, corporate governance, fund raising and business succession. His major interest is to assist business owners and their financial advisers plan and implement strategies to build and exit from successful businesses.