Tax and legal advice
Rolf Howard

Should you buy or renovate? Your legal rights and responsibilities

By Rolf Howard

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:

  1. 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.
  2. 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.
  3. 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.
  4. Pre-settlement preparation. Final figures may not be available until settlement. Bank some extra money to cover inspections, financing and miscellaneous items like photocopying.
  5. 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.
  6. 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.

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Rolf Howard

Rolf Howard

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.

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  ["title"]=>
  string(51) "Boost for investors as app sets up off-site bidding"
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  ["introtext"]=>
  string(144) "

Property investors are now able to identify and bid on auctions remotely using a new live-streaming functionality launched by Gavl.

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Called “Request an Auction”, the new functionality enables users to watch and bid on any Sydney or Melbourne auction remotely.

Through Gavl, prospective buyers are now able to register to bid on their preferred auction. The platform will obtain permission from the listing agent and confirm within 48 hours.

Vendors can also request to have their auctions broadcast to a larger buyer audience.

Co-founder Joel Smith said that auctions streamed on Gavl attract 47 per cent more viewers than traditional ones.

He said that Request an Auction will be valuable for remote buyers.

“Buyers are able to have Gavl attend any auction they nominate, so they will never have to miss out on an opportunity due to logistical complications in physically attending the auction.

“Vendors, too, have the opportunity to directly book an auction with us, so they can open up their event to buyers all around the world. With more potential buyers, they’re giving their property the chance to receive more bids and maximise their sales result.”

Mr Smith said that prior to the Request an Auction app, buyers were limited to what they could achieve through the Gavl technology.

Gavl is a live-streaming and bidding platform for real estate auctions.

Mr Smith said that it has streamed more than 6,000 auctions, which have achieved 3.5 million views from 50 countries.

Gavl’s Request an Auction function is currently being offered in Melbourne and Sydney only.

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Boost for investors as app sets up off-site bidding
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Having to split her time between Hong Kong and her original base of Sydney has not slowed Julia Tita’s goal of building a high-performance Australian property portfolio. Instead the resulting alterations to her strategy have positively impacted her investing success.

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Having recently purchased her 6th property, Julia joins host Tim Neary to discuss her journey, share her ups and downs over the years, and reveal her thoughts on why some properties are better than others.

Julia also explains why she no longer makes a move without the help of a buyer’s agent, why working with a strong team of specialists is extremely important and discloses her long-term property ambitions.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

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AREAS MENTIONED:

Eagleby
Charters Towers
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Bondi

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How a move to Hong Kong impacted Julia’s Australian property goals
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  ["id"]=>
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  ["title"]=>
  string(88) "‘Common’ referrer practice of being paid on both sides of the fence coming to an end"
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  string(246) "

The practice of property investment firms sharing undisclosed kickbacks among the supply chain involved in development sales will be outlawed in NSW on 1 July this year under the Real Estate Reform being handed down by regulators in NSW.

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Property commentator and valuer, Suburbanite’s Anna Porter, said the reform will address conflicts of interest.

She said they arise when a mortgage broker, accountant or financial planner receives part of the commission from the property firm, who receive their fees from the developer or seller.

“This puts the broker into a position by which they are being paid on both sides of the fence,” she said.

“Until now this has been a grey area and there was nothing stopping this practice.” 

Ms Porter said this has been a common practice in the industry.

"Some well-known mortgage broking firms openly admit to receiving $5,000–$10,000 per referral in their pocket.”

She also said this process has been going on for decades.

"Property investment firms commonly pass some of their commission on to the mortgage broker, accountant or financial planner as a reward to them for passing on the referral. This means that many brokers or financial service providers are making significant amounts of money just to refer on to a property firm, often totalling hundreds of thousands of dollars a year," Anna Porter said.

Ms Porter said the Property, Stock and Business Agents Amendment (Property Industry Reform) Bill 2017 will be in force from July this year, and will prohibit this practice unless the broker or referring partner also holds a real estate industry license.

"Under the new laws, if the broker takes a referral fee from the property firm, they will have to be a licensed real estate agent and also hold a corporation’s license,” she said. 

“Subsequently, every transaction that they receive a referral fee from, they will be putting their license up against the transaction and taking full liability for the conduct, practices and outcome of that transaction, even if they have little to do with the transaction; they are a party to it financially and therefore take as much risk as everyone else in the transaction.”

Mr Porter said where a referrer holds a real estate license, and receives a part of the sale commission, they may find themselves in breach of the ethical requirements under the act.

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‘Common’ referrer practice of being paid on both sides of the fence coming to an end

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