Property Transfer and Conveyancing
I am purchasing a property and about to sign the Contract of Sale and Form 1 (Cooling Off) document.
Should I obtain independent legal advice before signing?
Purchasing a property can be a very exciting time. However, along with the excitement comes an immense amount of legal paperwork to sign.
A lot of people, particularly first home owners, do not fully understand the content and legal implications of the documents that need to be signed throughout the buying process.
One of the first documents that needs to be signed is the Contract of Sale. It is important that buyers understand all the clauses in the Contract and that any required ‘subject to’ clauses are included to protect the buyers interest. For example, most people today obtain loans from financial institutions to assist with the restrictive purchase. It is important that the Contract is signed ‘subject to finance’ so that if problems arise throughout the loan process and you have not been successful in obtaining finance by the date specified in the contract, you are not contractually bound.
Some land, particularly in new housing estates, is also subject to encumbrances, which can place certain restrictions on what buyers can do with the land. It is important to receive legal advice on what those restrictions are prior to executing the Contract of Sale.
The Form 1 (Cooling Off document) outlines the particulars of the land, examples of which include mortgages, easements, covenants, leases, and heritage matters. Obtaining legal advice will ensure that you understand all the details that pertain to that particular property. It is also important buyers understand their cooling off rights and how to proceed if they wish to withdraw from the sale during that cooling off period.
I own farming land that has been in my family for generations. I want to transfer to my children whilst I am still alive but am concerned about the stamp duty costs.
When there is a conveyance of land in South Australia, it is very likely there will be stamp duty costs that will be applicable. However, there are some exemptions that may apply, the ‘Family Farm’ exemption being one of them.
The South Australian Stamp Duties Act 1923 (the “Act”) provides that you may be eligible for this exemption if:
1. the land is being transferred between natural persons who a r e relatives or a trustee for a relative;
2. the land you own is used wholly or mainly for the business of primary production;
3. the land is not less than 0.8 hectares in area;
4. the sole or principal business of the transferor (person transferring the land) is the business of
primary production; and
5. for a period of 12 months immediately before the date of transfer there was a business relationship between you and your children with respect to the use of the property for the business of primary production.
Some examples of the factors that are taken into account in determining whether a business relationship existed between the transferor (you) and transferee (your children) includes:
• A previous employment relationship between you both (regardless of the amount or form of remuneration);
• A share farming arrangement;
• The provision of assistance in the running of the business; and
• A partnership arrangement.
The exemption applies not only for a transfer to children but also to other relatives, examples of which include grandchildren, parents, siblings or spouses/ domestic partners. If you would like to see whether you are eligible for the ‘Family Farm’ stamp duty exemption contact Scammell & Co.
I intend buying a house property shortly. Should I buy it in my own name or should I set up a family trust to purchase it?
This question is one for your accountant rather than for a lawyer because the correct answer will be heavily influenced by your financial position. The following general comments may assist you.
• If you intend living in the house as your residence, setting up a trust is unlikely to benefit you because the trust will not be exempt from capital gains tax and land tax which are exemptions available to a person living in his or her own property.
• If you set up a trust to buy the house as a negatively geared investment property, you will not be able to claim tax losses against your own income because those losses will be carried forward in the trust. However, if you own a negatively geared property in your own name you will be able to claim those losses against your own income.
• If it is your long term objective to set up a portfolio of investment properties then a trust or a series of trusts can be useful, especially if you wish to keep mortgaged properties separate from unencumbered properties (thereby reducing your chances of losing everything during financially depressed times).
When establishing a trust you must keep in mind that the trust assets are not your own – they belong to the trust. If you treat those assets as your own and something goes wrong the liabilities and penalties can be most unpleasant.
There are too many potential benefits and pitfalls to describe in this column. To summarise, if you intend to establish and utilise a trust you need a plan, a strategy, discipline to implement supported by careful advice.
I am about to sell my house and have been advised the conveyancing process has now changed. Can you explain what these changes are?
As technology continues to advance, it is not surprising that conveyancing has now joined the online world. With the introduction of ‘electronic conveyancing’ comes many new processes that are now required to be done by the Registered Conveyancer or Solicitor acting on your behalf (‘the Practitioner’). Some of the changes are discussed below.
Stopping Fraudulent Property Transactions:
The Practitioner is required to take reasonable steps to verify the following on any transaction in relation to land:
1. Your identity as the vendor (‘seller’) in the conveyancing transaction. This will be done by the Practitioner meeting with you in a face to face appointment whereby you are required to bring along original identification documents (‘ID’). The Practitioner will be able to provide you with a checklist of what ID can be used.
2. Your authority to be a party to the instruments (transfer documentation) authorised by or under a client authorisation. This means the Practitioner will need to sight and make copies of documentation you provide to them, such as council rates or loan documentation, linking you to the land you are selling.
Legal Documents when Transferring Land
Under the previous requirements, you would have been required to sign a Memorandum of Transfer (‘Transfer’). The new requirements under electronic conveyancing differ in that, once the above processes have been completed,
your Practitioner will sign the Transfer on your behalf under the authority you give to them in a Client Authorisation form.
Duplicate Certificates of Title
The Lands Tiles Office is no longer issuing duplicate Certificates of Title (commonly referred to as Original Titles) and are instead issuing Confirmation Notices.
What are the stamp duty implications if I want to add my spouse or my adult child as a registered proprietor of my principal place of residence?
If you can satisfy section 71CB of the Stamp Duty Act then you will be able to add your spouse as a registered proprietor of your principal place of residence (‘residence’) without any stamp duty needing to be paid.
The requirements under section 71CB are:
1. The land needs to be transferred between two spouses who are married to each other.
2. The property being transferred needs to be the shared residence between you both as spouses. Shared residence means your principal place of residence of which one or both of you are the owner(s).
3. The property does not include premises that form part of industrial or commercial premises or land used for primary production.
Even if your adult child will not be paying any consideration (money) to be added as a registered proprietor of your residence, it is likely that stamp duty will still be payable on the portion of the land that is being conveyed.
Stamp duty is charged using the conveyance rate of stamp duty on the market value of the interest being conveyed as at the date of conveyance. Therefore, if the Registrar General’s current market value of your property is $300,000.00 and the interest being transferred to your adult child equates to 50% of the property, stamp duty will be paid on $150,000.00. In this example the estimate of stamp duty payable would be $4,830.00. There would also be registration fees that need to be paid to the Lands Titles Office.
Contact Scammell & Co. today to discuss the potential legal and taxation consequences of adding another person(s) as a registered proprietor of your residence.
My investment property is currently tenanted. I need confirmation re when the residential tenancy agreement can be terminated. The lease is for a fixed term of 12 months but the tenant has only been living there for 7 months.
If you intend to see out the duration of the fixed term then you must give notice of termination of the agreement at least 28 days prior to the end of the tenancy. You do not need to provide a reason for termination.
If the tenant breaches the tenancy agreement then it is likely you will have grounds for terminating the tenancy. Examples of a breach of tenancy include the tenant not paying rent or damaging the property. Depending on the type of breach, will determine the steps needed to be taken to terminate the tenancy. Some breaches will involve you providing the tenant with a notice requiring them to remedy the breach within a certain time.
It is important you obtain legal advice to ensure you comply with the correct notice period as different breaches may have different notice requirements. Other breaches may require you to apply to the South Australian Civil and Administrative Tribunal (SACAT) for an ordering terminating the tenancy.
If the tenant has not breached a term of the tenancy agreement then generally the agreement cannot be terminated by the landlord. However, there are exceptions to this.
If you terminate the agreement but the tenant does not leave as required then you will need to apply to SACAT for an order of vacant possession of the premises. You cannot evict the tenant. If the property is destroyed or rendered uninhabitable or ceases to be lawfully usable for residential purposes then you can terminate the agreement immediately by giving the tenant written notice. An example of when this might occur is after a natural disaster such as a bushfire.
My childhood friend wants to rent my investment property. He is trustworthy so is it really necessary to have a written residential tenancy agreement in place when we have agreed on everything verbally?
As lawyers, it is unfortunate that we see too many friendships or family relationships break down over disputes in relation to tenancy agreements. This could be due to many reasons such as the tenant not paying their rent, keeping unauthorised pets at the property and not keeping the property in a satisfactory condition.
Even though a residential tenancy agreement can be verbal or implied, it is always best to set out the terms of the agreement in writing in the form of a lease.
Having a lease can assist to avoid future conflict between the landlord and tenant by providing clarity as to the terms of the agreement. For example, the lease will outline:
1. The term of the lease (e.g. 6 months or 12 months);
2. Amount of rent to be paid;
3. The frequency rent is to be paid (i.e. weekly, fortnightly, monthly);
4. How the rent is to be paid;
5. The amount of bond;
6. Who is responsible for rates and water supply charges;
7. Who is responsible for insurance of the premises and the contents;
8. Any other terms, such as whether pets are allowed.
It is important to note that every tenancy agreement, whether in writing or not, has implied terms that are outlined in legislation. Examples include quiet enjoyment of the premises by the tenant and no alteration of the premises without written consent from the landlord.
Most agreements should also outline the terms regarding termination of the lease such as termination at the end of a fixed term, termination by landlord or tenant for breach of agreement and termination for rent arrears.