Buying or Selling Property

The cooling off period allows a purchaser to terminate a contract for the purchase of a residential property within 3 clear business days from the day on which the purchaser signs that contract. Purchasers who exercise their rights to cool off are entitled to a refund of the deposit less the greater of $100.00 or 0.2% of the purchase price. The vendor may retain this penalty.

A cooling off period is not available in the following situations:

• If the contract is signed at auction or 3 clear business days before or after an auction;
• If the parties have previously entered into a Contract for the property;
• If the purchaser received independent legal advice before signing the contract; or
• If the purchaser is an estate agent or a corporate body (e.g. a company).

The word caveat means "beware" and lodging a caveat over a property is a method of giving notice to anyone who wants to deal with the property that someone other than the registered proprietor has a prior interest. Lodging a caveat will also prevent dealings (like transfers of land and mortgages) from being registered without your consent.

A caveat should be lodged as soon as the purchaser's offer has been accepted by the vendor. Sometimes, however, a contract of sale will prohibit the lodging of a caveat. As such, a purchaser should obtain legal advice before lodging a caveat.

There are also some other circumstances in which a person may have a right to lodge a caveat over the title to another person's property and may wish to do so to ensure no dealings are registered with respect to the property. It is extremely important that you ensure that you have a caveatable interest before lodging a caveat, as the caveat can be removed if it is shown that no caveatable interest exists, and penalties may apply.

If you wish to lodge a caveat, legal advice should always be sought.

Section 32 of the Sale of Land Act 1962 requires a vendor to provide to a purchaser a statement that discloses information about the property prior to entering into a contract. The information contained in a Vendor's Statement varies depending on the type of property being purchased but generally includes information such as:

• particulars of any building permits relevant to the land;
• particulars of any owner-builder insurance and report which lists any defects as required under the Building Act 1993;
• details of any registered or unregistered easement, covenant, caveat, charges or other similar restriction which affects the property and any breach of these restrictions, even where they do not appear on the title;
• particulars of the relevant planning instruments and information;
• details of outgoings affecting the property;
• particulars of any notices, orders, declarations, reports or recommendations of a public authority or government department affecting the property, which includes matters such as fencing, road-widening and sewerage;
• advice as to road access if there is no access to the property by road;
• owners corporation information; and
• a copy of any applicable lease.

In addition, to the information listed above, the vendor is required to attach certain documents to the Vendors Statement including:

• a copy of a search of the Certificate of Title;
• evidence of the vendor's right to sell;
• a copies of relevant plans; and
• if the land is affected by an owners corporation, a copy of the owners corporation certificate and all relevant documents such as a copy of the rules and a copy of all resolutions made at the last general meeting.

The Vendor's Statement should be prepared by a qualified practitioner to ensure that the information contained in the Statement is correct and all relevant information for the property being sold by the vendor is provided. Where the vendor fails to meet these requirements, the purchaser may terminate the contract at any time before they are entitled to the title and possession of the property (which usually occurs at settlement). In the situation that a vendor knowingly or recklessly provides false information or fails to provide all the relevant information required the vendor may be found to have committed a criminal offence and be liable for fines.

The contract should specify whether the purchaser is entitled to vacant possession of the property or receipts of rents and profits at settlement. If the Purchaser is entitled to vacant possession and the property is leased, the vendor must terminate the lease in sufficient time to ensure that the tenant will have left the property by settlement date. In these circumstances, care should be taken to ensure that the obligations of the landlord under the Residential Tenancies Act 1997 have been complied with. This Act contains a number of requirements in relation to termination of a residential lease.

If the contract provides that the purchaser is entitled to the receipt of rents and profits, the lease continues after settlement date. In this situation, the purchaser is required to observe and perform and be bound by the obligations of the landlord under the lease from settlement, and shall be entitled to the receipt of rents and profits from the date of settlement.

Should a purchaser want to terminate the lease, legal advice should be obtained as notice periods to end a tenancy may vary depending on the lease in effect.

GST is a tax imposed on the supply of goods and services. In property transactions the supplier is the vendor and they may be liable to pay GST on the transaction to the Government. A purchaser does not have a primary liability to pay GST as they are not making a supply, however the contract may provide that they must reimburse the vendor for the amount of the tax.

In determining whether GST applies to the sale of property it needs to be determined:

• whether the vendor is registered for GST or required to be registered for GST;
• whether an enterprise is being carried on by the vendor. An enterprise is carried on when activities are conducted on a regular and recurring basis with a view to making a profit; and
• whether the sale of the property is made in the course of that enterprise.

Where a residential home or vacant land is being sold by a vendor who is not carrying on an enterprise, the supply will generally be outside the GST net. However, GST will apply to supplies of vacant land, new residential premises and commercial premises where an enterprise is being carried on by the Vendor, if the Vendor is registered or required to be registered for GST.

When you are selling a property you need to know exactly where you stand with respect to GST, as otherwise you may find that you are required to remit a significant proportion of your sale monies to the Australian Tax Office. When you are buying you need to read the contract carefully to ensure whether the price in the contract is inclusive of GST, exclusive of GST or GST free.

If the price is GST inclusive, then the vendor cannot ask the purchaser for any money on top on the price nominated in the contract for GST. If the price is GST exclusive, then it may be that the purchaser can be required to pay an amount on top of the nominated price to the vendor to reimburse them for the GST which they are required to pay in relation to the sale.

Margin Scheme

The margin scheme is a method that allows for the reduction of GST calculated on the sale of a property. Normally GST is one-eleventh of the GST inclusive price of the supply. Under the margin scheme, the GST payable is one-eleventh of the of the sale price less the original purchase price, or the value of the land as at 30 June 2000, if the land has not been sold since that date.

For the margin scheme to apply to a transaction the parties must agree in writing to apply the margin at or before making the supply and other pre-conditions must also be met. Not all properties are able to be sold on the margin scheme. The application of the margin scheme is an important issue for both the supplier and the recipient. The Purchaser is not entitled to claim any input tax credits where they have purchased the property and the margin scheme has been used to calculate the GST applicable.

As the application of GST is a complex area the parties should obtain legal advice on the implications of the transaction before signing the contract.

A restrictive covenant is a restriction on the way land may be used. A restrictive covenant is created through a deed of agreement between two or more parties, usually agreed to in the contract and recorded on the Transfer of Land document.

Section 88(1) of the Transfer of Land Act 1958 provides that the burden of a restrictive covenant may be recorded on the Certificate of Title. For the covenant to be registered on the title it must be negative and prohibit the performance of specified acts, must be given for the benefit of another's land, must touch and concern the land and must be intend to run with the land. If the covenant meets these requirements it will usually bind all successors in title.

Modern restrictive covenants often include prohibitions against building more than one house on a lot. Older restrictive covenants often prohibit the removal of soil or clay or other kinds of excavations not associated with the construction of a dwelling.

If you are interested in purchasing a property and it has a restrictive covenant registered on the title or mentioned in the contract, you should seek legal advice to ensure that you may use the property as you intend. Varying or removing such restrictions is a complicated matter.

A restriction on a plan of subdivision also aims to control the use and development of the land, and is very similar to a restrictive covenant. For example, a restriction may limit the height of buildings or the distance a building may be erected from the street corner or boundary.

A restriction on a plan is very similar to a restrictive covenant except that it is created when the plan of subdivision is registered, rather than being created on a transfer of land document.

If you are interested in purchasing a property and it has a restriction on the plan, you should seek legal advice to ensure that you may use the property as you intend. Varying or removing such restrictions is a complicated matter.

An owner-builder must not carry out domestic building work on his or her land or in respect of the building on the land, if the cost of the work is estimated to be more than $12,000.00, unless the owner has been issued with a certificate of consent for the work, is a registered builder or architect, the Director of Housing or is carrying out the work with an emergency order, or a building order or notice.

An owner-builder who wishes to sell a domestic property within 6 years and 6 months after the completion date of the building works must obtain insurance where domestic building works have been carried out and the cost of the works are more than $12,000.00. A failure to obtain insurance may result in the owner-builder be found to have committed a criminal offence and be liable for fines. In addition, the purchaser may be able to avoid the contract before settlement.

The owner-builder must provide certain warranties pursuant to the legislation in the contract of sale and where the owner-builder is not a registered builder a report listing any building defects is required, however if the owner-builder is a registered builder there is no requirement to provide a report to the purchaser. The defects report must be obtained no more than 6 months before the contract is signed. The insurance does not usually cover the specified defects. Failure to meet the warranty or report requirements may also result in the purchaser being able to avoid the contract before settlement.

An owner-builder who wishes to sell a commercial building within 6 years and 6 months after the completion date of the building works must obtain a defects report, where the owner-builder is not a registered builder. Insurance is required where the commercial building has domestic building works carried out and those works are valued at more than $12,000.00. Where the works fall below the monetary threshold and/or outside the definition of domestic building work, no insurance is required.

Bodies Corporate that existed prior to December 2007 are now known as Owners Corporations and are governed by the Owners Corporation Act 2006. An Owners Corporation exists where the plan of subdivision contains common property such as pathways, driveways, stairs, lifts and lobbies. However, sometimes an Owners Corporation exists where there is no common property.

An Owners Corporation is a legal entity that is created to collectively manage the common property by undertaking the following:

• repairing and maintaining the common property, fixtures and services;
• general management and administrative functions associated with the land and building;
• maintaining relevant insurances;
• ensuring members comply with the rules and regulations of the corporation; and
• providing Owners Corporation Certificates.

Not all Owners Corporation fees and levies are adjustable at settlement. You should seek advice about such fees before entering into a contract of sale as the treatment of each fee or levy can have a substantial impact on the amount and distribution of settlement monies.

Special care should be taken to read and understand the contract in this regard. Where there are significant fees and levies you should understand who takes the responsibility for these costs before you sign the contract.

An Owners Corporation must have public liability insurance for the common property for a minimum amount set by the Act and reinstatement and replacement insurance for all buildings on the common property. An Owners corporation may take out additional public liability insurance and reinstatement and replacement insurance to cover any insurable interest in the common property or relating to the performance of its function and conduct of its office bearers.

Each owner of property in the Owners Corporation will be liable for a proportion of the insurance costs which is calculated on the lot liability. Where there is no common property or there are only 2 lots in the subdivision, the Owners Corporation may resolve that each lot owners must arrange for their own insurance in accordance with the Act.

It is important to note that a person cannot sell a lot affected by an Owners Corporation unless the vendor or the Owners Corporation has a current insurance policy in accordance with the Act. Where a lot is sold without such insurance the purchaser may avoid the sale at any time before the contract is completed.

An accumulated fund is a fund into which the members of the Owners Corporation contribute money based on lot liability for purposes such as maintenance, repairs and capital improvements. Care should be taken to ensure you understand whether you are to obtain the benefit of such a fund when purchasing.

The purchaser will often have a legal practitioner, conveyancer or estate agent hold deposit moneys payable to the vendor in the sale of property until settlement. However, in certain circumstances the purchaser may authorise the release of the deposit to the vendor prior to settlement.

Early release of the deposit is possible where:

• the contract is not subject to any condition enuring for the benefit of the purchaser;
• the purchaser has accepted title or is deemed to have accepted title;
• the vendor has given the purchaser notice in writing setting out if there is a mortgage over the land and the particulars of the mortgage and particulars of any caveats lodged on the land;
• the purchaser is satisfied with the particulars provided in the notice from the vendor; and
• the purchaser gives the vendor a signed notice stating that they are satisfied (or is deemed to be satisfied under the Act by the passage of time without objection).

As such, the notice provided by the vendor must contain details of any mortgage or caveat affecting the property. The purchaser should be satisfied that the amount owing against the property is low enough to be covered by the balance of the purchase funds payable at settlement before consenting to the release.

Duty (also known as ‘stamp duty’) is a tax imposed on various transactions, including the transfer of land. Duty must be paid within a specified time after settlement. Unless an exemption applies, the purchase of property attracts duty and is charged based on the greater of:

• the market value of the property; or
• the consideration (price paid) including any GST.

Exemptions/Concessions

Principal Place of Residence Concession

A Principal Place of Residence Concession is available to applicants who enter into a contract of sale on or after 1 January 2007, provided that the land purchased is intended to be occupied as the principal place of residence by the purchaser within 12 months of becoming entitled to possession of the property, and the applicant does reside in the property for a continuous period of at least 12 months.

The duty exemptions vary depending on the price of the property and the date upon which the contract was entered into.

An applicant who enters into a contract on or after 6 May 2008 and is eligible for the PPR concession may also be eligible for the First Home Bonus, where the requirements of the Bonus are complied with. Whereas a Purchaser who enters into a Contract from 1 January 2007 to 5 May 2008 must choose between the two grants.

Pension and Concession Cardholders Concessions

Individuals holding a Centrelink or Department of Veteran Affairs Pensioner Concession Card or Health Care Card, or a Department of Veteran Affairs Gold Card are all eligible for the duty concession, provided the applicant has not previously received the concession, the property was purchased for market value and the applicant intends to reside in the home as the principal place of residence.

The duty exemptions depend on the value of the house and the land, the date upon which the contract is entered into, and whether there is a house on the land at the settlement date.

Eligible pensioners who also qualify for the First Home Bonus can choose to take either the Bonus or the pension concession. Pension and concession cardholders can also benefit from the Principal Place of Residence Stamp Duty Concession as discussed above.

First Home Owners with Family Exemption or Concession

A first home owner with a family who enters into a contract on or after 1 January 2006 may be entitled to receive an exemption or concession from duty, provided the property was purchased for market value, the applicant intends to reside in the home as the principal place of residence, the applicant has a dependant child at the date of entering the contract or building contract or within 11 months of that date, and have not previously owned a home anywhere in Australia which was used as a principal place of residence.

Eligibility is determined by reference to the value of the house and land.

Eligible first home owners can choose to take either the First Home Owners Bonus or the first home owner concession. First home owners will automatically benefit from the Principal Place of Residence Stamp Duty Concession as discussed above.

First Home Owner Grant

The First Home Owner Grant of $7,000.00 is available to first homebuyers in Victoria who between 1 July 2000 and 31 December 2009 (inclusive) enter into a contract of sale or agreement for the purchase of a new, established or off the plan home, a contract for the building of a home on the applicants' land and in the case of an owner builder, commencement of construction (laying of foundations) of a home on their land.  Form 1 January 2010 until 30 June 2020 (inclusive) the Grant is restricted to eligible applicants who purchase an existing or new home, where the property value does not exceed $600,000.00 and for homes being constructed, the total contract costs of the building works must not exceed $600,000.00. The Grant is an on-going scheme with no end date yet specified.

To receive the Grant applicants must:

1. not have previously received a First Home Owners Grant in any State or Territory of Australia;
2. not have owned residential property, either jointly, separately or with some other person prior to 1 July 2000, in any State or Territory of Australia;
3. not have occupied for a continuous period of at least 6 months, a residential property in which a relevant interest was acquired on or after 1 July 2000 in any State or Territory of Australia;
4. be a natural person (i.e. not a company or trust);
5. be at least 18 years of age at the time of settlement or completion of construction;
6. at least one applicant must be a permanent resident or Australian citizen at the time of settlement or completion of construction of the home; and
7. at least one applicant must occupy the home as the principal place of residence for a continuous period of at least 6 months, commencing within 12 months of either settlement or completion of construction of the home.

First Home Bonus

An applicant that is eligible to receive the First Home Owners Grant may also be entitled to receive an additional payment known as the First Home Bonus.  For contracts entered into to purchase or build a home, or build a home as an owner builder between 1 May 2004 and 30 June 2009 (inclusive) a Bonus of $3,000.00 for existing homes or $5,000.00 for newly constructed homes is available.  To receive the Bonus the first home buyer must meet the eligibility criteria of the Grant and the consideration for the established and new home and the total contracts costs of the building works must not exceed $500,000.00.

From 1 July 2009 until 30 June 2010 (inclusive) the Bonus is altered to $2,000.00 for existing homes or $11,000.00 for newly constructed homes and the price restriction of $500,000.00 for the value of the property is increased to $600,000.00.

Regional First Home Bonus

The Regional First Home Bonus is on top of the First Home Owner Grant and the First Home Bonus. The Regional Bonus of $3,000.00 is available to first homebuyers who enter into a contract to buy a newly constructed home in regional Victoia between 6 May 2008 and 30 June 2009 (inclusive).  This includes house and land packages.  As with the Bonus, the consideration for the established or new home and the total contract costs of the building works must not exceed $500,000.00.

From 1 July 2009 until 30 June 2010 (inclusive) the Regional Bonus is increased to $4,500.00 and the price restriction of $500,000.00 for the value of the property is increased to $600,000.00.

To receive the Regional Bonus purchases must be located in the following regional municipalities and alpine resorts:

Regional Municipalities

Alpine Resorts

• Falls Creek
• Lake Mountain
• Mount Baw Baw
• Mount Buller
• Mount Hotham
• Mount Stirling
• Mount Torbreck

First Home Owner Boost

The First Home Owner Boost Scheme supplements the State Government's first home buyer initiatives.  The Boost provides $7,000.00 to first homebuyers who purchase an established home and $14,000.00 to first homebuyers who build a new home or purchase a newly constructed home, where contracts are entered into between 14 October 2008 and 30 September 2009.

The First Home Owners Boost will then be phased down, so that first homebuyers entering into contracts on 1 October 2009 until 31 December 2009 (inclusive) will receive $3,500.00 to purchase an established home and $7,000.00 for a newly constructed home or new home.  After 31 December 2009 the First Home Owners Boost will cease.

As such, a purchaser who enters into a contract to buy an established home:

1. from 14 October 2008 until 30 June 2009 may be entitled to receive a total of $17,000.00 in benefits, which includes $7,000.00 from the Grant, $3,000.00 from the Bonus and $7,000.00  fromt the Boost;
2. from 1 July 2009 until 30 September 2009 (inclusive) may be entitled to receive $7,000.00 from the Grant, $2,000.00 from the Bonus and $7,000.00 from the Boost, a total of $16,000.00 in benefits;
3. from 1 October 2009 until 31 December 2009 (inclusive) may be entitled to receive a total of $12,500.00 in benefits, which includes $7,000.00 from the Grant, $2,000.00 from the Bonus and $3,500.00 from the Boost;
4. from 1 January 2010 until 30 June 2010 (inclusive) may be entitled to receive $7,000.00 from the Grant and $2,000.00 from the Bonus, a total of $9,000.00 in benefits.

A purchaser who enters into a contact to buy a newly constructed home or build a newly construced home in Metropolitan Victoria:

1. from 14 October 2008 until 30 June 2009 may be entitled to receive a total of $26,000.00 in benefits, which includes $7,000.00 from the Grant, $5,000.00 from the Bonus and $14,000.00 from the Boost;
2. from 1 July 2009 until 30 September 2009 (inclusive) may be entitled to receive $7,000.00 from the Grant, $11,000.00 from the Bonus and $14,000.00 from the Boost, a total of $32,000.00 in benefits;
3. from 1 October 2009 until 31 December 2009 (inclusive) may be entitled to receive a total of $25,000.00 in benefits, which includes $7,000.00 from the Grant, $11,000.00 from the Bonus and $7,000.00 from the Boost;
4. from 1 January 2010 until 30 June 2010 (inclusive) may be entitled to receive $7,000.00 from the Grant, and $11,000.00 from the Bonus, a total of $18,00.00 in benefits.

A purchaser who enters into a contract to buy a newly constructed home or build a newly constructed home in Regional Victoria:

1. from 14 October 2008 until 30 June 2009 may be entitled to recieve a total of $29,000.00 in benefits, which includes $7,000.00 from the Grant, $5,000.00 fromt he Bonus, $14,000.00 from the Boost and $3,000.00 from the Regional Bonus;
2. from 1 July 2009 until 30 September 2009 (inclusive) may be entitled to receive $7,000.00 from the Grant, $11,000.00 from the Bonus, $14,000.00 from the Boost and $4,500.00 from the Regional Bonus, a total of $36,500.00 in benefits;
3. from 1 October 2009 until 31 December 2009 (inclusive) may be entitled to receive a total of $29,500.00 in benefits, which includes $7,000.00 from the Grant, $11,000.00 from the Bonus, $7,000.00 from the Boost and $4,500.00 from the Regional Bonus;
4. from 1 January 2010 until 30 June 2010 (inclusive) may be entitled to recieve $7,000.00 from the Grant, $11,000.00 from the Bonus and $4,500.00 from the Regional Bonus, a total of $22,500.00 in benefits.

To be eligible to receive the Boost grant under the newly constructed home criteria, the home must be sold for the first time and must never have been previously occupied as a place of residence including occupation by the builder, a tenant or other occupant. Substantially renovated homes, where the entire building or substantially all of the building have been removed or replaced, may be considered as a new home, where the purchase is the first sale of the home since it was substantially renovated and the residence has not been occupied since the substantial renovations.

To be eligible for the Boost an applicant must meet the requirements of the First Home Owners Grant and the following additional criteria:

Established Homes

1. The applicant must have entered into a contract to purchase an established home between 14 October 2008 and 31 December 2009 (inclusive).

New Homes Being Purchased Under a Contract

1. The applicant must have entered into a contract to purchase a newly constructed home between 14 October 2008 and 31 December 2009 (inclusive).

New Homes Being Built Under a Building Contract

1. The applicant must have entered into a contract to build a home between 14 October 2008 and 31 December 2009 (inclusive);
2. construction must commence within 26 weeks of the date of the contract; and
3. the contract must specify a completion date for building work within 18 months of the date of construction commencing or construction must be completed within 18 months of the construction commencing.

New Homes Being Purchased ‘Off the Plan’

1. The applicant must have entered into a contract between 14 October 2008 and 31 December 2009 (inclusive); and
2. the contract must specify a completion date on or before 30 June 2011.

New homes being built by an owner builder

1. the construction (i.e. laying foundations) must commence between 14 October 2008 and 31 December 2009 (inclusive); and
2. construction must be completed within 18 months of the date of construction commencing.

Special land tax is a land tax imposed where land that used to be exempt from land tax ceases to be exempt under one or more of the following categories:

1. primary production land that is wholly or partly within the greater Melbourne area;
2. sporting, recreational or cultural land;
3. rooming houses;
4. residential care facilities and supported residential services;
5. caravan parks;
6. land owned by public statutory authority with a taxable value of more than $224,999.00; and
7. land used as a mine.

Special land tax is calculated at a rate of 5% of the taxable value of the land at the time of the change of use. Where land ceases to be exempt immediately upon or within 60 days of a change of ownership, special land tax is payable by the owner of the land before the change of ownership takes place. Outside of this timeframe the tax is payable by the owner of the land at the time of cessation of exemption (which will be the purchaser).

Care should be taken when buying and selling land to ensure it is clear if the responsibility for payment is to be different to that stated above.

The Local Government Act 1989 provides that land used for certain purposes are exempt from rates. This Act and the Cultural and Recreational Land Act 1963 allows councils to impose a maximum of five years back rates on urban farm land and a maximum of ten years back rates on recreational lands, where the properties have previously been exempt from rates but the use of the land has changed, resulting in the exemption being no longer applicable. For example, golf course land used for recreational purposes may have been exempt from rates for many years. If the golf course land is sold and that use is ceased, the council would be entitled to seek payment of an amount equivalent to the rates that would have been payable on that land if it had not been exempt for the previous 10 years. To make this calculation, it is assumed that the value of the land at the time the exempt use ceased is the value of the land for the previous 10 years. The back rates are levied immediately after the use of the land changes, and the owner of the land at that time will be liable.

The vendor of a property should disclose the potential for back rates to the purchaser in the Vendors Statement.

The Australian Government's approach to foreign investment is to encourage and welcome foreign investment as long as it is consistent with community interests and concerns. To balance these concerns the Government requires foreign citizens or companies who are looking into buying real estate, to apply to the Foreign Investment Review Board (FIRB).

A foreign person is a person who does not ordinarily reside in Australia. A foreign company is a company that is 15% owned by a foreign national or 40% owned by a number of foreign nationals. As such, Board approval is not required for acquisitions made by Australian citizens abroad, of property zoned residential by foreign nationals who hold permanent resident visas, or who are eligible to hold a special category visa such as New Zealand citizens and foreign persons purchasing as joint tenants with their Australian citizen spouse.

Where a foreigner or foreign company is trying to acquire an interest in real estate which includes urban land, an application must be submitted to the Board for its approval in the following situations:

• development of non-residential commercial real estate where the property is subject to a heritage listing, valued at $5 million or more;
• development of non-residential commercial real estate where the property is not subject to heritage listing, valued at $50 million or more;
• accommodation facilities;
• vacant real estate;
• residential real estate; or
• shares or units in Australian urban land corporations or trust estates.

If FIRB approval is given for a foreign citizen or company to buy vacant land or an existing property which is to be converted into residential property, approval is usually subject to specific conditions requiring continuous substantial construction to commence within 12 months, or 5 years in the case of commercial developments, of receiving that approval.

A foreign person or company should ensure when they are purchasing property that the contract of sale contains a clause saying that the contract is subject to the purchaser obtaining FIRB approval, unless approval is obtained prior to entering into the contract.

Where real estate is purchased by a foreign company or citizen without the prior approval of FIRB substantial monetary penalties may apply.

Ownership of property involves making periodic payments such as outgoings which include council rates, land tax, sewerage, drainage and parks service charges and owner's corporation fees. In addition to this, some properties generate income through rent.

When a contract is settled, a statement of adjustments is agreed upon by the parties. The statement of adjustments is a calculation in relation to each of the applicable outgoings to ensure that the vendor pays those outgoings up until settlement date and the purchaser pays for them after the settlement date. In relation to income, the adjustment ensures that the vendor obtains the income up to settlement and the purchaser obtains it after settlement.

The statement of adjustments is generally prepared by the purchaser and forwarded to the vendor for approval, a reasonable time before settlement. The statement will show the purchase price, deposit paid and pro-rata adjustments for outgoings and income. The actual calculation will depend on whether the outgoings have been paid and the income received, before settlement.

Most contracts provide for the payment of penalty interest if either party delays the payment of money due under the contract of sale.

Penalty interest is calculated on the balance of the funds due including any adjustments. Often the contract will refer to the rate set under the Penalty Interest Rates Act 1983, which is subject to variation. Other contracts will state a specific rate.

The term buying or selling "off the plan" means entering into a contract to purchase a property or selling a property prior to registration of the plan.

The main advantages to buying off the plan are:

• savings on duty, as duty is calculated on the value of the property (land and any buildings) at the date of the contract;
• possible tax benefits such as depreciation;
• the purchaser is able to acquire a property at the market price prior to completion, which may be lower than the market at completion;
• the purchaser may be able to select the fittings for the home subject to the contract; and
• the purchaser will have extra time to save money for future mortgage repayments as a deposit will be required at the time of signing the contract but the balance will usually only be required once construction is complete.

The advantages to selling off the plan are that the developer can raise capital for the project and continue development with the surety of a certain number of sales.

Off the plan sales are more complicated for both the buyer and seller. The Sale of Land Act 1962 creates a number of obligations for a vendor selling off the plan. These include disclosure of additional information not otherwise required. A purchaser buying off the plan should also read their contracts carefully and ensure they understand its conditions, as they will generally be longer and more complicated than a standard contract. If the contract relates to the sale of a house to be constructed, a certificate of insurance for defects may also be required to be provided.