Twelve things most people don’t know about buying property

There are many quirks and surprising elements to property purchasing. Here are just twelve things that most people don’t know about.

1.You don’t get a cooling off period if you sign the contract for a commercial property. There are other reasons why a buyer may not get a cooling off period. These include:

• you bought the property at or within 3 clear business days before or after a publicly advertised auction; or

• the property is used primarily for industrial or commercial purposes; or

• the property is more than 20 hectares in size and is used primarily for farming; or

• you and the vendor have previously signed a contract for the sale of the same land in substantially the same terms; or

• you are an estate agent or a corporate body.

2. An auctioneer must advise the crowd of an alternative auction schedule if one or more vendors are planning to bid on the property. This also needs to be declared in the paperwork that is on display for th4 half hour prior to the auction commencement. In Victoria, a typical auction schedule is schedule 1, signalling that an auctioneer may make a vendor bid. Conversely, a schedule 2 auction would apply for a property co-owned by two vendors, with one of the vendors intending to bid to purchase the property from their co-owner. That vendor may make bids personally, or through a representative, but not through the auctioneer. And a schedule 3 auction relates to a property that is co-owned by more than two vendors, in which one or more (but not all) of the vendors intend to bid to purchase the property at this auction. They may make bids themselves, or through a representative, but not through the auctioneer. There are other auction schedules for other varying circumstances.

3. Banks can say no to a particular property in a building if they have reached their exposure limit in that building. The purchaser may have obtained reapproval, but in most pre-approvals, lenders specify the conditions of the loan in the pre-approval documentation. One common condition is “acceptable security”. A security is deemed unacceptable if the lender has a cap on the number of securities within the development that they are prepared to hold.

4. Some Owners Corporations won’t allow pets in the building. Without a thorough legal review and review of the OC rules and AGM minutes, unknowing buyers could find out the hard way that Garfield isn’t actually permitted to move in. If documented, an OC has the power to force an owner to move their pet out. The same applies to renters too.

5. You can claim land that doesn’t belong to you if you satisfy the requirements for an adverse possession claim. “Adverse possession is a legal rule that enables the occupier of a piece of land to obtain ownership of it, provided they can prove uninterrupted and exclusive possession of the land for at least 15 years.” (Source: Land.vic.gov.au) Such claims require documentation, (often including statutory declarations from past owners), but there are limitations to an adverse possession claim though. For example, one cannot claim adverse possession against the crown.

6. An auctioneer can refuse a legitimate bid. Whether it be a smaller bid increment than they are calling for, or a bidder that has conducted themselves poorly, the auctioneer can sell (or pass in)the property to a buyer with a lesser bid should they choose. I can recall many situations where I have seen this happen, and a particular auction in 2020 comes to mind. A bidder refused increase his bid by the increment being called for. Instead of placing a ten thousand dollar bid, he adhered to his five thousand dollar bid. The auctioneer passed the property in to me as a result and my opponent bidder was devastated.

7. You can have a 1% share in a property. The methodology to apply in order to nominate a specific share is to sign the contract as ‘tenants in common‘, (as opposed to joint purchasers.

8. Your home insurance may be void if there are illegal works that the previous vendor did. Illegal works range from pergolas and decks, all the way through to renovations and extensions. Title insurance can sometimes help, but this is determined on a case by case basis.

9. You can claim your investment property land tax as a deductable expense against your Federal income tax.

10. A buyer can lose their deposit and be sued for any damages if they cannot settle the purchase. If a buyer fails to settle their purchase on time, a vendor can serve a rescission notice, (also known as a default notice).

11. You cannot buy a stratum property with a 5% deposit. In fact, most buyers can’t buy a stratum property with anything less than a 20% deposit. And some could require as much as a 40% deposit depending on the lender and the loan product.

12. A developer can vary the inclusions and/or the floor plan for a unit after a buyer has already purchased the property off the plan. While any variations need to be within a particular tolerance, some changes can be quite distressing for a buyer.

The world of property indeed has plenty of quirks and surprises, but buyers can safeguard against many of these by obtaining a thorough legal review by a qualified legal professional.