Navigating The Legal Aspects Of Residential Property Investment

Investing in residential property is a significant decision that comes with numerous legal complexities that need to be taken into account. To navigate this with confidence, you need the services of expert residential property consultants who can guide you along the way towards a successful investment. 

Let’s take a brief look at some of the legal aspects of residential property investment that you should keep in mind as you move into the realm of becoming an owner.

What Are Your Rights As The Owner? 

Property owners have the legal right to possess a property, which means having the right to exert control over it directly. The property’s value is determined by its usefulness. If you own residential property, you have the right to store your belongings there, live there, amend the property, or rent it out. These usage rights are subject to various planning legislation and the rules of homeowner associations such as body corporates. You usually have the right to exclude others from your property. 

Finally, you have the right to transfer ownership of the property to someone else, whether temporarily or permanently. As the owner of the property, however, you will also be held responsible for all taxes and other legal obligations related to it. This includes real estate taxes and adherence to building codes and standards, subdivision and zoning laws, and any other applicable legislation or rules put forward by your local council and your homeowners association.

Do You Inherit Liability When You Buy Residential Property?

Generally, the rule of thumb is that anyone who purchases real estate will inherit all of the liabilities that relate to it. This might include liabilities linked to ongoing leases or other interests that are registered on the title. 

Normally, when land is bought, any pre-existing mortgages or charges relating to the property will be dismissed. However, certain liabilities relating to taxes will remain in place, as this is a statutory charge and will be inherited upon purchase. An application can be made to have this discharged upon acquisition in certain cases.

Generally, it’s a smart idea to insist that the contract of sale includes certain warranties that protect the buyer against unconfirmed or hidden liabilities related to the property. 

In the case where the seller is not able to be found or no longer exists, the current owner will become liable for any issues relating to the property, even if they were present before the purchase.

What About Backing Out Of The Purchase Contract?

If you decide to invest in residential property and sign a contract of sale but then wish to back out, there is generally a short period wherein this can be done with no significant legal ramifications. 

Most territories within Australia enforce a financial penalty for doing this. In the Australian Capital Territory, New South Wales and Queensland, you have up to five business days to back out of the contract, whereupon you will forfeit 0.25% of the sale price to the seller. 

In the Northern Territory, there is no penalty at all if you back out of the sale in under four business days. In South Australia, you have two business days to back out, but you will forfeit your holding deposit. Tasmania and Western Australia don’t allow for a cooling-off period at all, with no applicable penalty.

What About Taxation Obligations? 

Stamp duty is a form of taxation applied to all property purchases and is related to the value of the property, its location, and the type of home loan that you have. Stamp duty also differs depending on whether you’re a resident or non-resident.

You will have a certain amount of time to pay the stamp duty after making the purchase. If the stamp duty is not paid on time, you could face penalty fees.

In addition to stamp duty, every property owner is required to pay council rates and land tax, which are ongoing in perpetuity. If you own an apartment as part of a development, you will have to pay a strata fee on top of your council rates.

To learn more about the complexities of investing in residential property and to receive expert assistance from residential property consultants who know what they’re doing, contact WPG Advisory today.