Try Before you Buy, not necessarily Renovate before you Buy

This article in the SMH rightly raised concerns about the practice of some purchasers beginning to renovate a property before settlement.

There are many issues associated with obtaining access to a property prior to settlement to do some 'work' on the property:

• Insurance and Liability - who is liable for accidental damage to the property from the works?
• OHS Issues - who is liable for OHS breaches and issues?
• Council approvals - does the work require approval from Council?
• Does the early access constitute early possession? 
• Commercial risks associated with the sale not proceeding, having to make good and other insurance issues.

If you are buyer and are interested in doing some work before settlement, you should raise this with your lawyer before exchanging the Contract. Amendments to the Contract may need to be drafted to protect your interests and appropriately apportion liability for the risks involved.

Similarly, if you are a vendor and your purchaser asks you for permission to begin work, you must get the right advice to ensure that your renovator's delight doesn't become your renovator's nightmare!

Jonathan Marquet
Emil Ford Lawyers

The greener grass is often the riskier one....

You're looking to move. Maybe downsize. Maybe a tree-change or sea-change. You've just started looking and suddenly you see it. Your new perfect house (your current place was also perfect when you bought it, but now is less than ideal). It has everything you could possibly want. But. It has to be sold right now. Perhaps the auction is in 3 days time. Perhaps there are a number of potential buyers lined up make offers. What do you do?

I have seen this scenario with a few clients. They are in the difficult position of wanting to buy a new property but have not sold their current property (and often haven't even put their current property on the market).

It is important to take a step back and consider the consequences of purchasing the new property without having sold your current one. The obvious and key risk is that you are unable to sell your property in time for the settlement of your purchase. This is a real possibility, especially in the context of a sluggish market. Speak to a number of local agents and get an idea of the clearance rate for your type of property in your local area.

If you decide to go ahead you need to consider what kind of amendments to the contracts (purchase and sale) you should request to minimise your financial exposure. A longer settlement on the purchase and a shorter settlement for the sale, for instance. Use of deposit bonds. Having the deposit on your purchase broken up into instalments payable when you exchange on your sale. Ultimately, the safest way to do it, is to make the purchase conditional upon the sale of your current property. The problem is that most vendors would not agree to a conditional contract. But if they are desperate to sell, you never know, they might just agree. You should fully investigate the likelihood of you obtaining bridging finance should you have to settle the purchase before your sale. This is a crucial backup.

At the end of the day, be wary of the lure of a new perfect property, when you don't know if you can sell the ex-perfect one.

Jonathan Marquet
Emil Ford Lawyers