House and Land packages – What to look for.

At Smart Legal, we often see confusion around the obligations and benefits of buying house and land packages.

When buying a house & land package, it’s essential to understand that generally, two contracts are entered into. The first being is the sale of land contract, while the second is your building contract.  You may be thinking, “But I am only dealing with one seller!”, however, in a transaction of land and build, you enter into two contracts. One with the “vendor”, who is the entity or person who owns the land you are purchasing and a contract with the builder (who could be the same such person or entity) who will build your home upon the land.

In a typical agreement, you will be required to put forth two separate deposits for each contract entered into, one for the land purchase (upon which you pay stamp duty) and one for the contract of build. The difference here is that you pay stamp duty on the land component only.

So, what are the risks?

In a ‘normal’ property purchase, you can inspect the house you are purchasing; however, in a new build scenario, you are purchasing off-plan or on inspection of a display home.  Until YOUR home is built, there is no physical opportunity to walk the floors to inspect. In this case, there will always be a risk when you are relying on plans and for someone to interpret your ideas into an actual building.  The worst part of this is that despite the risk a purchaser takes, the vendor is not obliged to make further disclosures. There is no protection to purchasers of off-the-plan beyond what is already guaranteed by the vendor’s statutory disclosure obligations.

Another aspect of house and land package purchases is the land registration. It is not uncommon for developers to offer house and land packages before the subdivision of the land is registered. Of course, if this is the case, construction won’t start until the land subdivision is registered. However, it is essential to note that this is entirely out of the seller/vendors control and is entirely in the council’s hands to decide. If specified time limits aren’t met, the vendor might have a right to extend for a further period awaiting the registration or the contract can be cancelled if the registration extends beyond an agreed time or falls through entirely.  While you are waiting for the registration of land, all documents disclosed in your original contract of sale relate to a larger plot of land that is being subdivided.  Your disclosure documents do not necessarily relate to your specific lot.  This will only be available once the land has been subdivided and is therefore subject to change once registered.

Beware the fine print!

Builders often reserve the right to alter your plans when it comes to the use of substituted materials. These rights allow them considerable manoeuvrability in varying the plans for a multitude of reasons. For this reason, we highly recommend you check with your solicitor if you receive a notice of variation, which detrimentally affects your proposed lot. You just might have the right to rescind the contract and get your deposit back.

How does finance work?

One of the most common issues we find buyers encounter regarding finances is that they end up paying off a mortgage for the land component while their house is built. Your financial institution will typically separate your loans for the land and build component so ensure you clarify this with your bank or institution to see how your loan/s will be structured. You will also be required to pay each stage of the build, where you will start to pay interest on your loan and council rates.

Lastly, ensure you understand the warranty terms.  Your solicitor will be able to walk you through to understand time frames for issues that may arise after you move in.

We have packages from as little as $440 to review your house and land contracts. Call our friendly team today.

This article is intended to provide general information only. It does not constitute any legal advice.