Ask about incentives when buying property 'off-the-plan'

With purchasers finding it increasingly difficult to secure the purchase of a property at auction, many are turning to private sale negotiations to buy a property not yet constructed based on plans and specifications. This is called buying "off-the-plan" and is regulated by the Sale of Land Act 1962 (Vic). 

When negotiating to buy a property "off-the-plan" be sure to ask the selling agent or developer if they are offering any incentives to you as part of the sale.  Many developers do this to sweeten the deal and ensure a quick sale. 

There are many different incentives a selling agent or developer can offer.  The more common incentives we see in off-the-plan contracts are:

1. A one-off contribution by the vendor to the purchaser's legal costs of say $2,000 (including GST);
    
2. Inclusion of a 'blinds package' (window furnishings to all windows) which must be installed in the property by the settlement date;
    
3. A stamp duty rebate paid to you at settlement by the vendor provided you effect settlement on the due date.  The rebate might be a partial or full reimbursements of stamp duty liability, remembering that you are entitled to a reduced stamp duty liability when buying "off-the-plan";
    
4. A free or discounted purchase price for an accessory lot, such as an extra carspace or a storage area;
    
5. Interest which accrues on the cash deposit (the deposit being usually 10% of the purchase price) is payable to the purchaser at settlement.  This is on the basis the purchaser effects settlement on the due date and otherwise complies with all of the requirements of the contract;
    
6. A free optional upgrade of certain item/s in the fitout schedule or for electrical appliance/s in that fitout schedule;
    
7. Free variations to the standard fitout schedule or floor plan;
    
8. Any legal fees charged by the vendor's lawyer, if the purchaser nominates a substitute or additional purchaser/s, being waived;
    
9. Any special condition of the contract which passes on the cost of the vendor obtaining owners corporation certificate/s to provide to the purchaser prior to settlement being waived.  Note that each certificate usually costs $165 (including GST);
    
10. The defects liability period in the contract being extended from say 3 months to 6 months;
     
11. For investor purchasers, a guaranteed rental return being provided at no extra cost (called a 'rent guarantee') for a 1 or possibly 2 year period;
     
12. Some developers might offer other incentives like frequent flight points or a free air ticket to fly to the property prior to settlement to view it;
     
13. For investor purchasers, a vendor might offer a depreciation schedule for tax purposes at no extra cost.  That depreciation schedule would be provided at settlement to the purchaser to provide to their accountant.   

If you are looking to buy a property "off-the-plan" speak to our Property Department today.  Have the proposed contract of sale checked by us and we can discuss if you have been offered any incentives.  You may not have been, and it is worth asking the question in any pre-purchase negotiation. 

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Do we need a Shareholders Agreement?

This is a question we are often asked by shareholders of newly established and existing proprietary limited companies.  The simple answer is, a properly drafted Shareholders Agreement can help shareholders avoid potential disputes over the way in which a company is operated, by proving an agreement between the shareholders on predominately commercial issues not covered by a company’s Constitution.

Upon incorporation a company is regulated by the Corporations Act 2001 (Cth) (Corporations Act), its regulations and to the extent a company has one, its Constitution.  However, the Corporations Act and the Constitution primarily focus on the legal, regulatory and corporate activities of the company and do not do deal with business objectives including the commercial expectations of the shareholders.



In this regard, shareholders should ask themselves:

• What are the business activities and purposes of our company?
• How long will the company operate and build up the business before selling the business and providing a return on each shareholders’ investment?
• Which shareholders are entitled to be appointed directors and thereby have a say in the day to day management of the business?
• What decisions may only be made by shareholders as a group, rather than the directors?
• How do shareholders with minority shareholdings have an impact in the decision making process, rather than having their wishes ignored by majority shareholders?
• Should shareholders as a group restrict the sale or transfer of shares outside the current group of shareholders?
• How are the funding requirements of the business to be met? Debt, equity or both?
• What happens when a shareholder who is active in the business dies or suffers a permanent disability?  How can the other shareholders acquire the shares of the affected shareholder?
• Should shareholders be restrained from being involved in other businesses which complete the business of the company?

In answering these and other related questions, the shareholders should be able to formulate the commercial issues to be agreed to in their Shareholders Agreement.

Although Shareholders Agreements are not vital to the success of a company’s business, especially where there is a small number of like-minded shareholders, they are generally recognised as greatly assisting the objectives of the shareholders as owners and operators of the business.

The content of the Shareholders Agreement will follow a generally accepted structure developed over the last 30 or so years of commercial legal practice, with additional specific clauses to deal with the company’s own circumstances.

It should be noted that despite what shareholders may agree, the Corporations Act will in most cases take precedence over the terms of a Shareholders Agreement.

The Constitution, on the other hand, may be overridden by a Shareholders Agreement to the extent of any inconsistency. However, ideally the Constitution should be amended to incorporate the terms of the Shareholder Agreement.

Nevett Ford Melbourne’s Commercial lawyers have a wealth of experience in the preparation of Shareholder Agreements and advising companies and shareholders alike.

Please contact Andrew Bini if you would like further information.

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Waiting time reduced on applications using experienced lawyer early

David O’Brien a 40 year veteran in the quarry industry and Managing Director of Prosper Valley Enterprises speaks of his difficulties in applying for a Work Authority and Work Plan Variation licence in the Sand and Stone Magazine’s February/March edition. 

 

The application “seemed like a very drawn out and expensive process,” but after changing from a local solicitor who had been creating delays, David was advised by the CMPA to engage Andrew Lumb of Nevett Ford Lawyers. 

 

Mr O’Brien said "once Andrew had taken charge the blockers were quickly eliminated and the Work Authority and Work Plan Variation licences were finally granted".

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