Free Legal Information

Purchasing a Property - Legal Requirements

This information has been provided by Australian law firm, Australian Conveyancing Services and is applicable in Victoria only.

In Australia the whole legal transaction of buying/selling a property is called 'Conveyancing'. The law sees the transfer of ownership in a property as important, and there is a process that must be followed by the Seller and the Buyer.

This process is normally more involved for the Buyer than the Seller. The Buyer has to make sure that the Title to the property is clear and this is an important task, as it involves doing various searches of the property. Also the Buyer is responsible for drafting up the transfer documentation and stamping it, as well as organizing their finances.

The things that you as a Buyer will do as part of a normal conveyance for Victoria property includes:

Signing a vendor's statement and entering into a Contract of Sale - this is called the 'exchange of contracts'. You need to ensure that any special conditions that you need in the Contract are inserted. The Seller (through their Solicitor/Conveyancer) will have the Contract prepared for you to consider. It is advisable that you arrange for your Solicitor/Conveyancer to look over the Contract before you sign. For more information on the exchange of Contracts (including gazumping), see our article below entitled When can the Buyer change their Mind?

If you are doing your Conveyance through Quicklaw, a Lawyer can look over your Contract for a small additional fee.

Fulfilling the Buyer conditions that are included in your contract.

Talking with your Financier to make sure you get any moneys you are borrowing by the settlement date, and signing mortgage documents.

Arranging the necessary searches over the property Drafting the transfer documents.

If you are using the Quicklaw DIY conveyancing service, our award winning program drafts the documents for you, based on your responses and you can have them checked by your Lawyer Support for a small additional fee. Attending at settlement to hand over the balance purchase price and to get various documents you need to transfer the ownership (if you have a Financier, they will attend at settlement as well and take these documents on your behalf) Stamping the transfer document. Go to the Land Victoria and lodge your documents for registration of the transfer of ownership (if you have a Financier, they will do this on your behalf).

QUICK TIP If you are thinking about buying a property, please consider using our online conveyancing service. The service is fully interactive and includes full information on how to arrange the above requirements. You can access the service 24 hours a day! For more information, click here.

The Deposit - A Buyer's Guide

This information has been provided by Australian law firm, Australian Conveyancing Services and is applicable in Victoria only.

In a contract for the sale of residential property in VIC, the deposit is held by the Agent, or, if there is no Agent, by the Solicitor for the Seller, in trust as stakeholder for the Seller and the Buyer until completion. It cannot be released by the stakeholder without an authority from both the Seller and the Buyer, which is given under a 'Section 27' Early release of deposit or at completion. Legislation protects this deposit in the hands of the Agent or Solicitor from being misused, so the deposit is safely held until completion occurs. If completion does not occur for any reason, the deposit is held by the stakeholder at the direction of both the Seller and the Buyer, or court order.

Because in VIC, a 10% deposit is usually provided by the Buyer, it is becoming common for a Seller to request a release of the whole, or part of the deposit prior to completion, usually to enable the Seller to utilise the amount released as a deposit on the purchase of another property.

It is true that the standard contract provides that if any of the deposit is released prior to completion by the Buyer, it is a charge upon the land in favour of the Buyer (only subject to any other existing right on the land). This is some comfort to a Buyer, but can be risky. There may be many reasons why it is difficult to enforce such a charge, some of which are:

• The charge comes second to any prior mortgage over the property. The Seller's mortgagee is not bound by the charge (or the current contract between the Seller and Buyer), and could, if the Seller should default under the mortgage, sell the property to recover the amount owing under the mortgage (this may not be enough to also pay back your deposit!);
• the charge stops if the contract is rightfully terminated by the Seller (for instance due to a breach of the Contract by the Buyer)
• The charge may be void, if the Seller becomes insolvent before completion, as against the trustee in bankruptcy of the Seller.

If you do agree to release the whole or part of the deposit:

• 28 days has lapsed since the dating of the contract, (s.27) Early release of deposit form signed by all the seller's
• Allow it to be available at completion only, or
• Make some enquiries first as to any mortgage on the title, and the amount secured under it, to ensure that the Seller has sufficient equity to complete settlement from the balance of purchase monies (being the price less the deposit).

When can the Buyer change their mind?

This information has been provided by Australian law firm, Australian Conveyancing Services and is applicable in Victoria only.

Introduction

In Victoria, the Buyer has two major opportunities to reconsider their proposed property purchase. The first is after you have agreed verbally with the Seller to purchase the property, but before contracts are exchanged.

The second is after contracts have been exchanged and during the cooling off period. However Buyers need to know that there is a cost to changing your mind, once you have exchanged contracts.

The Procedure up to Exchange

If you are going to bid on a property at auction, then you will need to arrange your finance, and all preliminary inspections and searches before you attend the auction. You can change your mind obviously at any point up until the hammer falls in your favour. After that you will be compelled to sign a Contract, which will normally be unconditional and usually requires a 10% deposit.

For non-auction sales, you as Buyer will normally make a verbal offer first, and if the Seller accepts that offer, then you can proceed in one of several ways: if you want to exchange contracts immediately (to take a sought after property off the market) you can do so, allowing the statutory cooling off period (3 business days) to quickly arrange building and pest inspections, as well as finance. Then, if you do cool off, you can terminate the contract, subject to the payment of a penalty.

More usually, it is considered better to conduct your preliminary inspections and arrange finance, and then exchange contracts. Because the time lag between verbal offer and exchange can be anywhere between 1 and 3 weeks, the opportunity arises for the Seller or the Buyer to be gazumped. For instance, a Seller may be presented with a second and higher offer after verbally agreeing to a price with you as the first Buyer.

Similarly, you as Buyer can gazump the Seller, and can go and buy another property instead.

In these scenarios, the gazumped party will not only be disappointed, but also may have incurred expense – for instance if you really wanted the property and were taking all reasonable steps to make your arrangements, then you would feel quite cheated if the Seller pulled out. The Seller is not obliged to compensate you either for the money you have spent on legal advice, inspection reports, finance application costs and inquiries. As to who is more likely to gazump or be gazumped really depends on the market – in a falling market, it may be the Seller, in a rising market, it may be the Buyer.

QUICK TIP If you want to minimise your chance of being gazumped, then as a Buyer you should consider the immediate exchange of contracts, making the contract subject to pest & building reports and finance approval.

The Cooling off period

Following the exchange of Contracts between the Buyer and the Seller, the Buyer has a cooling off period in which to change their mind about purchasing the property. This 'cooling off' period starts on the Contract date and lasts for a period of 3 working days, terminating at 5pm on the third working day (working day excludes weekends and public holidays).

The situations where you as a Buyer do not have the right to a cooling off period are:

if you buy a property at auction or if you buy the property after the auction and on the same day

if you have purchased the property pursuant to an option

Penalties

A Buyer may terminate the Contract, but only within the cooling-off period, and must give a notice in writing to the Seller, their Solicitor, or Agent. This is an absolute right and no reasons need to be given, however, there is a cost to terminating. If a Buyer terminates under the cooling-off period a "termination penalty" must be paid to the Seller. That termination penalty is $100 or 0.2% of the purchase price (whichever is more) under the contract. If you would like to know what the amount could be, insert a purchase price in the calculator below.

 Cooling Off Penalty Calculator

Pre-contractual legal advice

Just because you as a Buyer have got a cooling off period, doesn't mean that you should be blasé about entering into a contract. Firstly, we have seen that there is a cost if you want to change your mind. Secondly, it is important to make sure that all of the terms and conditions that you want are in the Contract at exchange, as it is difficult to try and negotiate these at a later stage

Obtaining pre-contractual advice from your solicitor could be as simple as arranging for the agent to fax the proposed contract through to your solicitor, and your solicitor providing advice and input to you over the telephone. If you are using the Quicklaw DIY service, you can have your Contract reviewed before signing for a small additional fee.

Joint Tenants vs Tenants in Common

This information has been provided by Australian law firm, Australian Conveyancing Services and is applicable in Victoria only.

If you are purchasing a property with one or more other persons, then you will need to state whether you are holding the property as joint tenants or as tenants in common. This will be specified on your Contract and in your transfer document.

If you own a property as joint tenants, it means that:

• You all own the property in equal shares
• If one of the owners die, then their share automatically passes to the other owners (even if you have a Will that gives your share to someone else – your Will cannot override a joint tenancy)

This type of ownership is most popular with married and long term defacto couples, as it is often their wish that if they die, that their share in the property goes to the other partner.

NOTE: If you are buying a property that will be your major asset, and you have dependents (ie children from a previous relationship) then you may not wish to choose this option. This is because your only asset needs to be shared amongst your children as well as your partner, should you die. There are other ways to get around this, however. For instance, you could take out life insurance, so that in the event of your death you could leave your share in the property to your partner, and the proceeds of your life policy to your children.

QUICK TIP I recommend that you get legal advice before you select whether you will hold as joint tenants or as tenants in common. This is because that decision is tied up with your Estate matters (that is, how you would like your property to be distributed if you were to die). It is quite expensive to change the way you hold a property after it is done, so now is the time to get it right.

If you own a property as Tenants in Common:

You can choose to own the property in equal shares, or unequally. For instance, if one of you have contributed more to the property than the other, you could hold shares of say, 1/3rd and 2/3rds) If one of the owners die, your Will decides who gets your ownership share (it will not automatically go to the other co-owners as it would if you held as joint tenants)

QUICK TIP If you buy a property as tenants in common, then make sure that you have in place a Will to deal with your share in the event that you pass away. Otherwise your share will not automatically go to your loved ones.

This way of owning a property is popular with owners who don't want their share to necessarily all go to the other owners. For instance, if you buy into a property with a group of friends, or with your business partner, etc.

Stamp Duty

This information has been provided by Australian law firm, Australian Conveyancing Services and is applicable in Victoria only.

This discussion relates to the stamp duty requirements in Victoria for the purchase of residential property. Each State will have its own particular rules.

Our Article covers the major general stamp duty effects for residential property. However, you should contact the State Revenue Office to confirm stamp duty liability for your particular situation.

Stamp Duty

This information has been provided by Australian law firm, Australian Conveyancing Services and is applicable in Victoria only.

This discussion relates to the stamp duty requirements in Victoria for the purchase of residential property. Each State will have its own particular rules.

Our Article covers the major general stamp duty effects for residential property. However, you should contact the State Revenue Office to confirm stamp duty liability for your particular situation.

For owner occupied housing referred to principal place of residence (PPR) there is reduction in stamp duty for properties between $130,000.00 and $550,00.00.

Properties over $550,000.00 pay the full stamp duty rates.

See our calculator below to calculate stamp duty.

First Home Owners Grant

Contracts that were entered into after the 1^st July 2013, will be eligible for the Grant. This will be limited to Buyers to build or buy a new home only.

The payment of up to $10,000.00 is available to build or purchase a new home.

Stamp Duty on Finance raised to Purchase

Owner occupied housing

Investment housing

Duty on mortgages for owner occupied housing and investment housing has been abolished.

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Strata Title - Buying into a Family

This information has been provided by Australian law firm, Australian Conveyancing Services and is applicable in Victoria only.

With the population around Sydney in particular growing at an ever rapid rate, Units and Townhouses are becoming a popular (and cheaper) alternative to owning a house & land. There are now over 50,000 strata title schemes in Victoria alone.

When you buy into a Townhouse or Unit complex, you need to consider the special legal nature of that type of property, that doesn't apply to an ordinary house & land situation.

This is because a 'strata titled' complex consists of not just one dwelling, but many (from the normal '6 pack complex' to a unit complex of 100s of units). Whether you buy into a small complex or a large one, there are certain principles that generally apply, as follows:

You own your unit and the airspace encompassing that unit (but not the external walls, roof or floors, which are common property). What you do own is normally the internal walls, and fixtures and fittings such as kitchen, carpets, drapes, etc. Each unit in the strata scheme has a unit entitlement. Unit entitlement governs the voting rights attaching to the unit, and the proportion of levies that the unit must pay. Each unit owner has an undivided share in the owners corporation, in proportion to the unit entitlement attaching to the unit. You have an ownership share, along with all other unit holders, in the common property surrounding the unit (such as foyer, driveways, pool, grounds, common stairwells, etc) in proportion to your unit entitlement. There are rules which govern your use of the Unit and the common property, referred to as the Owner's Corporation by-laws. These by-laws set down the rules of living in the complex.

QUICK TIP Before you buy into the Unit/Townhouse, identify what is common property and what property belongs to the Unit. This is important for 3 reasons: Common property has to be maintained at the expense of the Owner's Corporation Common property has to be insured by the Owner's Corporation To alter common property you must first get the consent of the Owner's Corporation The strata plan will normally show you the delineation of the common areas.

The Owners Corporation

All of the owners comprise the Owner's corporation and they elect an executive committee to make most of the decisions. They are responsible for the maintenance of the common property and other matters relating to the management of the complex. The corporation has it's own individuality (with the right to sue and be sued). The external building and the common property is owned by the owners corporation.

QUICK TIP If you are a Seller, keep your insurance in place until the date of completion.

Insurance

The owners corporation has the insurable interest in the improvements, and is obligated to effect replacement insurance each year on the building and improvements. The owners corporation is also obligated to effect insurance for public risk (covering common property) and worker's compensation (covering workers employed by the owners corporation).

A unit owner has the insurable interest in the internal fixtures (eg lighting, carpet and curtains) and contents (eg furniture and moveables (including carpet) in the unit, and this should be covered by a separate insurance policy of the unit owner.

QUICK TIP If you are a Buyer, don't forget to take out insurance for the fixtures and fittings within your unit, as well as public liability for any accident that could take place inside your unit.

Owner's Corporation Levies

You pay to the Owner's Corporation certain levies, and the amount depends on your lot entitlement. There are normally two levies that are payable on a periodic basis:

• an administrative budget covering annually recurring expenditure, (ie insurance, annual repairs, lighting to common property, wages etc); and,
• a sinking fund budget, to cover long term expenditure (ie painting of the building, repair/replacement of lifts etc). This fund is designed to have funds available to meet long term expenses when they occur. If adequate funding is not put into place early in the life of a building, the sinking fund will not have sufficient funds to meet long term expenses, and the result will be that the owners at the time when the expense is incurred by the owners corporation will have to pay the expense, which will be raised by way of special levy by the owners corporation.

Unit buyers - Do you Homework First!

I have seen many unit complexes and strata scheme situations, and each does have its own particular 'personality', which is largely dependent on the character types of owners and how they interact. Just like with a normal family – some are rowdy, some always arguing, some peaceful and stable, so too are various owner's corporations. If you get a good group of owners and a competent Corporation, you will be happy, but a constantly bickering or inflexible Corporation can make life very unpleasant. Take a look at the following real life examples:

Example 1: Bonnie was an elderly lady who bought a Unit on the ground floor of a Complex that contained 19 other units. The heat affected her so she wanted to install an air conditioning unit in her bedroom (the type that sticks out of the window/wall). The Body Corporate was a tough one run by a dictatorial Manager, who did not want the outside walls 'defaced' by unsightly projections. Bonnie had to stick to a fan.

Example 2: George and Meredith owned a Unit that was part of a '6 pack'. Most of the owners used the Units as holiday homes a few times a year, although there were one or two retired owners who lived there permanently. George wanted to put up a lattice wall at the front of his Unit to give him some privacy from the road. The Owners Corporation readily agreed and George erected the wall.

Read the Owner's Corporation family 'diary' before you buy!

The Owner's Corporation is required by law to keep a written record of its various dealings. This includes its budgets and forecasts of expenditure, correspondence, insurance details, particulars of the owners and also the Minutes of meetings with its members.

The Owners Corporation must allow you to inspect their records upon payment of the stated fee.

These records read like a 'diary' and can tell you very quickly whether the Unit/Townhouse experiences trouble between the owners or has other problems. Take a look at the correspondence file to see if there are any disputes or legal actions. The Minutes of the Annual General Meetings are particularly helpful in this regard. This meeting is held once a year and all Unit owners can attend. At that meeting, anything of relevance to the complex is discussed, and decisions made on what to do. Looking at the Minutes gives you a good 'snapshot' of what went on – are people generally agreeable? Or are there many disputes and disagreements? How reasonable are the participants? Are there ongoing battles?

QUICK TIP Before buying into a Unit complex, do an Owner's Corporation search to see if everything is fine in the owner's corporation records. Here is a checklist of things to look out for: All insurances are in place and adequate; The amounts held in the administrative and sinking fund, and whether they are adequate; The state of harmony in the building; There are no other matters raised by the owners corporation (eg litigation, special levies)

If the members of the family don't get along, or there are other problems (such as large expenditures coming up or litigation) then you may not want to buy into this.

By looking at the records before you sign, you can avoid walking into trouble – not all problems that appear after you sign allow you to terminate after you sign (for instance if there is a long history of bickering, disputes or poor management of the complex).

 

Insurance - Guidelines and Tips for the Buyer

This information has been provided by Australian law firm, Australian Conveyancing Services and is applicable in Victoria only.

The Sale of Land Act in Victoria states that the risk for the property between Buyer and Seller (after the exchange but before settlement) does not pass to the purchaser until:

completion (the date of settlement) or If the Buyer takes possession of the property before settlement, then that earlier date.

QUICK TIP Following exchange, you have a financial interest in the property so it's wise to get the property (improvements and fixtures) insured straightaway.

Some further Insurance Tips:

• If you are getting finance, then your mortgagee will often require you to arrange a Certificate of Insurance before settlement. Make sure that it is a Certificate (not a cover note) and that the insurance is paid. Also get the Insurer to note the mortgagee as an interested party on the Certificate.
• Make sure the Insurance is in the name or names of all the actual Buyers (as noted on the Contract).
• Insure for the full insurable value of the property (namely the value of the improvements). If you are unsure as to this value, take the market value of the property as a whole, and deduct the value of the land or use the replacement value
• Check that your policy covers you for public risk. Most policies of insurance on residential homes have this as an extension. You will be glad that you did, if you are unfortunate enough to have a visitor suffer an accident or injury on your property, which may be as a result of your negligence.

If the property is damaged between the date of the contract and the settlement (or early possession date) then the Buyer may:

• seek a reduction of the purchase price on completion by the amount which is "just and equitable in the circumstances". There is no formula for determining that amount so it would be up to the parties to negotiate, or referred to clause 24.4 of the standard contract. However, even if the purchase price is not reduced on completion, the purchaser's right continues and a proper amount may be recovered from the Seller as a debt after settlement.
• Where the damage is substantial, the buyer has an extra option – they may terminate the contract by giving notice in writing. 'Substantial damage' means damage which renders the land (a term which includes buildings and other fixtures) 'materially different from that which the buyer contracted to buy'.

Buying a Property with Tenants in it

This information has been provided by Australian law firm, Australian Conveyancing Services and is applicable in Victoria only.

When you buy a property and the tenants are to remain in the property, then I recommend that you follow this procedure:

Before you sign the Contract, talk to the Seller or their Agent who manages the tenancy to make sure that the tenants are regular payers and that they keep the property in good condition. If they are not good tenants, look at whether they are on a fixed term tenancy or simply a periodic tenancy. If fixed term, how much longer does the term have to run? If periodic, then you can ask for vacant possession in the Contract (Seller needs to give 4 weeks notice after contract signed).

On settlement, some of the items that you should collect from the Seller include:

• The tenancy agreement (as signed by the previous Landlord (the Seller) and the tenant
• A copy of the condition report (if one exists)
• Bond transfer form
• A letter from the Seller addressed to the Tenant directing them to pay the rental to the new Landlord (the Buyer)

You will also need to adjust the settlement figures for the rental, and collect keys from the Seller/Agent (as your Landlord's copy).

For more information on residential tenancies in Victoria, visit the Consumer Affairs Victoria site, which provides a host of free information at www.consumer.vic.gov.au

Underground Cables - Let the Buyer beware

This information has been provided by Australian law firm, Australian Conveyancing Services and is applicable in Victoria only.

In the last 10 years we have seen a surge in communication services, including the Internet, more mobile phones and pay TV. All of these communications are serviced by underground cables, so their presence in residential back yards are also increasing.

The standard conveyancing searches carried out by Solicitors for the Buyer of a property will not discover the existence of any underground cables. This is because communications carriers have special powers granted under the Telecommunications Act which permits them to lay cables without the need to take out easements which show on Title Deeds.

The carrier who wants to lay cables over private property, must notify the Owner of the property and compensate that Owner for any loss that they suffer as a result of the installation. But subsequent owners do not get any compensation and do not need to be notified by the Carrier of the cable's existence.

With the presence of cables affecting property now estimated to be 3-5% and growing, it is recommended that property buyers (or owners wanting to do work on their property) conduct an underground Telco search as part of their searching procedure. (Statistic quoted from Pronet Consulting, Telco searchers).

The cost of finding underground cables on your property after settlement can be very high:

Get a Telco search done. The costs is $55.00 but it protects a major investment. The best time to do the search is before you sign a Contract.

If you dig it up, then you're up for the repair bill or worse You are restricted in what you can do over that part of your property The Carrier has the right to enter to maintain and repair their cable

QUICK TIP Get a Telco search done. The costs is $55.00 but it protects a major investment. The best time to do the search is before you sign a Contract.

Getting the cable relocated is one option, but this can be expensive.

Property Searches - How many? How much?

This information has been provided by Australian law firm, Australian Conveyancing Services and is applicable in Victoria only.

When you are buying a property, one of the major things that will need to be done as part of the conveyancing process is the property searches. These searches are designed to find out if there are any problems with the property or the Seller that would materially prejudice the Buyer. That way, the Buyer knows before they hand over the money at settlement, because afterwards it is too late to complain.

QUICK TIP If you are ringing around for conveyancing quotes, one sure way to know if the service provider is cutting costs is to ask about the number of searches that they will do. If they are not doing the standard ones mentioned below, they are not doing a thorough job. REMEMBER: You get what you pay for!

Because the purchase of a property is such a significant investment, it is wise not to skimp on the number of searches that you do.

Standard Property Searches done in Victoria

The standard property searches that most Solicitors will do for you if you are buying a property (and the ones that Quicklaw recommends and which are included in the DIY conveyancing service) are:

• Title Search - a title search will be attached to your vendor's statement. You would however normally order a final search at completion, to check that nothing has changed since the date of the last title search. If you are borrowing, your financier will want a copy of this search handed over at completion
• Priority Sites Register -details as to whether any materials have been previously dumped on the property.
• Land Tax search - this search tells you if the Owner owes any land tax in relation to the property. If the owner did not pay it before settlement, the monies due would pass on to you as the new owner
• Bankruptcy/Company search - tells you if the owners are bankrupt/wound up - if so, they could not hand over the ownership of the property to you without the Official Receiver in Bankruptcy's approval
• Vicroads - ascertains whether the property will be affected by any road planning proposals
• Local Authority search - A Land Information Certificate regarding rates status is a necessity
• Water Authority Search - If there is a separate Water Authority in the Area a Water Information Certificate must be done for water rates status
• Telco Search - to ascertain the existence of underground telecommunications cabling - see our article Underground cables - Buyer Beware .

For Units and Townhouses

Some additional searches are standard - they include:

• Owner's Corporation search - to see if there are any claims regarding the Owner's Corporation by any of the Unit Owners
• Strata Inspection Report - this is a physical inspection which is done to see what owner's corporation levies are owing, the insurance, and a host of information about the goings on in the Owner's Corporation (eg disputes, any litigation, budget forecasts, etc) This search should be done PRIOR to exchange of contracts

Cost of Standard Searches

The search outlays will vary depending on the Local Council search, but the following is a rough guide:

For Vacant Land/House and Land: $220.00 - $390.00 *

For Unit/Townhouse: $420.00 - $475.00*

* NOTE: Depending  how old  the certificates attached to the vendor's statement

Additional Searches that may be required:

This should be assessed as per each individual property. For example:

• If the property is in a mine subsidence area affected by mine subsidence, then a mine subsidence search should be done
• If property is affected by flooding then you should examine the likelihood of flooding and to what extent

Both of the above searches should be done PRIOR to exchange.

Designated Bushfire prone Areas

If the property is located near a forest or National Park, this search will advise whether the property is likely to be affected by any Bushfire.

Planning Search

This Planning Certificate search will define what you can build on the property.

Heritage Search

If you believe that the property may be listed on the heritage register under (s 50) for historically significant properties.

Survey Plan (offline)

When you are unsure of the property's boundaries, particularly useful in inner city areas where houses may not be built entirely within actual boundaries.

House rules for capital gains

Source: By Paul Clitheroe, The Sunday Telegraph - 23/10/05

FOR most of us, the family home is our biggest investment. Normally, any capital gain you make when you sell what is technically called your principal place of residence is tax-free.

But this isn't always the case, and there are also potential benefits if you understand the capital gains tax (CGT) rules.

Let's say you buy a property, then rent it out to help pay the mortgage in the early years.

If you owned the property for eight years and rented it out for four of those years, CGT would apply to half the capital gain if you sold it at the end of the eighth year.

There would be a 50 per cent discount on the CGT because you owned the home for more than 12 months, but the bottom line is that the government would share in your upside.

The situation would be very different, however, if you lived in the home for at least six months after you bought it.

If you then rented it out for the next four years, moved back in again, then sold it three and half years later, no capital gains tax would apply.

This assumes you don't have another property that you are claiming as your principal place of residence during the four years it was rented.

You also need to have genuinely lived in the home initially, not just dropped around to pick up a token amount of mail.

The different result is due to the six-year rule, as it is commonly known. This rule was developed originally to help diplomats who went on overseas assignments, but is now more widely applied.

It allows you to rent out a property for as long as six years and still claim it as your principal place of residence. If you lived in the home first, you don't lose the CGT exemption.

Interestingly, where you own more than one home you have the flexibility to decide which one is your principal place of residence.

Say you bought a second home and decided to keep the home you were previously living in to rent out.

If, five years down the track, the first home was sold and made a significant capital gain, you can elect to claim the first home as your principal place of residence. If you did, you wouldn't have to pay CGT on this sale.

You would have decided that the second home has less potential for capital growth, as CGT would be paid on that property when it was sold.

The CGT would apply to the period where you chose to make the first property your principal place of residence. In other words, if you sold the second property five years after you sold the first one, you would pay CGT on half the gain.

This is because for half the period you owned the property, it was not your principal place of residence, even though you lived in it. The CGT discount would also apply.

If you do have to pay CGT on a property when it is sold, remember to add to the cost base any renovations and other capital expenses that were not tax deductible but that added value to the home. A higher cost base reduces the CGT you pay.

Smoke Alarms - laws for VIC Property Owners

This information has been provided by Australian Conveyancing Services and is applicable in Victoria only.

This article draws on information contained in Fact Sheets issued by the Victorian Building Authority.

VIC owners of residential property in most circumstances must install Smoke alarms and must be connected to your building's power mains as well as having a battery back-up, unless your building was built before 1 August 1997, where a battery-powered back-up meets the Regulations..

This law is designed to minimise the number of deaths in house fires, many of which occur at night time when the occupants are asleep. An estimate of only 80% of dwellings in VIC comply with smoke alarm legislation.

Who needs to install smoke alarms?

The regulation requires owners of new and existing houses, townhouses, and units (homes) to ensure that smoke alarms are installed in their residences. Other dwellings are also included (eg relocatable homes, residences above shops, etc). Failure to do so will incur a penalty.

There are some exceptions, such as certain moveable dwellings, and buildings in which nobody sleeps, however these exceptions are very limited.

For more detail on dwellings that are included/excluded, see the Smoke alarms for residential buildings.

Owners of homes that have smoke alarms installed in compliance with a current or previous requirement need take no additional action. Also, homes where smoke alarms have already been voluntarily installed are not required to take action if their smoke alarms are in good working order and in the right locations (see below for details).

How does this affect Sellers?

Persons intending to sell their homes who enter into a Contract on or after 1 August 1997 are affected by the legislation will be legally required to have installed the smoke alarms into the property they are selling.

How does this affect Buyers?

Buyers entering into a Contract to purchase a residential property should make sure that the Seller has included a 'Warning Statement' regarding Smoke Alarms in the prescribed form in the Contract (appears in REI standard conditions). Buyers should check the property to ensure that complying smoke alarms have been fitted.

Type of Smoke Alarms required

Any smoke alarm that complies with the Australian Standard (AS)3786 – 1993, Smoke Alarms (which should be noted on the product packaging) will meet the new requirements. These alarms can be hard-wired (powered from the mains electricity supply) or battery-operated at the owners’ choice.

Where to locate smoke alarms to meet the new requirement

The number of smoke alarms required will depend on the size and layout of each particular home. For houses and townhouses (Class 1a buildings) and manufactured/relocatable homes, smoke alarms are required on or near the ceiling in the following areas:

• in storeys containing bedrooms: in every corridor or hallway associated with a bedroom, or, if there is no corridor or hallway, between the part of the home containing the bedroom and the rest of the dwelling; and
• in any storey not containing bedrooms.In these storeys smoke alarms should be located in the path of travel most likely to be used by those evacuating the home.

For apartments, blocks of flats (Class 2 buildings) and residences over shops or caretaker flats (Class 4 parts of buildings) smoke alarms are required on or near the ceiling in the following areas in each flat or unit:

• in every corridor or hallway associated with a bedroom, or, if there is no corridor or hallway, between the part of the unit containing the bedroom and the rest of the dwelling; and
• in any storey not containing bedrooms. In these storeys smoke alarms should be located in the path of travel most likely to be used by those evacuating the unit.

For an excellent article on location of smoke alarms click here.

Penalties for non-compliance

The regulation includes provisions for fines to be issued for failure to install smoke alarms after 1 August 1997, however there are no new inspection powers. Also, from 1 August 1997, it will be an offence to interfere with or remove an existing smoke alarm, unless it is to repair, maintain or replace the alarm.

SWIMMING POOLS

Warning Statements and Compliance Certificate laws for VIC Property Owners

This information has been provided by Australian Conveyancing Services, and is applicable in Victoria only.

This article draws on information contained in Fact Sheets issued by Victorian Building Authority (VBA) and Building Commission Victoria (BCV).

Recent amendments to Swimming Pool legislation have been set in place in an effort to reduce the risk of drowning of young children in backyard pools. These changes will affect all property owners, including those that do not have a swimming pool located on the property.

What are the new requirements?

The VBA reminds Victorians with pools and spas that they must take the following precautions:

• If a pool or spa can hold a depth of 30cms, the length of a school ruler, they must have fencing around them. This applies even to inflatable pools.
• All pools and spas built since 2010 require a four-sided fence, with no direct access from the house to the pool or spa surround.
• A building permit is required to build the pool/spa and the fencing. You must begin work within 12 months of the building permit being issued, with work to be completed within six months of starting it.
• You should hire a registered building practitioner to do the work. The VBA has a list of registered practitioners on its  website at www.vba.vic.gov.au
• Gates around pools and spas must be self-closing and self-latching, regardless of when a pool was built.
• Homeowners should never prop open a pool gate. It is illegal to do this.
• Pot plants, Eskies and chairs, which may be used by children to climb into the pool or spa area, must also be moved away from the fencing.

Barriers aren’t required for:

• Bird baths
• Fountains
• Water supply/storage tanks
• Fish ponds
• Dams
• Baths used for personal hygiene and emptied after each use
• Pools or spas not containing a depth of water greater than 300mm (30cm)
• Inflatable swimming pools (typically toddler or wading pools) not containing a depth of water greater than 300mm (30cm)
• Spas inside a building used for personal hygiene (a spa bath in a bathroom that’s emptied after each use)

Further it is a requirement that any access to the swimming through this barrier is to remain securely closed at all times.

There may be some exceptions to these rules but the best way to be sure is to make contact with (VBA) for more details.

Warning signs be erected in a prominent position in the immediate vicinity of the swimming pool (it is preferable this be displayed adjoining the shallow end of the pool) containing the words “YOUNG CHILDREN SHOULD BE SUPERVISED WHEN USING THIS SWIMMING POOL” together with details of resuscitation techniques associated with infants, children and adults.

How does this affect Sellers?

All pools built before 2010 should now be fenced in accordance with (VBA).

Additionally, where there is a pool located on the property the Seller is legally required to ensure that the pool is compliant with the new safety requirements. If a compliance certificate is not already issued by Council, the Seller should make arrangements with the local government authority to obtain this certificate prior to marketing the property for sale.

How does this affect Buyers?

First and foremost a Buyer entering into a Contract to purchase a residential property should make sure that the Seller has the swimming pool fenced in accordance with (VBA guidelines).

Secondly where a Buyer is purchasing a property that has a pool located at the premises should make enquiries with the Seller and the local government authority to ensure that the pool is compliant and that the appropriate Compliance Certificate has been issued for the property. We suggest that this is done prior to exchange of contracts where possible.

In the event that the pool is not compliant the Buyers will become responsible to ensure that the pool is compliant and to obtain this certificate from RBS.

Penalties for non-compliance

The are provisions for fines to be issued, including 'on the spot' fines, for failure to comply with the requirements set down by this Act and the regulations. Additional inspection powers have been granted to local government authorities to enter and inspect swimming pools located on properties to inspect for non-compliance.