First Home Buyers: What to consider when purchasing your first home in NSW.

Buying your first home is a significant milestone for most individuals, however, it does carry significant legal and financial risks. If you are a first-time home buyer in NSW, there are several things you should consider prior to signing the Contract for the purchase of property. At Jenkins Legal & Advisory, we strive to make your purchasing experience as seamless and easy as possible, as well as providing you with high quality legal advice to ensure you are aware of the risks and understand your obligations and responsibilities as a homeowner.

Among other things, we recommend you consider the following when purchasing your first home in NSW:

A.    Pre-purchase Due Diligence

In most cases, property is purchased ‘as is’, meaning in its existing condition, including any visible (patent) or hidden (latent) defects. As a result, it is essential that purchasers undertake thorough due diligence before exchanging contracts. While there are some statutory and contractual protections available, these are limited, and in many instances, the purchaser will have no recourse against the vendor for any defects in the property.

We strongly recommend you carry out pre-purchase due diligence when purchasing property. This includes obtaining the following documents:

• Pest and Building Reports

• Strata Report (if buying property within a Strata Plan)

• Community Title Records Report (if buying Property within a Community Title Plan)

The agent or vendor may already have copies of these reports. If you choose to rely on reports provided by the agent or vendor, then you should arrange to purchase these reports and have them issued in your name by the inspector prior to exchange. Without that, you may be unable to pursue those inspectors in the event the report was incorrect, or negligence was an issue.  We also recommend you check the invasiveness of the report as to whether the report was limited to a visual inspection, as there may be issues with the property that were missed due to the inspector not having full access to the property.

B.    Cooling Off Period

Typically, you are entitled to a five (5) business day cooling off period when purchasing residential property in NSW, commencing from the date Contracts exchange (when the contracts have been signed by both parties and dated). During the cooling off period, you may withdraw from the purchase for any reason provided you forfeit 0.25% of the purchase price to the vendor. If Contracts are exchanged at auction, you will not have the benefit of a cooling off period.

It is common for vendors to request that you waive your cooling off period, meaning that you will be required to proceed with the purchase from the time of exchange. It is not recommended that you waive your cooling off period rights without first obtaining independent pre-purchase reports (i.e. pest & building reports, strata report etc.) and satisfying yourself as to the condition of the Property, as well as obtaining formal finance approval from your lender (if required).

C.   Unconditional Finance Approval

If you require a loan to purchase the property, it is strongly recommended that you obtain unconditional finance approval from your lender prior to exchanging Contracts. If you are unable to complete the purchase because of failing to obtain finance approval before entering the Contract, you may lose your deposit and be sued by the vendor for losses etc. If your broker/bank manager does not anticipate that you will obtain unconditional finance approval within the five (5) business day cooling off period, we recommend you request that the Contract include a ‘Subject to Finance’ clause as part of the terms of your offer to purchase the property. A ‘Subject to Finance’ clause provides you with a timeframe (usually 10 business days) from the date of exchange to obtain finance approval. If you do not obtain finance approval within this period, you can withdraw from the purchase provided you forfeit 0.25% of the purchase price to the vendor.

D.   Transfer Duty (also known as Stamp Duty)

Stamp duty is a state Government tax payable when you purchase property. It is administered by Revenue NSW and is payable within three (3) months from the date of exchange. For off-the-plan purchases where the purchaser intends to occupy the property, payment may be deferred for up to 12 months from exchange. The amount of stamp duty is generally calculated on the dutiable value of the property, which is the greater of:

• the purchase price, and

• the market value of the property.

  
  

Concessions or exemptions may be available for:

• First home buyers

• Off-the-plan purchases

• Transfers between spouses or due to breakdown of marriage/de facto relationship

  
  

E.    First Home Buyer Assistant Schemes

If you are purchasing your first residential property, you may be eligible to receive the benefits of a First Home Buyer Assistant Scheme.

The First Home Buyer Assistant Scheme (FHBAS) offers a transfer duty (stamp duty) exemption or reduction depending on the purchase price of the property. The key eligibility requirements include (among other things):

• You must purchase as an individual (i.e. not a company, partnership, or on behalf of a Trust);

• You must be an Australian citizen or permanent resident;

• Neither you nor your spouse/partner have owned or co-owned property in Australia;

• Neither you nor your spouse/partner has previously received benefits under the FHBAS; and

• You must occupy the property as your principal place of residence within 12 months of your ownership and must reside at the property continuously for at least 12 months.

Note: In order to apply for the FHBAS, specific identification documents are required. This includes your birth certificate, photo identification (i.e. driver’s license or passport), and Medicare Card. If your name has changed since birth, you will also need to provide proof of your name change (i.e. marriage certificate). Please ensure you have the original copies of these documents available prior to exchanging Contract to avoid any delays with the settlement of your purchase.

There is also the First Home Owner Grant (New Homes) which offers a $10,000 grant for buying or building a new home up to a certain value threshold.

We recommend you visit the Revenue NSW website or contact Revenue NSW directly to find out further information as to the eligibility criteria of these Schemes or any other Government Assistance Schemes.

F.    Contract Review and Requesting Contract Amendments

You will require the services of a solicitor or a conveyancer to act on your behalf regarding the purchase. Typically, your solicitor/conveyancer will review the Contract (which is drafted by the vendor’s solicitor/conveyancer) and provide you with written advice regarding the terms and conditions of the Contract, they will also advise you regarding any easements, restrictions, zoning or permitted uses issues relating to the property. Most Contracts include special conditions that are added by the vendor’s representative which usually favor the vendor. As such, your solicitor/conveyancer will typically contact the vendor’s representative requesting amendments be made to the Contract that are in your best interests, and will negotiate the terms on your behalf.

The above considerations are not an exhaustive list of factors to be aware of when purchasing property in NSW, and we recommend you consult directly with your legal advisor regarding your purchase, together with any other professional associated with the transaction, such as your accountant, mortgage broker, town planner, financial advisor, insurance advisor etc.

If you have any questions or are interested in purchasing property in NSW and require legal advice, please do not hesitate to contact the property team at Jenkins Legal and Advisory. 

This article is not legal advice, and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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