ILN: BUYING AND SELLING REAL ESTATE - AN INTERNATIONAL GUIDE

[BUYING AND SELLING REAL ESTATE IN AUSTRALIA]

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acquisition. Each State and Territory has its own stamp duty regime when dealing with options. Terms Contracts A terms contract is a special type of contract. Except for Victoria and Western Australia, these types of contracts are referred to as instalment contracts. What constitutes a terms contract, or an instalment contract will vary depending on the applicable legislation of the State or Territory. Terms contracts can be created inadvertently. Care must be taken. Generally, a terms contract can arise when a purchaser is obliged to make multiple instalments of the price under a contract, or the purchaser is entitled to possession or occupation of the property before settlement. In some States, the title to the property may be transferred before the purchaser has paid the full price. While in other States the use of these types of contracts is either prohibited or their use is severely restricted. Where terms contracts or instalment contracts are permitted, the relevant statutory requirements must be strictly complied with to avoid creating a contract which is voidable by the purchaser. Terms contracts can impose restrictions on the vendor’s ability to mortgage the property once sold. Depending on the State or Territory, the consent of the purchaser is required to any mortgage of the property. Terms contracts are not common but were used for the sale and acquisition of rural properties (e.g., farms). Legal advice should be obtained when you are dealing with a terms contract or instalment contract. DIFFERENT TYPES OF OWNERSHIP In Australia there are several distinct ways that property can be owned. Sole Proprietor If a property is acquired by an individual or by a single corporate entity, that individual or single corporate entity will be recorded on the

certificate of title as the sole registered proprietor. Co-ownership If two or more parties purchase property together in Australia, those owners are co- owners. The two types of co-ownership are joint tenancy and tenancy in common. Careful consideration as to how property is owned is important as this can have implications for stamp duty, estate planning, finance, and tax implications. The co-ownership of a property can be registered as joint tenants or as tenants in common or a combination of both. Joint Tenancy A joint tenancy means that all co-owners own the property jointly and equally and each co- owner is entitled to the whole of the property. This means that upon the death of any of the joint tenants, the ownership share of the deceased person automatically passes to the surviving joint tenant/s equally. It is the right of survivorship, which is the principal difference between a joint tenancy and a tenancy in common. It is important that legal advice be obtained when determining whether a property should be owned as a joint tenancy or as tenants in common. A joint tenancy form of ownership is commonly used by spouses/domestic partners. In certain circumstances, a joint tenancy can be severed and converted into a tenancy in common. Tenants in Common A tenancy in common allows two or more parties to record and specify the percentage in which they will own a share in the property. This form of ownership is used when the contribution to acquire the property is unequal or where the ‘partners’ are not spouses. For example, the transfer of land would refer to shares as proportions. This type of ownership allows each owner to separately deal with their

ILN Real Estate Group – Buying and Selling Real Estate Series

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