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Contract negotiation - access to property before settlement date

Discussion in 'The Buying & Selling Process' started by foal40, 24th Jun, 2015.

  1. foal40

    foal40 Member

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    I once heard Cherie Barber spruiking the notion that you (as a buyer) could possibly negotiate terms of your contract with the seller that would allow you access to the property before settlement. This would allow you to start renovations before the settlement date, thus saving you some time and money as a renovator. Has anyone ever tried doing this? Obviously it would depend a lot on the seller's need to sell vs. what sweetener to the deal you could offer them. I'd be interested to know if it's possible. Thanks.
     
  2. wylie

    wylie Moderator Staff Member

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    We did this directly with the vendor once as we needed to renovate quickly before heading off overseas. Our solicitor said that the vendor's solicitor would likely say "no" and it would be better to speak directly with the vendor, which we did. She signed something for us.

    Generally, it probably has more risk and downsides and isn't something we've done before, or since.

    If something goes wrong it is a problem. You've spent money on someone else's house. Some will say vendor gains from your improvements, but if you've ripped out a bathroom...?
     
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  3. vtt

    vtt Well-Known Member

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    I haven't listened to Cherie Barber's talks before but did she actually suggest to start renovating the property before settlement? Or did she say that she gains early access to the property in order to prepare it for renovation?

    I would suggest the latter would be the much safer option. You can arrange for early access to get measurements, tradies to quote etc. but I would avoid doing any actual work until once settlement is complete. What happens if something interferes with settlement and it doesn't occur at all and you've just ripped out the kitchen or bathroom of a property you don't own. I can imagine that would be a lawyer's pot of gold. Perhaps one of the legal experts from this forum can comment further.

    vtt
    :D
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    What if the vendor cannot or doesn't settle after you have done all this?
     
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  5. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    I've done this before.

    It was our first IP. We were so keen to get in and renovate and have it ready for tenants on settlement. We put the request to the vendor via our solicitor and they were happy to allow access.

    On the day of exchanging contracts - we went out to the property and started demolishing it. We ripped out the kitchen and part of the bathroom.

    We took a month renovating it - and managed to get tenants signed up a week before settlement.

    All in all - it was a good experience but there's certainly pros/cons to consider and if I was the vendor, I don't think I'd be as generous to allow it!

    Cheers

    Jamie
     
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  6. Roosterman

    Roosterman Well-Known Member

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    Haven't asked for access for renovations but I did manage to negotiate access to the property before settlement to enable open inspections for prospective tenants.

    I ended up getting a tenant the week after settlement, I may have been waiting weeks after settlement otherwise.

    In terms of negotiating tactics I used it to justify a higher offer - vendor did not go for my low ball offer so I upped it by 10K on the condition that I could get access before settlement. When in fact I was more than happy to offer the additional 10k, if they had said no to the condition I would still have proceeded. You don't ask, you don't get!
     
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  7. RPI

    RPI Property Lawyer, Town Planner Business Member

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    We do it for clients regularly, just need to make sure the benefits outweigh the risk.
     
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  8. Big Will

    Big Will Well-Known Member

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    Getting tradies in to provide quotes would be a lot easier to get approved rather than starting work. As someone is going to lose if settlement doesn't happen. Either the vendor has no kitchen/bathroom or the vendor has a brand spanking new kitchen/bathroom.
     
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  9. Travelbug

    Travelbug Well-Known Member

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    We got early access once. They weren't keen really but we said we would only rip wallpaper off and rip the carpet up and paint. So there was no loss if something went wrong. They would have actually been better off because EVERY wall had 40 year old wallpaper.
     
  10. inertia

    inertia Well-Known Member

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    A friend bought a house intending to move in, and got a long settlement to give themselves some breathing space to sell their existing PPOR. They negotiated to be able to move in and pay rent so they could do some work on their old house before selling. They also got written into the contract that they could start on the "cosmetic" renovations - like ripping up carpets, polishing floorboards, painting, etc.
     
  11. rhinsor

    rhinsor Well-Known Member

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    I did this on my last purchase. Picked up the keys from the agent after the contract when unconditional and did renovations past settlement. The owner didn't have a problem with it.
     
  12. bob shovel

    bob shovel Well-Known Member

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    from memory there was a good thread on SS with a good clause to add to the contract for access as mentioned
     
  13. Be Developer

    Be Developer Property Developer Business Member

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    @foal40 .. can be arranged if contract and terms are agrred up on.

    Just make sure you are covered by good insurance policy (Property and public liability)
     
  14. citystar

    citystar Well-Known Member

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    Did this with most of my IP's, all needed spit and polish to increase rent and add value. Included a clause in the contract I would have access if I gave 24 hours notice so I could get quotes from tradies. Meant on settlement the tradies were organised to rip the guts out and start work immediately. The first IP I purchased I had a verbal only agreement the vendor would grant access, however they ended up stuffing me around so from then on it's in writing on the contract.
     
  15. foal40

    foal40 Member

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    Thanks everyone for the input, personal experiences and different perspectives!
     
  16. Mars

    Mars New Member

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    Hi Jamie and everyone,

    Thank you for this good post.

    I am going to buy an investment property and I will ask owner for the permission to access to the house for some renovation.

    I just have two question regarding this idea.

    1, As we renovate the house before settlement date, which is before we earn the income for investment property, can we still claim yearly tax return for the renovation expenses? Or can we only claim it when we still house as a cost?

    2, As we assess to property 2 weeks before settlement day and the owner move out by then, we have to use the water, electrity during renovation, do we just leave it to our solicitor to work out what bills we have to pay during renovation process before settlement?
     
  17. Marg4000

    Marg4000 Well-Known Member

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    An initial renovation is never deductible - it is simply added on to the cost base of the property when calculating CGT after sale.
    Marg
     
  18. drg86

    drg86 Well-Known Member

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    I've had early access approved before. Just a verbal agreement via the agent. However it was for gardening/landscaping works only. I needed a head start to hack out the jungle in the yard left behind.

    Also had it denied before. There are issues with insurance and liability that solicitors don't like.