Legal Tip 316: Don’t buy a property on 13 November

When considering purchasing a property in November, just be very careful with the settlement date.



In NSW the standard settlement period is 42 days. This would mean someone entering a contract on 13 November would need to settle on Christmas day. On or near Christmas day is probably not the ideal time to settle. Note that this 42 day thing is something that can be negotiated.



Even in the few weeks before Christmas it won’t be a good time to try to settle as it is a very busy period.



Just after Christmas is also not ideal as there are a few public holidays and many law firms close down for their annual holidays.



So when buying around November just speak to your conveyancing solicitor before you enter contracts to see what the situation is in their office so you can work around it by having a shorter or longer settlement, or even using another firm if need be.



And don’t try to settle on the last day before the public holidays because if that settlement is missed, for whatever reason, it may be days or weeks before you could actually settle.



For some reason, every year my mortgage broking company experiences an up swing in people buying properties and settling around Christmas time.

 

And its Friday the 13th

And its a important reminder of the issues with buying some property in some states (eg NSW) that settle just prior to 31 December. It could fail the PPOR tests for land tax too and also mean more land tax where a settlement that falls to early January could avoid that issue. The common response I hear is : But I only owned it for 5 days - Why do I need to pay a full years tax ? A : Land tax is a tax applied AT a specific point in time (while you are saying Happy New Year at midnight !) and isnt a yearly tax like income tax. [Excepting ACT]

 

Just got a client going to sign a contract for purchase in NSW. standard 42 days would take it to Jan 4. That should be ok, but prob best to try to push it out to mid Jan settlement just in case.

Contracts entered into from say 10 Nov to 30 Nov might have issues with a 42 day settlement.

 

Land tax assessment in NSW date (Happy New Year) may mean a vendor wants it earlier to stop a further years tax and the buyer wants it later to save them a year of tax. Sort of thing to consider when making the offer. In the haste to get the deal done its easy to overlook and then its all unconditional.

Clauses which charge ""rent"" for delayed settlement should also be avoided as this can create a CGT or a land tax problem. Where interest for delays is preferred. I saw that once and ATO gave a adverse view that s118.192 did apply. And the "market value"didnt include acqusition costs. So they lowered the costbase through poor advice. It was a conveyancer who isnt qualified to give tax advice and wasnt something to seek damages for. But a solicitor would possibly need to consider tax in their advice to alter the contract that way.