OTP apt - no sale within ten years condition

Discussion in 'The Buying & Selling Process' started by Joynz, 29th Apr, 2016.

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  1. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    So if such a clause is effective ...Why cant I insert a clause that says you can only sell to someone I later approve ?

    Clauses like this cant help the value.
     
  2. sanj

    sanj Well-Known Member Premium Member

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    this development is not trying to help the value. 99.99% of properties arent affected by this, i fail to see how this is bad overall. it isnt meant for those trying to make money, quite frankly imo more resi property should be like this.
     
  3. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    That could be a serious concern for a SMSF. Illiquidity in property in a SMSF can never be good. I'm a little surprised a bank lender would agree to such terms for a SMSF limited recourse facility as it hampers the owners ability to cut and run. How might such a clause impact a mortgagee in possession ??

    Your friend probably hasnt encountered this problem yet !! Banks dont do OTP for SMSFs and dont give approval until its available to inspect. And that hasnt occurred yet. Their legal vetting may baulk at such clauses and lead to a rejected loan application. One of the brokers here may give a better view.

    However some DHA homes can be in this boat. The nature of a long term lease can be a disincentive to sell as it only suits a long term investor as there is virtually no right to punt the tenant and move in. Its always been the turn off IMO about DHA.
     
  4. Player

    Player Well-Known Member

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    Paul, maybe the friend is paying cash.
     
  5. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Even so the liquidity issue is a concern. I have seen peeps buy a property using cash and ignore the minimum pensions which may be required. They then realise their folly after several years and decide to invest in something more liquid. Death of a member even !!! No option to do this ?
     
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  6. Player

    Player Well-Known Member

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    Oh, I agree. This is not even an investment grade condition in any entity or personal name IMO. I cannot fathom what some people do. In fact, if there was a lender involved perhaps at outset a firewall would have been established to say no go. Shakes head :( .......then again I am the bloke that reads every page of my mortgage documents and the pds of my insurances. :eek: As best I can do i try to verify everything.
     
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  7. Joynz

    Joynz Well-Known Member

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    No, not cash as far as I know.
     
  8. melbournian

    melbournian Well-Known Member

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    10 years? i think you can sell but only for the suburb % increase and nothing more than that.
     
  9. SmashedEconomy

    SmashedEconomy Active Member

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    Yes, people plan things, but plans do not go as envisaged. What happens when suddenly you need money, yet cant liquidate your property due to such a stupid clause? As I said, signing it is lunacy, unless you like restricting your lifes choices. too bad if you need a pricey lawyer all of a sudden, I guess its jail instead.
     
  10. tobe

    tobe Well-Known Member

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    You can sell for up to what you paid for it, so if you can find a buyer willing to go ahead with the same conditions you got the money for that lawyer.
     
  11. Trevor Skinner

    Trevor Skinner Member

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    Yes in Melbourne at least it is quite common although this is the longest period of time I have come across so far. It would be, I assume, a special condition of the contract and as such is legally binding.
     
  12. Casteller

    Casteller Well-Known Member

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    It's a common thing here in Spain for new constructions built by the government. A friend bought one and if they sell within 25 years all profit goes to the government, I.e not allowed to make a capital gain on it. Sale price was cheap though, way under market, competition fierce to buy so decided by lottery.
     
  13. Joynz

    Joynz Well-Known Member

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    I think it is good for a POPR to lock in affordable housing but for an investment?

    Is it just for OTP places?