OTP Contract Variation - Carspace & Storage Swap

Discussion in 'Legal Issues' started by CHE, 21st May, 2018.

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  1. CHE

    CHE Active Member

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    Hi,

    This is a follow up from my recent post on not being delivered what was on our inclusions list.

    I've since met with the Developer and he is happy to work with us to rectify this situation. Our current verbal agreement with him is to swap the Carspace & Storage allocated to our Lot with one of the Lots that he owns.

    We would be quite happy with this outcome, as our current Carpark Storage is barely 1m3 and the one he is offering to exchange with us would have about 10m2 of extra floor space in the storage area.

    He indicated this agreement can be made between ourselves and him, as a 99-year lease for $1 - to give us exclusive access to the Carspace & Storage on his lot.

    I've only been able to find examples on how these sort of agreements get worked out on Common Property agreements (and our Solicitor is still investigating this issue), so was hoping I could get some advice:
    • Any advice on how best to approach this agreement (or alternatives to a lease) so that it can't (easily) be repealed?
    • Would such an agreement raise any concerns to the bank?
    Also note:
    - our settlement is due at the end of this month,
    - the Developer holds about 14 out of the 24 apartments.
     
  2. Trainee

    Trainee Well-Known Member

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    What happens if you sell in the future?
     
  3. CHE

    CHE Active Member

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    Ideally the agreement just stays in place
     
  4. Trainee

    Trainee Well-Known Member

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    Thats something you want to lock down legally. What happens if the developer sells?
     
  5. Scott No Mates

    Scott No Mates Well-Known Member

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    It is a lease - there should be provision for assignment (preferable upon notification not requiring consent).
     
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  6. CHE

    CHE Active Member

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    Yes, just trying to get my head around how this legal agreement needs to be structured.

    If a 99-year lease is confirmed to be viable and we both sell after 10 years - I'm assuming this lease agreement then has another 89-years left in place. But really hoping to get some legal feedback, as this type of arrangement doesn't seem to be too common
     
  7. CHE

    CHE Active Member

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    Thanks, would this type of arrangement likely be of concern to my bank - if they had to repossess etc?

    Or would they likely consider the valuation to be lower because of this? (we would still have our original carspace & storage on our lot, just access to a better set up.)
     
  8. Marg4000

    Marg4000 Well-Known Member

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    In-laws were given a 99 year lease over some common area to enlarge their private courtyard/garden. This continued on to the new owner when they sold.
    Marg
     
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  9. Paul@PAS

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

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    Thats something a lawyer should be assisting with.
     
  10. CHE

    CHE Active Member

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    Yes, they are like looking into it but not necessarily familiar with this type of arrangement - so hopefully this all gets resolved pretty quickly
     
  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Who is going to draft this lease?

    Leases can be mortgaged, but the bank will probably disregard it for lending purposes. This may effect the value upon which they will lend.
     
  12. purplecat

    purplecat Well-Known Member

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    I’m just throwing an idea out - how about change the lot number on the contract - eg your original apartment = lot 1, carapace & storage lot 20; developer carapace & storage lot 18

    The new contract can be you now own lot 1 & lot 18?!
     
  13. CHE

    CHE Active Member

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    We are happy to pay our Solicitor to get things drafted, as we can't rely on the Vendor's side to progress things in a timely manner - when our settlement date is fast approaching.

    At present we've just sent out a brief summary letter as to what was discussed on site and agreed upon, with an aim to receive a response from the Vendor with some form of agreement in principle. I'm just hoping to receive this initial confirmation, as it doesn't seem likely that we'll get the lease all signed off before settlement (end of the month).

    Does an agreement in principle increase the likelihood this lease would get signed off after settlement (if this isn't finalised in time)?

    The bank seems reasonably comfortable with what is proposed, but they want to see the drafted agreement (once available) and indicated they may order a re-val. But I believe we should be okay in regards to valuations, as the unit below (with exact same floor plan and outlook) sold 6-months after ours for an extra $100k
     
  14. CHE

    CHE Active Member

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    I have no idea, unfortunately, as to whether this could be locked in via a variation to the contract.

    I believe lease is the easiest, as the only alternative I'm aware of would be revising the registered Strata Plan.
     
  15. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Probably not
     
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  16. JDM

    JDM Well-Known Member

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    "and our Solicitor is still investigating this issue" - Get a solicitor that knows what they're doing.

    What State is the property located in?

    A 99 year lease is unusual but fine if drafted properly. Consider asking for a perpetual lease.