Removing NRAS restriction on title

Hi all,

Looking to purchase a townhouse that is registered under the NRAS.

Going over the contract and the requirement for the property to be listed as NRAS is a restriction on the title.

Is this something easy to have removed or is it stuck there for 10 years?

 

Is it actually a caveat / covenent on title?

Wouldn't think it'd have to be nras. Rent it at market level and disqualify yourself and don't get the $10k.

@euro73 might have heard different?

 

Yeah, on the title it says it must be NRAS and it must be managed by an NRAS agent.

The property isn't on the market but it well below market value so I wanted to purchase it and remove the requirement to keep it NRAS.

 

See attached

 

Hi Cudareli, What state are you purchasing in? In Victoria, the NRAS agreement itself isn't really an issue as vacant possession can usually be exercised (no restrictions on occupation) after giving the required notice period.

If there is a Section 173 Planning and Environmental agreement on title (or equivalent planning agreement) which states that the land must solely be used for affordable housing then its pretty much set in stone unless there is a special exemption.

 

You have made the classic mistake of confusing NSW's AHSEPP with NRAS, I'm afraid

The clause you have uploaded refers to AHSEPP ( Affordable Housing) not NRAS.

So what is AHSEPP? It's a NSW Govt policy. Specifically, the Affordable Housing State Environmental Planning Policy 2009. In a nutshell, under the affordable housing developers get to build extra stock than they would normally be allowed to build, but the trade off is that they must offer the stock back at 20% below market rent for 10 years, and it must be managed by a registered community housing provider (CHP) Department of Planning and Environment - Affordable Rental Housing

This makes it similar to NRAS at first glance, but not at all the same, as there is no tax credit sweetener paid under AHSEPP as compensation for the 20% rental discount being offered for 10 years. The sweetener in this case ( under AHSEPP) is that the developer gets to build an extra 25-30% of stock. So it's really, really fantastic for the developer . They get a huge uplift in what they build, and therefore a huge uplift in profits. But many developers figured out early on that while it was great they got to build all that extra stock, selling that extra stock would be problematic. After all, it can only be sold to investors, because of the 10 year/ 20% caveat on title- as you have discovered - owner occupiers are precluded from buying it during that 10 year term - and what investor would buy something that comes with an in built 20% rental discount for 10 years? None, is the answer.

So the smart ones figured out that just like AHSEPP, NRAS also runs for 10 years and requires a 20% rental discount...so they went looking for NRAS incentives to place on their AHSEPP approved stock, and viola!... They got to build the 25-30% extra stock, making their project far more profitable that it would otherwise have been, and by adding NRAS to it, they satisfied both the AHSEPP 20%/10 year requirement, and the NRAS 20%/10 year requirement simultaneously, so they were actually able to sell the stock.

So to answer your query - no, cant get Affordable off the title for 10 years. It was part of the DA when the project was originally approved. You are stuck with it. But its fine with banks and valuers - they dont have any issues with it whatsoever.

And further, this means that NRAS is not in your contract at all. So make sure that you ask to see a copy of the NRAS approval letter confirming the property has an NRAS allocation. I have seen many people buy what they thought was NRAS, only to learn it was AHSEPP only, because they made the same mistake you made- assuming affordable housing was the same as national rental affordability scheme. Not the case. That would be a very expensive mistake. You should double check that before proceeding. PM me if you arent sure what to ask.

 

Yes, that was the expensive mistake I have made in 2014!!!!!

 

Sorry to hear that. I had posted on this many times as a warning. Do you still have the property?

 

Yes. I still have it. It was settled in 2016. I bought it off the plan. I wish I bought a house in Schofield for the same amount of money.
I will have this unit for another 9 years! Because I would not get a good price for it due to the AFH restrictions.

In highsight I wish I bought more houses instead of units because more captital gains for houese . Anyway this is the lesson I learnt.