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Some Legal Tips on Building versus Buying a House
Buying a property will be one of the most important financial transactions you make. There are various arguments for and against building a house or buying an established property which should be considered before making your decision.
Building
Advantages of Building
One advantage of building is that you can choose the design to suit your needs. Features such as room sizes, layout, floor coverings and fittings can be personally chosen and you can build a "green home".
Disadvantages of Building
Building a house takes time. Alternative housing will be required until construction is finished. Bad weather can delay completion of the property which needs to be factored into when budgeting or managing time for moving in.
You will need to pay more than just the building costs. Establishing a garden, constructing fences and building retaining walls, adds to the costs to build. When building, you are limited to your choice of suburb, as vacant land is very limited in established areas, unless you intend to demolish an existing house.
What are the best ways to avoid problems when building a house?
Research and early planning should be undertaken before you enter into a building contract to avoid unforseen expenses later. Have an accurate breakdown of the expenditure for the land, building and all expected associated costs.
All domestic building work must be covered by a contract that complies with the Domestic Building Contracts Act 2000. You should carefully check your contract documentation and, if necessary, seek legal advice before signing. Builders almost always prepare the building contract and this can lead to the contract being more favourable for the builder than the owner.
Building contracts can be very complicated and the amount of money that you are agreeing to spend is significant. Make sure that you understand what you are getting for your money. It is important that all aspects of the building work are discussed and documented in order to avoid disputes once the work commences.
Plans and specifications must be included in the contract and form an integral part of the agreement between you and your builder. They may be prepared by the builder or drawn up for you by an independent architect, engineer or building designer. However if your plans and specifications were provided direct by a licensed builder, they may be subject to copyright and therefore cannot be used by another builder or building designer should you decide to change your builder.
Remember, there is a 'cooling-off' period of 5 business days during which you may withdraw from the contract provided you have not received formal legal advice about the contact before entering into it. However, if you do withdraw under the ‘cooling-off’ period, the builder is entitled to a payment of $100 plus all out-of-pocket expenses reasonably incurred.
The contract needs to clearly set out: < the total contract sum: < the deposit amount; and < the progress payments. The deposit and progress payments need to be in accordance with the percentages required under the Domestic Building Contracts Act 2000. Investigate whether the contract price is fixed and if so, for how long and what factors may affect the final price. Consider whether the commencement and completion dates are realistic as are the grounds for an extension of time. Make sure all changes to the contract (‘variations’) are priced and recorded in writing.
Buying
Advantages of Buying
When you buy an established property you can physically see and inspect what you are purchasing. You can also move into the house straight after settlement (eliminating rental costs) plus established gardens are also included in your purchase price. Buying an established home also gives you wider choice of location.
Disadvantages of Buying
Utility costs are often more expensive because of maintenance requirements of older properties, including outdated wiring and plumbing. Repairs may have to be made, especially if the house is 15 years or older and fire alarms or electrical safety switches may need to be installed to ensure safety.
Tips when Buying a House
Seek advice before you sign the contract. A solicitor can review a draft contract to ensure that it is correct and meets your needs. If you obtain legal advice after the contract has been signed by the seller, it is usually too late to ensure that you are getting what you have negotiated or have not placed yourself at a disadvantage.
However, all residential property sales in Queensland, apart from auctions, are subject to a cooling-off period of five business days from the date you receive the fully signed contract. If you decide not to proceed with the sale within that period, your deposit will be refunded less 0.25% of the purchase price of the property.
A standard contract for the conveyancing of residential property was developed by the Real Estate Institute of Queensland and the Queensland Law Society. When you have expressed your interest to purchase a property, the agent will prepare a standard contract for you to sign. If necessary, further special conditions should be added to the contract, for example, the purchase may depend on the sale of your existing property.
The standard contract provides that the initial deposit is payable when the buyer signs the contract. Contracts should be drafted so that the initial deposit is payable at least two or three business days after the contract is signed and the balance deposit is due when the contract becomes unconditional.
Excluded fixtures and included chattels must also be listed in the contract. A dishwasher is considered to be a chattel and it should be noted as an included chattel so that the seller is not entitled to remove it. On the other hand, a plasma television mounted to the wall, for example, may be considered a fixture and if the seller is going to take it with them, this needs to be noted as an excluded fixture in the contract.
Regardless of whether you build or buy, you should discuss the matter with a solicitor before signing any contract.
Article by Katie Rowling - Associate, Property Services
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Buying a property? Talk to one of our conveyancing professionals today 1300 369 581 or katieg@macgillivrays.com.au.
PLEASE NOTE: This article is not legal advice and our comments are of a general nature only. This document is not to be relied on as substitution for proper detailed advice.
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