Home » Property Law: Legal aspects to consider when purchasing detached house investment properties

Property Law: Legal aspects to consider when purchasing detached house investment properties

Posted by Mark Foy | 30 June 2021 | Legal Developments

When purchasing a detached house as an investment property, it is important to consider the legal aspects and responsibilities which accompany your real estate purchase.

 

Know what you are investing in – and its more than just the house and land. 

When purchasing a detached house as an investment property, it is important to consider the legal aspects and responsibilities which accompany your real estate purchase.

So you’ve decided to invest in a house. There’s no strata title scheme involved and your investment does not require you to engage with a body corporate.

You have complete control over the management of your asset, or do you?

Below are some questions you should consider when finalising your property purchase:

Prepare for both the ups and potential downs

Your investment in a detached house includes the potential upside for further development, extensions renovations and such – but it also brings with it a corresponding increased risk that you must fully bear the costs of maintenance and repair to all elements of the building and any other improvements located on the property.

In some States, the standard form of contracts typically used for purchasing detached houses will make provision for the buyer to obtain a building and pest inspection. Auction contracts of course are generally unconditional and / or have these conditions removed. If purchasing a property subject to building and pest inspections, it is extremely advisable that you try and negotiate these conditions.

It would be unrealistic to assume that when purchasing new (or nearly new) house that all relevant building works have been conducted in complete compliance. It is also not unknown for certain termites species to substantially damage new buildings very short periods of time – and for these reasons, it is critical to obtain both a building and pest inspection of a property wherever commercially agreeable to the Seller.

Check the boundaries of your real estate purchase

Your investment in a detached house and ability to make future changes to it (such as substantial renovations, extensions or demolishing pre-existing structures) will be controlled by local council planning schemes and restrictions.

Inner city properties are generally heavily restricted by planning regulations, which can limit what modifications can be undertaken. Inner city lots are typically segmented by old surveys and, with increasing improvements in technology, it is not unknown for resurveys of these lots to be required, to adjust for now out of date surveys measurements.

It is highly advisable when investing in a house, building or other major land improvements close to local boundaries that surveyors are engaged to confirm that the house and all major improvements on the property are within the stated legal boundaries and to also check that adjoining owners have not constructed improvements over the boundary into your propose property.

Have you checked what planning restrictions may apply?

  • Renovations: If rebuilding, check that applicable planning restrictions not only cover restrictions on demolition and the addition of extensions, but also define what the site coverage rules are – so that if you do wish to extend the building, to what extent you can add additional living space.
  • Multi occupancy: Multi occupancy is also another significant potential upside for investment in detached housing. In most cases, the planning scheme and Local Councils will preside over whether it may be possible to add a separate independent living quarters within or adjacent to a detached house.
    For example, the planning scheme may only allow immediate relatives to reside on your property and there may be a requirement to register the separate building as a flat with a Local Council and pay a yearly fee. This presents a significant long term opportunity for the use of a second building on the site for children as they grow into young adulthood or for aged parents downsizing and not able to live independently.
  • Easements: The due diligence process and checks required to invest in a house will necessarily entail your lawyers to check the title for the property and identify, for example, whether there are any easements which effect the property. Such easements may actually benefit the property, such as provide access to the property over someone else’s adjoining lot or burden the property, for example make provision for the existence of underground drainage or sewage lines for services.
    An easement will be registered on the title and be an arrangement you’ll have to live with long after the lawyers are finished their work. It is therefore very important that you obtain copies of any easements which may affect your property, read them, obtain advice where appropriate and understand fully what your obligations are in relation to those documents.
    They may be material, for example, if it is an access easement as you may have ongoing costs to maintain pavements or other surface treatments along an easement over the term.
    If it’s a services easement which contains underground pipes or an overland flow easement for storm water you may be prohibited from building in the easement area or within a particular setback to the easement area.
    Say for example you’ve selected a particular property, agreed a price and even mapped out a location for the backyard pool but what has not been factored in is that an existing stormwater easement along the rear boundary of the property prohibits the construction of improvements over that particular area – this could mean that you won’t be enjoying summer by your dream pool.

The legal aspects outlined highlight just some of the many reasons both first time and sophisticated real estate investors should always engage in a trusted and experienced property lawyer when purchasing detached house properties.

For more information on this update or other related property matters, please contact Group Principal Mark Foy on mrf@nexuslawyers.com.au

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 This publication is © Nexus Law Group and is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues. 

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