Hello, we have received an offer for our property, but the buyer wants to do put a "price apportionment clause" on it. He will pay one amount to us, which we are ok with, but he wants to put in the sale price or contract price a much higher amount as he says that will cover the stamp duty, fees and other improvement he wants to do to the house. My solicitor does not want to do such a contract and he says that it is not legal to put a different price. The buyer has come back saying that my solicitor does not know what he is talking about and that it's a common procedure.
Also what are the capital gain consequences on that considering that it's not our main residence, will be asked to pay CGT on the whole amount or only on what we receive?
Anyone can advise me on that?
Thanks in advance for your reply.
I would go with your solicitor on this one.
It appears the buyer is trying to get a bigger loan with minimal security – ie to mislead his bank – and also will be an incorrect value for stamp duty and valuations – I'm no expert in this area but I think your solicitor is likely to be and has advised correctly.
A rebate clause or early settlement payment is common practise on new land releases or off the plan contracts where the seller wishes to have some uniformity on his pricing and does not wish to show that there was some discounting of sales prices.
In saying this the amount rebated must be clearly displayed on the Contract or Special conditions page.It sounds to me that your Buyer is trying to increase the sales price for his finance purpose without disclosing the true net amount to his lender.
Personally I would be walking away from such a transaction.Richard Taylor | Australia's leading private lender
the NSW Law Society has put out a notice warning solicitors to steer clear of deceptive practices which involve inflating contracts. But it is fairly common. Having the vendor pay the stamp duty of the purchaser is not as bad as openly adding a 10% discount on early settlement and if it is disclosed to the bank then there should be no problems i think.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
midri wrote:Hello, we have received an offer for our property, but the buyer wants to do put a "price apportionment clause" on it. He will pay one amount to us, which we are ok with, but he wants to put in the sale price or contract price a much higher amount as he says that will cover the stamp duty, fees and other improvement he wants to do to the house. My solicitor does not want to do such a contract and he says that it is not legal to put a different price. The buyer has come back saying that my solicitor does not know what he is talking about and that it's a common procedure.Also what are the capital gain consequences on that considering that it's not our main residence, will be asked to pay CGT on the whole amount or only on what we receive?
Anyone can advise me on that?
Thanks in advance for your reply.Say you're fine with it as long as it is clearly disclosed in extra large font in the contract.
Wait for the buyer to run away but not before finding out where else he has bought so you can avoid getting stung by misleading previous sales data.
Put your solicitor on retainer becuase you've got an honest one.
As a solicitor I can confirm that unless is it specifically noted in the contract it is fraudulent. The intent is for the bank to be misled so that the purchaser can obtain a benefit (extra finance). That clearly makes out the elements of fraud in every state and territory.
As for putting a solicitor on a retainer for being honest, I would expect that every lawyer would advise the same. It's pretty straightforward. If a solicitor advised any different, he/she should be reported to the relevant Law Society.
Whenever I comment on legal issues on this forum I normally put a disclaimer down the bottom to the effect that it should not be interpreted as legal advice and that independent legal advice should be sought. However, I am prepared to stand by this one.
Cheers
K
Linar wrote:As a solicitor I can confirm that unless is it specifically noted in the contract it is fraudulent. The intent is for the bank to be misled so that the purchaser can obtain a benefit (extra finance). That clearly makes out the elements of fraud in every state and territory.
As for putting a solicitor on a retainer for being honest, I would expect that every lawyer would advise the same. It's pretty straightforward. If a solicitor advised any different, he/she should be reported to the relevant Law Society.
Whenever I comment on legal issues on this forum I normally put a disclaimer down the bottom to the effect that it should not be interpreted as legal advice and that independent legal advice should be sought. However, I am prepared to stand by this one.
Cheers
K
Indeed!
Yes, this is indeed fraudulant – often called lying. The financier is providing more funds than the property is worth, and most credit areas are now very vigilant with wanting to see any contracts in full that have annexures or clauses inflation the price – sometimes done when people buy interstate.
As already posted, your solicitor is 'on the money'.
It's one thing to be creative, another to be deceptive.all the best.
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