Hello!
I was wondering if anyone can explain to me how deposit bonds work from a legal point a view when settling the property.
For example, I obtain a deposit bond from an insurance provider and the settlement date is 16 months from the date of signing the contracts. Within that time frame I "sell" the property to party B whereby arrangements have been made to have the 2 settlements on the same day.
Now my question. Firstly, is this feasible to do? Also, can I actually sell something I dont own to party B? Has anyone bought a property off the plan and sold prior to or on settlement? If so, can you describe your experiences? I understand often investors get sucked into buying off the plan and paying above market value…
Would be most interested to read some responses.
Cheers!
Kris
this is a complicated question. You should seek legal advice.
Some general comments –
some off the plan contracts won't allow you to transfer before setllement
generally if there is no clause in the contract saying that you can't onsell then you are able to at common law however as I understand it the purchaser may have some issues in getting finance for the purchase because of what you are selling
if you do sell prior to completing the contract then unless the original contract contained a put and call option then you have to pay stamp duty on your purchase and the purchaser from you will have to pay stamp duty on his purchase.As far as the deposit bond goes I don't know a lot about them but my understanding is that it wouldn't make any difference whether you on sold it or not. The deposit bond is merely a promise to pay if you default on the purchase.
hope this helps.
Ben
Hi Ben! Thanks for your response. Can you please explain the "put and call option" in order to avoid stamp duty.
Cheers
Rather than proceed to Contract on a property you enter into a Call Option.
This gives you the right but not the obligation to proceed to Contract after a specific time period.
When the expiry date of the Option has expired you have the ability to nominate your purchaser who will complete the Contract.
This can be someone to whom you have onsold the property to. As the end buyer they pay the stamp duty on the Purchase.In Qld there is no stamp duty on an Option Contract but this is not the case in other States.
Richard Taylor | Australia's leading private lender
Thanks for that Richard. Its rather insightful. I will have to see what the legalities are in Victoria however.
How would I go about setting up an "option contract"? Will i need a solicitor?
Cheers
I was wondering what the CGT implications are for the above transaction. Also, what would the base dates be in order to determine CGT? Contract date or settlement date?
Cheers
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