TYPES OF HOME OWNERSHIP TITLES

If you want to buy or sell a home, land or investment property you’ll have to sign a contract. The legal work involved in preparing the sales contract, mortgage and other related documents, is called conveyancing. It’s possible to do your own conveyancing, however, most people get a licensed conveyancer or solicitor to do the work for them. This fact sheet explains what is involved with conveyancing.

mortgage broker midas properties  sydney

IMPORTANT

Unlike when you buy a house that is for sale, there is no cooling-off period when you buy at auction, or exchange contracts on the same day as the auction after it is passed in.

TYPES OF HOME OWNERSHIP TITLES

Torrens Title

Torrens Title is the name given to the Government system of recording ownership of land. It is by far the most common land title, and the cheapest to buy and sell. Once you are registered on the title, you are the guaranteed owner.

 

Strata Title

Strata Title is the common method of unit ownership. The Strata Schemes (Freehold Development) Act makes possible the sub-division of the airspace above the surface of the land, and the issue of a Certificate of Title to part or parts of a building. This enables the purchaser to buy the actual space enclosed by the unit and then sell, lease, mortgage or otherwise deal with the unit as any other owner of property.

The individual owners in a block of Strata Title units are compelled by law to form an owners’ corporation, which controls the general administration and necessary funding of common property.

All unit owners are required to contribute towards the costs associated with the common property areas (eg. lighting of entrances and hallways, gardening, maintenance). Facilities, such as lifts, swimming pools and saunas, will increase the contributions markedly.

As a unit owner your involvement can vary from paying the levy and abiding by the rules to participating in the executive committee of the owners’ corporation.

Common Law Title

Also known as Old System Title, this consists of a series of title documents called ‘a chain of title’. Following a sale, Common Law Title will be converted to a qualified Torrens Title.

Action may be taken at a later date to convert that to a full Torrens Title.

Community Title

Community Title is a form of sub-division which allows common property areas to be incorporated into a land sub-division. On registration of a community style plan, an association will be established similar to an owners’ corporation under strata schemes legislation. People purchasing into such a scheme will receive a Torrens Title for the lot they own and membership of the association. They will also share ownership of the common facilities.

Company Title

Company Title is where unit owners are actually shareholders in a private company. Buying a certain number of shares entitles the shareholder to exclusive possession of a particular unit, and perhaps space for a car.

Shareholders vote to decide company rules governing occupation, such as rights to lease, sell or transfer shareholdings. You must have the company’s approval to alter in any way the occupancy of a Company Title unit. Because you do not actually gain a title to the property but shares in a company, lending bodies are more reluctant to lend for this sort of property.

White House

THE PROPERTY BUYERS CHECK LIST

Use this handy checklist before you sign....

1. The dimensions of the land, including whether it is the same as what appears on the title.

2. The structure of the building, for example the foundations, plumbing, wiring, dampness, cracks in the walls.

3. Pest infestation.

4. Whether any part of the building overhangs an adjoining property.

5. The condition of the fences.

6. The gutters, eaves, roof, exposed pipes.

7. The tendency of the land to flood - ask the neighbours if the property is in a low lying area, especially if it is located at or near the bottom of an incline.

8. If there is a vacant block of land next to or near the property, check with the council. For instance, you would probably want to know if a block of flats or apartments is to be built next door, or a huge house will be built that will allow the neighbour to look over your back yard.

9. Whether there are any zoning or building restrictions on the property.

10. Whether there are any easements. An easement is something that restricts the ability to use of the land, for instance whether there is a right of way across the property.

11. Whether there are any roads or freeways proposed to be built in the area.

12. Whether any renovations were completed without council approval. Wiring and plumbing must also have been legally connected.

13. Is this the type of area you want to live in?

14. Is there the public transport you need, and a reasonable distance to shops, schools etc.

15. Do I know the price performance for the area?

16. Have I conducted at least two inspections at different times of the day to check traffic and noise, and the exposure to the sun?

17. Are the rooms a sufficient size?

18. Does the laundry allow easy access to the yard?

19. Is the kitchen designed to work well (you will curse yourself later if it doesn't!)

20. Is the house insulated?

 
 
Mortgage Broker Sydney - Midas Solutions

DEPOSIT BONDS

Midas can help you with your deposit to secure the property you intend to purchase.

If you don't currently have the cash or don't want to use your cash for a property deposit, then a deposit bond could be the answer you are looking for.

What is a Deposit Bond?

A financial guarantee issued by an insurance company/underwriter to the vendor. It acts as a substitute for the cash deposit paid between signing a contract and settlement of the property. At settlement the purchaser is required to pay the full purchase price including the deposit.

The use of a Deposit Bond does not remove the obligation of the purchaser to pay the full deposit upon settlement.

The Deposit Bond can be issued for all or part of the deposit amount required, up to 10% of the purchase price. Acceptance of the Deposit Bond in lieu of a cash deposit is at the sole discretion of the vendor.

Why use a Deposit Bond?

By using a deposit bond you no longer need to cash in your shares or term deposit or refinance your house, in order to come up with a deposit on a property. A deposit bond allows you to pay the full price of the property at settlement. Some of the significant benefits of using deposit bonds are:

  • Cost Savings: the cash funds that would normally be used as an upfront cash deposit can now remain invested thereby earning you extra interest or returns. In some circumstances this could mean not having to refinance your house or take out a personal loan for the deposit, which saves you money instantly.

  • Simplicity: You may find a property when you least expect it, therefore making it difficult to access funds from a term deposit or equity in your house at short notice. A deposit bond is a much simpler way of paying for the deposit.

  • Convenience: If you have bought a house before your current house is sold, you may not have the 10% deposit available. Deposits bonds are a very quick and convenient way to overcome this issue.

  • Auctions: Deposit bonds are commonly issued before auctions allowing you to know your maximum purchase price along with having the deposit ready on the day. If you are not successful at the first auction, the deposit bond is still valid for future auctions.

  • Guarantee: Major insurance companies issue deposit bonds and these companies guarantee payment to the vendor. This guarantee cannot be cancelled once the bond has been issued.

Who can purchase a Deposit Bond?

A Deposit Bond can be purchased by existing property owners who wish to purchase another property, property investors who wish to expand their property portfolio and first home buyers. They are ideal for the "asset rich/cash poor" purchaser who has funds tied up in investments or in their home, and need to provide a deposit. They can also be used for purchasing off-the-plan property.

Where are Deposit Bonds accepted?

Deposit Bonds are legal and available in all states. It is recommended that you check with the vendor for acceptance prior to purchase.

How much do they cost?

The cost of a deposit bond is based on the value of the property and the length of time to settlement. At the very least you can expect to pay around 1.2% of the guarantee deposit price. It’s a one-off fee that’s usually partly refundable if you don’t use it.

As an example if you were purchasing a home for $400,000 and needed a 10% deposit of $40,000 to exchange contracts, it would cost you approximately $480.00 to get a deposit bond in place. 

When does the deposit bond terminate?

The bond terminates when the contract of sale completes or the deposit bond expires. The bond also terminates when the insurance company pays a claim, or the seller/vendor terminates or rescinds the contract.

Is any security required to get a deposit bond?

Most deposit bond companies require no security before issuing a deposit bond, and therefore they are an unsecured facility. This makes deposit bonds very quick to be issued, in most cases bonds are issued within 48 hours of the company receiving the required paperwork.

What happens if I don't go through with the sale?

If you do not complete the settlement of the property, the seller/vendor can claim the deposit amount from the deposit bond insurer. The insurer will then seek to recover the deposit amount plus legal costs from you under the counter indemnity. This could involve legal action if you do not pay.