Due diligence in property

Upon expressing interest in purchasing a property, performing legal due diligence is critical. By reviewing documents and talking to people, you might be able to uncover issues about the property that may impose obligations and liabilities on you. The more you know about your potential investment, the more informed your purchasing decisions will be.

Below are some issues you should include in your due diligence checklist:

A title search should be non-negotiable as this reveals the ownership and the rights of the owner to sell the property. Our conveyancers can help you search state registries to find land title information such as changes in property ownership, subdivisions, and mortgages. Further, we can carry out other searches with councils and other authorities to identify issues that could affect the value of the property.

The title documents provided in the contract of sale may give you an idea of the fencing and boundary lines or measurements of the property. However, these are not guaranteed to match the exact measurements of the property. Consider commissioning a site survey from licensed land surveyors to determine the accurate location and extent of the property.

At first glance, the property may appear to be in top condition. But what if every single thing goes wrong the moment you move in? Before you put down your money on the table, consider obtaining a building inspection report and pest inspection report.

Licensed building inspectors can examine the property and ensure that the property is structurally sound and free from any defects. If there are defects, then what are the significance of the defects, etc? You also want to ensure that the property is not infested with insects or pests that could affect the property’s value and living conditions.

These are interests in a property that could restrict you from doing something on your land or allow another person to use the land for a specific purpose. Examples of encumbrances may be easements, caveats, restrictive covenants, and mortgages. In Victoria, common easements include those that give service providers the right to run utilities such as electricity or drainage through a property.

By checking for encumbrances, you’ll know if there are other interests in the property that could affect its use or development (for example, caveats on the property title, easements running through the land or restrictive covenants in respect of building certain things). Encumbrances are generally outlined in the title document or the Vendor’s Statement but our conveyancers can check for other interests registered.

If you’re buying a property from a corporation (ie. company), due diligence should involve a search on the Australian Securities and Investments Commission. This will confirm the identities of the directors and shareholders so you can be sure you’re dealing with authorised representatives of the company. You can check if the names on the ASIC records match the signatories on the contract of sale. This will confirm if they hold the power to sell the property or not. Otherwise, you may need to request further documentation demonstrating their capacity to sell the property such as a power of attorney.

Owning too many properties in Victoria may involve paying annual land tax. The amount you’ll be paying depends on the total value of the land and what the land is used for. Make sure to review your taxes as these can have a significant impact on the bottom line. You should also review the land tax payable in a contract of sale as you could be forking out a few thousand dollars extra in adjustments from Vendors who hold the property as an investment.

If you’re buying a property under a plan of subdivision with common property, it may be managed by an owners corporation (also known as body corporate). An owners corporation can make rules that cover issues such as the use of common property, safety and security, and payment of fees. The Vendor’s Statement generally includes information about owners corporation so make sure to review the statement once it’s provided by the seller. You should also order the owners corporation certificate to see if anything is owed, what the AGM says, insurance coverage and premium, etc.

Bushfire and flooding risks can affect your land management and building and insurance premiums. Our team can help you determine if you’re in a designated bushfire-prone area (BPA). We can also coordinate with your local council for flood maps and flood-level information for your property.

Are you planning to change how the land you’re buying is used? You have to review its planning scheme first to know the permitted use and development. We can help you coordinate with your local council to get advice about zoning and overlays, as well as other restrictions that may apply to your property such as safety designs. The council can also advise you if there are any proposed or issued permits for nearby developments that can affect the overall ‘vibe’ or ‘character’ of the place.

Generally, you will need a permit if you’re planning to undertake any building work on your property. Part of due diligence is checking for any building permits issued for the property previously. This will give you an idea of what kind of building work was completed in the past.

Take advantage of our highly personalised services and cost-effective conveyancing fees. For assistance in reviewing your contract of sale and exercising pre-purchase due diligence, get in touch with our conveyancers at +613 9959 9850 or email us at info@tnsconveyancing.com.au.

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