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Confused, misinterpreted and muddled: Part 2

Confused, misinterpreted and muddled: Part 2

This is Part Two of a Two part article. To view Part One click here.

There are plenty of occasions where an agent, owner or buyer gets things a little confused when it comes to property. Either they don’t fully understand the scenario, the lingo or the consequences, and it is all made worse because often two parties will be talking to each other, each thinking they are discussing the same thing when they aren’t! Here are some common ones.

DA vs BA

This one can really confuse people because like freehold, the interpretation will vary depending upon the situation. DA can mean two things: Development Application or Development Approval. The same with BA: Building Application or Building Approval. You need to understand the context in which it is stated to know which applies. “I have lodged my DA” translates to “I have lodged my Development Application”. “The property is being sold with a DA” will normally mean it is being sold with a Development Approval. For those that don’t know, DA usually refers to items of a town planning nature, in other words the application and approval of the ‘use’. BA refers to the practical building side of things: engineering, compliance with building codes, etc. In other words it is the detail and approval that enables you to go ahead and build.

Residential Services vs Town Planning Approval

This one mainly applies in Queensland and people get it wrong all the time. Unfortunately it is a complex area to understand so educating yourself is very difficult. Residential Services is the name given to a collection of legislation that applies to some buildings that lease out individual bedrooms rather than whole houses, so things like boarding houses and student accommodation. Registration or approval as a Residential Service means the fire safety, building layout and/or the manager are approved to operate as a Residential Service. The trouble is, this is not a town planning approval. You can be approved as a Residential Service and not have town planning approval for the building. The most common scenario are houses that were approved as houses under the town plan (in Brisbane usually for occupation by 6 people, soon to be changed to 5), but over time bedrooms have been added, then the owner gets Residential Service approval and start leasing out the rooms individually. Unfortunately though, the building as only ever approved as a house and therefore a maximum of 6 occupants under town planning guidelines. Brisbane City Council are cracking down on this and have recently issued over 300 ‘need to comply’ notices.

Under Offer vs Under Contract

Sometimes an agent will use the term ‘under offer’ but really mean under contract, however, generally speaking under offer means there is an offer in place and whether or not it has been accepted by the vendor is another story. If there is no accepted, written contract in place then there is nothing to stop you from also making an offer, even if the agent doesn’t want to accept it. Did you know that the two most common reasons why they will say they already have an offer so won’t look at other offers is because they are either lazy and don’t want to do anymore work on the property or because they don’t want to jeopardise their existing offer?

Flats versus Units

This one is confusing because everyone has their own interpretation and there doesn’t seem to be a common agreement of what the definition should be. Do a web search and you’ll see what we mean! Also, there are different definitions from country to country. Just to make it harder again, the term ‘flat’ isn’t really applied to new product anymore, which may give an indication to its true meaning. We use the term ‘unit’ when the dwelling is either strata-titled or compartmentalised for fire. So if the ‘unit block’ is full brick we would normally consider them units and not flats. Flats, on the other hand, tend to be houses converted to flats, or timber construction, or similar. So they are usually a little less purpose built. In the past in Brisbane you used to require registration for flats, but this was not necessary for units. This probably stems from how the units/flats were originally created/approved. Find that out and you will probably have a better answer than we have provided here!

Building Inspector versus Builder

In Queensland there is a standard clause in residential house and land contracts that relates to inspections by building and pest inspectors. This clause used to be pretty liberal: a lot of people could pull out of a contract using this clause with minimal opposition and by employing a wide variety of people, such as an architect offering their professional opinion. These days it is far more restrictive, to the point where you can’t even employ a builder for your building inspection unless they have an inspector’s license (most builders don’t have this). You must employ a registered building and pest inspector if you are to use this clause to terminate a contract.

Road Widening versus Compulsory Acquisition

Government bodies will sometimes need to acquire land for their own purposes, whether it is a new park, a new road, a tunnel, etc. In most cases they will take this through compulsory acquisition and pay you accordingly for the portion of land they have taken. This is happening a lot at the moment in Brisbane with all the new roads and tunnels that are being constructed. They even pay you when they are building a tunnel 50m below your property. There is another method in which they take land from land holders and in this instance it is without paying them a cent! Sometimes when a land owner or developer proposes a development it is deemed they are doing so on land that is in a street that it is desirable to make wider, so what happens here is you are granted your approval on the provision you allow a ‘road widening’ across the width of your property. As an example, you may have had a block with 20m of frontage and 40m of depth. You propose a 6m front setback, but council want 1m, so you grant them the front 1m of your land and you get your approval. Your front setback therefore ends up only 5m. The density, etc. are all worked out on the original land size, not the new one. Council are able to do this because your development is ‘adding pressure and congestion to a road that can’t handle it’. An easy and cheap way for them to get free land, but not altogether a sensible one. What happens if no one else in the street develops? Another common scenario is where you develop on a corner lot. Most corner lots have square edges, but this makes it difficult for drivers to see around the corner, so council insist on a truncation to your corner to improve site lines.

Open Listing versus Sole Agency versus Exclusive Agency

This is more applicable to sellers than buyers, but if you can find out whether an agent has an open listing, sole agency or exclusive agency (without asking them!) it can make it interesting when buying and can create opportunities. Open listing is easy. It means any agent with the owner’s permission can advertise and sell their property. This used to be quite common, but is not as common anymore. Many agents would prefer to avoid trying to sell a property that is an open listing because it may mean a lot of work for no reward. There is nothing stopping the property from being sold by another agent while they are working with someone else. You will find in a lot of cases that the agents selling houses that have an open listing are new agents or struggling agents who have not got a database of sellers or listings. Obviously this isn’t always the case, but is quite common. Most agents prefer to list a property with an exclusive agency as it means they have complete control and if the property sells during this exclusive agency period (in Queensland this is normally 60 days) then they get their commission, regardless of who sells it. Sole agency is similar to exclusive agency, where there is only one agent with the rights to sell the property, however, the owner can sell the property themselves and if they manage to do this then the agent does not get paid any commission.

Deposit

We’ve heard all sorts of incorrect information regarding deposits when buying property. Some people still believe you must have a 10% deposit when buying, but this is not the case in most instances. The simple fact is the deposit can be almost any amount that is agreed upon, even as little as $1 (or $10 as was the case with Paul Eslick of the Reno Kings when he recently made an offer). A lot of people do not realise that the deposit amount required at auction is also negotiable. Standard amounts are either 10% or 5% deposit at the fall of the hammer, but in Queensland you can pay less, if agreed to in writing prior to the auction. Note that should they accept the lower deposit amount then they will normally make the same offer to all other purchasers. Another area that does confuse some people is the difference between the deposit when signing up the contract (i.e. the deposit amount agreed upon in the contract of sale) and the deposit in relation to your mortgage. Deposit in this instance relates to the amount that you, the buyer, are required to supply towards the purchase price with the remainder being supplied by a lender. It has no relationship to the deposit paid as a result of an agreement made in the contract of sale.

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