The Property and Finance Show

Sunset Clauses, 66W, and Deposit Games: Property's Legal Gotchas - With Jordan From Trinity Legal

• Kyrillos Mansour - First Brick Property • Season 4 • Episode 8

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Jordan from Trinity Legal and Migration uncovers the hidden legal complexities in property contracts that can trap unwary buyers and cost them thousands. 

• Special conditions in contracts often favor vendors with higher default interest rates and early deposit releases
• The 66W certificate in NSW removes cooling-off periods and protective clauses, creating significant risk for buyers
• Sunset clauses in off-the-plan purchases can be weaponized by developers to terminate contracts when property values increase
• Settlement periods carry different risks – too short creates financing pressure, too long exposes buyers to changing market conditions
• Trust and SMSF purchases involve complex structures requiring specialized legal knowledge
• Co-ownership arrangements need careful consideration as disputes commonly arise when one party wants to sell before the other
• Property deal collapses can sometimes be salvaged through price negotiations rather than termination
• Different ownership percentages between spouses can have significant tax implications
• Having responsive, proactive legal representation is essential as successful transactions often involve extensive behind-the-scenes work

Contact Jordan at jordan@trinitylegalmigration.com.au or visit trinitylegalmigration.com.au for help reviewing your property contracts.


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Kyrillos Mansour (KM):

Hello and welcome back to the Property and Finance Show. Your host, km, as always with you today. And today is a continuation episode from last episode, so if you missed last week's episode, you better listen to that one first before you jump onto this one. Last week we had Simon Sami from Trinity Legal and Migration giving us some tips on legal advice and things around contracts and the purchasing process, and we had so many questions and we had so many people ask things about that episode that we thought, well, now we have to do a part two. And who better than someone else from the team, someone a bit more handsome Sorry, simon A good friend of mine, also working with Trinity Legal and Migration.

Kyrillos Mansour (KM):

His name is Jordan and he's here to help us dissect the legal traps and advance tips when it comes to property purchasing. Welcome, jordan. Thank you for having me. How's things Good? Thank you for bearing with me for 40 minutes trying to figure out how the mics work. Every guest that comes on has to see where you sit. Watch me struggle, watch me ask Chad GPT why nothing works.

Jordan Rafail:

Yeah, but I figured it out, it's all working.

Kyrillos Mansour (KM):

now we sound good.

Jordan Rafail:

You press enough random buttons and you pretend like you're not talking about combo one, combo two, I don't know.

Kyrillos Mansour (KM):

Things start working, but anyway, how are you doing?

Kyrillos Mansour (KM):

you've been good yeah, good busy, yeah, that's it um, before we started the recording, you'll tell me you're very busy, um, you and simon um at trinity legal um, obviously very a lot of buyers, a lot of people purchasing properties. So keeping you guys busy, which is good, yeah, but it places you in a really good position to answer some of these questions. So last week we had like more of a basic conversation with Simon, like a beginner's guide to property purchasing through a solicitor's perspective. What is settlement? How do contracts work? The basic stuff.

Kyrillos Mansour (KM):

Today we're going to ask you some harder questions. Give me the hard stuff so we'll jump into it really quickly. But very quickly before we start, um, for anyone listening, if you do have questions and you do want to ask, in the show notes there is a link that you can click on and you can send a text message and it will come straight through to uh, through to us. So if you have questions or feedback or if you just want to say um hello to jordan, you can send that through in the show notes. So that's all there. We'll just start straight away. So we'll talk about. So now we're going beyond the basics and we're going to talk about advanced contract risks, some advanced topics around contracts. I think the first question I'm going to ask you is probably an easy one what are some of the more overlooked legal clauses buyers should watch out for when they're purchasing property?

Jordan Rafail:

Yeah, it's a great question. I think from the get-go, a lot of buyers are focused on the numbers, focused on the purchase price more than anything, so they can overlook the more particular parts of the contract. One area that we always focus on is the special conditions. So you'll find, typically, that a vendor will put a higher interest rate in the event of default. Maybe they're looking to release the deposit early so that they could use the funds to purchase another property. So these are areas that we will look over to help protect our client's best interests, typically as the purchaser, and ensure that they're protected as best as possible.

Kyrillos Mansour (KM):

Yeah, cool, I think one as well that I notice happens a lot in New South Wales, specifically in Sydney, specifically 66W right. Purchasers don't know much about contracts, and that's normal because they're not legal professionals and they're not in the industry. And so when they're trying to buy a property and they're negotiating and an agent says, hey, can you sign this 66w, and they say, okay, sure, um, and they say, sign a 66w, and this contract's yours, uh, this property is yours. And so they go sign it, and then they send it to you guys or they ask us afterwards and we and we think, oh man, it's not the end of the world, but you've kind of trapped yourself a little bit, correct, can you explain what a 66W is? And I think that's actually one of the most overlooked things that people are not sure about and they're signing them willy-nilly.

Jordan Rafail:

Yeah, definitely, I think. Yeah, you're right. Real estate agents will typically put pressure on buyers. You know, make it out that they need to sign this to secure the purchase. You know, make it out that they need to sign this to secure the purchase. 66w essentially is a. You're basically purchasing the property under auction conditions, so what that means is it's an unconditional purchase immediately upon exchange. So you will not have a cooling off period. You won't have. What we typically try to include is a building and pest clause or a finance clause. So you really need to ensure that when you are signing a 66W, that you have all your eggs in order, because you will not be able to get out of that contract.

Kyrillos Mansour (KM):

Yeah, it's exactly like you said forfeiting your cooling off period, and it happens a lot in Sydney, less so in other states, I find. I find in Adelaide it's very common the finance clause, no one asks two questions when we put it in In Queensland finance clause and building and pest clause, standard Along with the cooling off period. Perth has got its own kind of thing going on as well building past finance, electricity clause, all the rest, but there's no cooling off period. But yeah, Sydney, they really really put the pressure on. And yeah, like you said, auction conditions. So can you explain what potentially the negatives of if I purchase a property in Sydney, orney or in sydney and the agent says to me, sign 66w and I sign it, yeah, why? Why is that a risk to me? What does it actually mean to me?

Jordan Rafail:

yeah. So if you haven't um spoken to the guys at power loans and and got in your finances in order and haven't really checked if you could even, you know, be financially capable of purchasing that property, that's an obvious risk there. The other issue is that once you do your building and pest, you might find asbestos, you might find termites in the property and then you may not want to proceed with that purchase. Makes it very difficult for us to get you out of the purchase if you do sign a 66w yeah, so if they sign the 66w they forfeit their cooling off period.

Kyrillos Mansour (KM):

Um, when they sign the contract they're also paying a deposit, typically correct. Um five percent, ten percent of the purchase price. Yeah, if they did want to terminate based off building and pest or whatever afterwards, does that mean they would lose that five or ten percent deposit? Correct, they would forfeit that deposit.

Jordan Rafail:

Cool.

Kyrillos Mansour (KM):

So the other side to that is if you didn't sign the 66W and you did have a cooling off period or you did have a finance clause or building and pest clause, that money wouldn't be just forfeited.

Jordan Rafail:

You would be able to get that back. Definitely, yeah, so those clauses would be there to protect the buyer's interests and be able to get a refund of their deposit.

Kyrillos Mansour (KM):

Yeah, you also mentioned releasing deposits. Early is one of the causes that you find is overlooked often. Is that a big deal?

Jordan Rafail:

Typically it's not a huge deal, though, but I do think it is worthwhile looking at because it can protect the buyer's interest. They are, you know know. If you release that deposit to the, to the vendor, they could go ahead and use that money as they wish, and then if you're going to um rescind that contract or withdraw from that purchase, then you might find it difficult to get a refund of your deposit so it is, uh, definitely something to look and be mindful of yeah.

Kyrillos Mansour (KM):

So I always find these things very important, um, and very interesting that, as a purchaser, you're not you're not typically thinking about these things, but as solicitors, you're trained to understand what the ramifications of these, these little uh clauses or little one-liners in the contract that most people won't even notice and you're thinking, oh, this, this could be dangerous. Um, and often it might not be, but it's obviously the the one percent or the five percent of times where it does go the wrong way, that's exactly it.

Jordan Rafail:

So, as your solicitor, we need to think about the worst possible uh scenario and try and protect you from that happening.

Kyrillos Mansour (KM):

Yeah I'm going to move on to um developers and maybe some agencies. This might overlap a little bit, but mainly a question around developers and new buildings, off-the-plan, house and land packages. Now, anyone that's listened to any of my stuff knows that I hate off-the-plan. I don't recommend it as an investment ever, or house and land packages. But I mean people purchase it and if you're buying it to live in, you know there's a story for it and there's a case study for it. But those contracts are different to a regular purchase. Are there anything that you have seen in the past? Because I know of a couple of things that I find very, very unethical, I guess that are in these contracts. Do developers ever build in traps or put in clauses, for example, that are in their favor, that purchasers don't notice, especially when it comes to these newer purchases?

Jordan Rafail:

Yeah, definitely, I think. Look at the end of the day, most developers and agents are drafting these contracts to protect their best interests, right? So again, it's our duty to look at these contracts and again try and protect our purchasers' best interests. So the obvious one is sunset clauses. A lot of developers put those in place to protect them because, as you've seen, in the last few years since COVID, there's been a huge spike in cost of materials and also the cost of actually building these properties. So you'll find that the sunset clauses are there in place so that if there are um delays, they can um rescind the contract, um and and potentially sell that property at a higher price once the market's moved on yeah.

Kyrillos Mansour (KM):

So as I asked you the question, I wrote down sunset clause in case that wasn't the one you were going to mention, but you did. Can you break down what exactly is a sunset clause? Um, so you kind of teased it a little bit, but can you break down to someone who's never heard of a sunset clause before in their life, what does that actually mean?

Jordan Rafail:

yeah. So sunset clause essentially gives the um vendor the opportunity to push out the completion dates, the build dates, um, and give them the opportunity as well to make variations to the layout and the specifications of the property. So it's leaving the contract open-ended. You could say yeah.

Kyrillos Mansour (KM):

And so how I've seen this affect people in the past is because I think the sunset clause and please correct me if I'm wrong I I think the sunset clause and please correct me if I'm wrong. I think the sunset clause was originally designed to protect the purchaser originally. And so you might be listening and thinking how is it protected, purchaser? And the idea is, if the builder is taking too long or the developer is taking too long and the purchase is like, hey, what's going on? It's been two years, three years, correct? They can terminate, get their refund on the deposit, whatnot?

Kyrillos Mansour (KM):

yeah and move on. But how developers are actually using this in their favor is um, you, this is a brand new building that's not being built, right? You're signing a contract on on land. It's a piece of dirt, and you're signing a contract on a blueprint of a potential property that they're going to build and they say, okay, this will be ready in 12 months. Now you purchase that property for, for example, a million dollars.

Kyrillos Mansour (KM):

12 months later, that location may have boomed and the location may now be worth 1.3 million, 1.4 million, and so the developer is thinking, well, hey, there's three $400,000 of potential gain that I'm missing out on because I sold it for a million. And so often they will just slow down really, really slowly. And then that purchase takes that build takes a long time. It goes out 18 months, two years, and obviously what they're trying to do is frustrate the buyer to terminating. On the flip side, if they see the market going the wrong way, these developers get these buildings built and ready to go. So that's how I've seen it. Is that your same experience on your end?

Jordan Rafail:

Yeah, definitely. I mean, in the economic climate that we're in, property prices are always soaring, typically in Australia, so it is, I guess, a tool used by the developers to try and get out of deals if it's possible.

Kyrillos Mansour (KM):

Yeah, Okay, cool. So these are a couple of things in contracts that your solicitors will definitely be picking up on and advising you on. My next question is regarding settlement periods. So settlement day, as we learned with Sammy, is a day where you take control of the property, the title gets transferred over to the purchaser, um, and then you make the payment. The seller gets their money, everyone's happy. The the settlement period is how long after you sign a contract to when that day occurs. So it's 30 days. It means 30 days after signing the contract you'll have settlement 60 days, 90 days, whatever. The standard in sydney or new south wales is 42 days from from our understanding and from our experience in south australia it's around 35.

Kyrillos Mansour (KM):

Um, every state has like a little variance, but it's typically between 35 and 42, five to six weeks. Yeah, this is all negotiable. Sometimes it's short or much shorter, and sometimes it's longer and much longer. I only learned last week with Simon that in New South Wales stamp duty has to be paid within 12 weeks if you have a 13-week settlement. I didn't know about that.

Kyrillos Mansour (KM):

I think long settlements are really really positive for a purchaser on the buyer's side, because whilst it hasn't settled, you know it's going to settle and you know you're going to take ownership. You're getting the capital growth of that property without paying any interest because you haven't taken over yet. So a long settlement is excellent for me. If I purchase a property today and the person is selling it to me and we can agree on a 12-month settlement for me. If I purchase a property today and the guy and the person selling it to me and we can agree on a 12 month settlement for me amazing, I get 12 months worth of gains without paying anything yes but I'm sure there are risks to a long settlement and I'm sure there are risks to short settlement, correct?

Kyrillos Mansour (KM):

can you explain um what some of the risks might be.

Jordan Rafail:

Yeah. So in terms of a short settlement, I think the clear ones are that you may not have enough time to get your finances in order and get your building and pest inspections completed. Typically, banks need to come in to evaluation. These things take time. So we have and I have one now where we have a settlement that's 28 days. It's quite a short timeframe. Fortunately the purchaser has all their eggs in order and everything's set for settlement. But had they not had their pre-approval in place, had they not done a building and pest inspection prior to exchange, it would have been really tricky to meet that deadline.

Jordan Rafail:

So I guess those are the issues that you might face if you have a short settlement. If you have a long settlement, what I typically see is, like you said, there's a change in the financial sorry, the economic climate, but also there could be changes in the person's financial circumstances. So in, let's say, you know, two years ago, before the interest rate hikes, you could have signed a contract you know had pre-approval when interest rates were really low, and then times have now changed. You've seen a three or four percent interest increase, interest rate increase and now you may not be able to service that purchase. So I think that's also one that people don't typically think about because it doesn't, I guess, necessarily happen very often it's only happened in recent times but it's definitely something to be wary of. That your financial circumstances may change If you're a married couple. Your wife may be pregnant, and then that will also impact your serviceability. These kind of things can change.

Kyrillos Mansour (KM):

people's lives change, so that's definitely something to keep in mind, yeah, so what's the consequence? So, like in both short and long, for example, the short settlement scenario you gave, where settlement day comes around and you're not ready, you don't have the funds available or whatever what happens?

Jordan Rafail:

So you risk not meeting the settlement date if it's a short settlement. If there is that risk of not meeting the settlement date, you may get charged a default interest rate which is calculated daily, and that's also. It is a standard clause but we typically find that special conditions that are inserted into the contract to increase that default rate. So if you're getting charged 10% on a daily interest rate of the purchase price you could be paying, you know hundreds if not thousands a week for every week that it is delayed?

Kyrillos Mansour (KM):

Yeah, so it gets delayed. Even there are penalties on top of that that you're going to have to pay.

Jordan Rafail:

Yeah.

Kyrillos Mansour (KM):

Can become very expensive. It can, moving on to structures and some more legal complexities. These are some questions that we got sent in and that we get asked a lot. We obviously pass these questions off onto you guys because not our domain, but they're very, very common questions and these are relating to purchasing properties in trusts and purchasing properties in SMSFs. We're actually purchasing a property for a client in an SMSF now. Simon is actually the solicitor on this one. Fetty is the broker on this one. We have no idea who the accountant is on this one. Um, freddie is the broker on this one. Um, we have no idea who the accountant is on this one. And there's it's. It's not been the smoothest ride because that third party we we don't know who they are and they're kind of doing their own thing. Um, so what? What? How do purchases, how does making it, how does purchasing a property differ legally when you're purchasing in a trust or purchasing in an SMSF, or is it all the same?

Jordan Rafail:

No, it's definitely different.

Jordan Rafail:

So in a trust or in an SMSF, they are separate entities.

Jordan Rafail:

They are, I guess, you're the beneficiary of those entities, but they are separate entities to yourself.

Jordan Rafail:

So it's a legal, from a legal standpoint, it's a completely different entity as the purchaser. And that's something that, and specifically with SMSFs, is something that you need to consider, because the general purpose of the SMSF is to is purely for retirement benefits, right, so that you're trying to set yourself up for retirement, and the borrowing and the structure is different. So if you're borrowing if you're not purchasing the property with cash from your SMSF and you need to borrow within the SMSF, you need to set up a bear trust within that SMSF. And that in itself can have a complexity because from a borrowing standpoint and the guys at Powerloans probably know better than myself, but the borrowing is different you may need a larger deposit and things of that nature, but in terms of purchasing it, there are, I guess, the most important thing and, again, from the accounting standpoint, you need to make sure that the structure is put in place, because if it's not done correctly, there can be tax implications and legal ramifications for that.

Kyrillos Mansour (KM):

Yeah, so the SMSF one is interesting because there's like three entities in one purchasing this property. So you have the SMSF and you have the trust and then you have a bear trust, like you mentioned if there's lending involved.

Kyrillos Mansour (KM):

And that's where it can get quite complex, and it's very important that the solicitors are on top of all of this and you're using a solicitor that knows the differences in purchasing.

Kyrillos Mansour (KM):

The difference is I'm trying to find the right sentence for this it's very important to have a solicitor that understands the differences when it comes to different structures, because we have seen in the past solicitors that are not typically some people try not to offend anyone some people who were not sure of the differences and it's caused major problems. Come settlement, incorrect entity names, incorrect structure, money coming from the wrong place, and it causes major problems and it causes delays in settlement, which, going back to your previous point, causes heaps of penalties, and so the buyer, no fault of their own, is really out of pocket at the end of all of this a lot more than they thought. So it's very important to have solicitors that are aware what's going on. Yeah, well, what are some things that buyers should know before they buy in a trust or a company or an SMSF or whatever? Is there some common things that they should really know?

Jordan Rafail:

So I think one misconception is that you have the protection, the legal protection. I think that one area yeah, that's an obvious area, that's, I guess, a myth or a misunderstanding is that because it's a legal entity, they're not liable.

Jordan Rafail:

But what we typically find is with the banks they will ask for you to be a personal guarantee and as a personal guarantee, if the trust you know isn't able to service that loan at any point in time, then you would be personally liable for the debt and will need to repay that debt. So I think that's one common misconception that occurs.

Kyrillos Mansour (KM):

Do you know? That's a really good point. I had a point in mind when I wrote this question up, and it was a very basic point. Yours was really nice and meaningful, mine was silly. But people don't know the name of their people, don't know the entity name they're purchasing in um, because it can get confusing, that's true.

Kyrillos Mansour (KM):

So, for example, I might have a trust called km trust, yeah, and if I go purchase a property, it's you don't write km trust, there's a longer, there's a longer name. That goes on and most people don't know what it's called. And the amount of amendments, um, I've seen on contracts yeah because they don't know the put. They don't know the name because the accountant has set it up and not explained to them. Um, so I think all buyers should know what the trust what the entity name is, because I don't know if you see it a lot but I see it yes.

Jordan Rafail:

The amount of changes we make on contracts yeah, I think that's part and parcel of the process. I kind of overlooked it, but it's definitely an area where yeah because, like you said, you've got the SMSF and then you've got the bear trust you need to make sure that the correct entity is being listed on the front page of that contract yeah and and I'm surprised that how many professionals don't actually know what the correct entity name is.

Kyrillos Mansour (KM):

And so, um, whenever we have a mutual client, I always send it to you guys and say please, um, get the documentation from the client and make sure you have the right name, because the client often doesn't know what the right name is because the accountant or whoever set it up.

Kyrillos Mansour (KM):

I get a lot of questions about people wanting to buy a property with their siblings or with their cousins or their uncle or their brother's dog or whoever, and from a strategy perspective, it's often not a great idea because of future borrowing issues, of future borrowing issues. But are there any common legal issues that you, um can think of that might come up when it comes to joint ventures or co-purchases? Um, whether it's family or not, do you have any common legal issues?

Jordan Rafail:

that definitely. I think in any co-purchase you could say, whether that's husband and wife, whether that's siblings, friends, partners, business partners, there can always be legal ramifications in the event that the relationship goes astray or people's financial circumstances change. One issue that typically arises is one party will want to sell the property before the other party wants to sell.

Jordan Rafail:

I think that's really the most common issue that you'll see. So, yeah, that can happen from time to time and it is tough because if one does want to sell and the other doesn't, um, if the other party isn't financially capable of buying out the other party, they also may be forced to sell the property. So these are things that you need to consider, that you know um typically people overlook.

Kyrillos Mansour (KM):

Yeah, and something you mentioned. Actually again, when I read the question I was thinking about, yeah, more siblings and whatnot, but you mentioned husband and wife or partners. Um, is it a standard because I don't know if a lot of people know this when, say, me and my wife purchase a property, is the ownership 50-50?, is it 60-40?, is it set by us, is it determined by us, or is it just a 50-50 kind of thing? How does that?

Jordan Rafail:

work. It's a great question. I mean you can have it set up 50-50. You can set it up 70-30, 6040, however you wish, depending if maybe one party is paying a deposit or paying the majority of the deposit and the other isn't. So you can set it up as you wish. You can set it up as tenants in common or joint tenants, which also has different legal ramifications as well. Yeah, so there are options to how you want to set it up, which you should typically let your solicitor know prior.

Kyrillos Mansour (KM):

So that I mean the reason it's not always 50. 50 is typically a tax reason. Yeah, so you may discuss with your accountant. For example, if one party, one, one part of the, the couple, is earning a much higher income, you're in different tax bracket and you forecast to sell a sale in a few years, there's going to be a tax event and so there may be reasons why you kind of split, um, the percentage. Yeah, but you do have to inform your solicitor of that split correct.

Jordan Rafail:

Yeah, and another issue that I have seen in the past is people think that it's quite easy to add a sibling post-purchase. Yeah, um, and it's not. So there are stamp duty um implications if you were to, I guess, add um a sibling after the fact yeah that, um, that sparked a question in my mind, but I'll leave.

Kyrillos Mansour (KM):

I'll leave that to a little bit later, um, but that's a very good point. It's a very, very good point.

Kyrillos Mansour (KM):

Um, yes, you can't just add people and likewise probably can't just remove people, right, um, but that'll, I'll ask that question a little bit later. I want to shift focus to okay, what happens when things go really wrong? Okay, um, we obviously want to avoid these situations, but it happens. What happens when a deal collapses? And and what I mean is this happened to us the other day with a client. We purchased the property, signed the contract, did the building and pest inspection, major structural issues so much throughout the property. It was just bad. So we terminated. That property was in adelaide and so we did that. In the first two days the cooling off period, no deposit paid, no deposit lost yeah, happy days.

Kyrillos Mansour (KM):

We paid for the building pest inspection. Um, that's it. But what happens in general when a deal collapses and and obviously this may be state specific?

Jordan Rafail:

yeah, I mean it would uh depend state to state, but and then on, it also depends at what stage. You know. If, um, we're still in a building and pest clause period and it's conditional exchange, at that point we can try to negotiate a purchase price reduction. We've actually done that a few times recently where building and pest inspections have come back. There's been either waterproofing issues in the bathroom, termites in the pergola, and we've gone back to the vendor, shown them a copy of that report and advised, or even gotten invoices on what it might cost to fix those issues and then negotiated a reduction in the purchase price. What I've also seen in the past is you've given the vendor a copy of that building and pest inspection and the vendor will actually go and fix those issues themselves and provide evidence of that prior to settlement.

Kyrillos Mansour (KM):

Yeah, so those are ways we can, I guess, avoid the deal collapsing and trying to find you know um a win-win for everyone involved. Yeah, um, but what would happen, for example? Uh, let's say the purchase was in sydney, cooling off period had passed, um, and then, for whatever reason, the buyer, whatever building pest, they did a building pest late and it was poor, um, or their the broker informed them all of a sudden there's a change. Maybe they had a change in circumstance, or maybe they just couldn't get the money. They didn't, they didn't ask the broker before they signed the contract. They let's assume people, the purchaser did this the wrong way around. Yeah, um, and the purchase and the purchase has gone unconditional and has now gone unconditional. Yeah, what happens if the, if they have to terminate?

Jordan Rafail:

if they need to rescind the contract then they will forfeit their deposit, um, and that whether that's a five percent deposit, again it depends state to state. But you know, in instances where we've negotiated a five percent deposit they may still be liable for ten percent. Yeah, um, that's in new south wales anyways, but again, like it does depend state to state.

Kyrillos Mansour (KM):

Okay, uh, we've mentioned finance clause, building and pest clause a couple times. Cooling off are there any other legal protections that exist for buyers? Or? I'm trying to think of this top of my head. You, you would definitely know more than me. Um, but the three main ones that I know and that I negotiate on would be um cooling off, building, pest and finance. Is there anything else that exists?

Jordan Rafail:

so there are, I guess, warranties and obligations of the vendor to not mislead the purchaser. Now it is a bit harder to prove, um, but in the event that, um, you know the vendor has been deceptive or misled the the purchaser, then you you may be able to to get out of that purchase yeah, okay, now I'm gonna ask that question that came to mind when you were talking before and you were talking about it's not easy to add people and whatnot.

Kyrillos Mansour (KM):

Yeah, um, what happens if someone owns a property and they, they, they pass away? What happens to the property? So it depends if the purchase, if the sorry, if the property is in their name individually, it will go to a benefit of the will. Yeah was to pass it on to their wife, son, daughter, whatever it is. Are there now you're changing the title Correct? Is there stamp duty implications?

Jordan Rafail:

So there aren't stamp duty implications. There is talk of an inheritance tax recently, so that's something to keep in mind, but typically we can get the transfer completed on their behalf.

Kyrillos Mansour (KM):

Yeah, okay, without an exemption, okay, and so that differs to if, um, if you're purchasing, me and you bought a property together and simon wanted in later. Yes, and we added simon, there would be standard implication 100.

Jordan Rafail:

Yeah, that's a, that's a renegotiation and a purchase of whatever percentage that might be if we're. If you and I are 50 50 and simon wanted to come in and we both give up 25 each, then yeah, then there would be stamp duty implications for that, yeah, okay.

Kyrillos Mansour (KM):

now, sometimes I see, when I'm perusing the back end of CoreLogic and doing some research, I see some properties that were sold for very, very minor amounts of money, like a $1.5 million property getting sold for $5.

Jordan Rafail:

Yeah.

Kyrillos Mansour (KM):

And when you dig in a little bit deeper and it's Smith sold property to Smith for dollars, right, um? Can you explain what's going on there and um, and are there implications legally regarding?

Jordan Rafail:

yeah, so, uh, my understanding is that there are still implications. Um, the, the ato would still look at the market value of the of the property. Yeah, um, and they would still be liable for the stamp. Still look at the market value of the property and they would still be liable for the stamp duty based on the market value. Land tax based on the market value, things of that nature would still be yeah.

Kyrillos Mansour (KM):

So if anyone was confused about what I was talking about, it's a family member selling property to a family member extremely discounted rate, typically for a tax yeah event or to avoid a tax event. But if the ATO is going to look at the market value anyway, what is the? This may be outside of your scope. Yeah, if you know you please share. What would be the benefit of um, because I do see it often yeah, yeah, yeah.

Jordan Rafail:

Look, I'm not entirely sure um it could be to and, and even with um capital gains, I still think it would be a market value. So I'm not entirely sure. I guess it would depend on how the the purchase has been set up, maybe if it's in a trust or if it's in a company structure yeah. Maybe there are some tax evasion options there. I'm not entirely sure.

Kyrillos Mansour (KM):

There's no tax advice.

Jordan Rafail:

Yeah, no tax law.

Kyrillos Mansour (KM):

No tax advice, no legal advice, just a conversation. No, because I mean? I ask because I have the same understanding that the ATO. They're going to put a figure on it whether or not you sold it for $5 or $1.5 billion, so they're not silly.

Jordan Rafail:

Maybe they haven't received the legal advice and they thought that it was a smart idea and they later find out that it wasn't.

Kyrillos Mansour (KM):

I mean often I think that is the case where people think that's outsmart the government, but then it comes back to bite them in the ass pretty heavily. Actually, I see this often with first home purchases, where it's not really a first home purchase, it's an investment property and the purchaser pretends to live in it for a period of time, whatever. But I've seen it to a few people that didn't take our advice and I'm sure your advice will be similar.

Kyrillos Mansour (KM):

If you're not going to live in it, yeah, don't claim that you are 100% because, a particular person in mind actually ended up having to pay with like $80,000 in penalties because, of it and so it can really cause problems. So get your legal advice before you sell your house to your brother for $5. And you never know, your brother might take that and run away and like you had an agreement and they're not giving you the property back. That's exactly it.

Kyrillos Mansour (KM):

Your brother might be a bit sneaky. They might call him Sneaky Justin. I like stories, and so I asked Simon to give me a story and stories. And so I asked simon to give me a story, and I'm gonna ask if you can give me a story as well. Do you have any examples of a dispute that you helped resolve and, um, like a property dispute? It could be between family members, it could be between just buyer and seller. Any cool, crazy stories that you can think of?

Jordan Rafail:

um, nothing too crazy. I think that the the one that I touched on earlier is something that's fresh in my mind which is um the building and pest inspection. They found a whole heap of issues um, waterproofing issues in the bathroom, uh, termites in the pergola, um, and and a whole house of a couple other niggly things in the property, and we were able to get a $50,000 reduction in the purchase price.

Kyrillos Mansour (KM):

That's not to say that that will happen every time, so keep that in mind. You're going to get a lot of phone calls after this from buyers we want 50K off here. Sort it out.

Jordan Rafail:

But yeah, I was surprised at the level of issues that were in the property after the the report was provided to the purchaser and, to be honest, I didn't think that the purchase would go through. Um, I thought that we would be looking to rescind it but, um, the purchaser was, I guess, understandable of the issues and the vendor as well. Um was also, yeah, uh, understanding of the issues and willing to come to the party to try and keep that agreement in place. But yeah, I mean, in the time between the issues and the 50 K reduction there was a lot of back and forth, getting invoices from different um trades people and comparing those invoices and then arguing.

Jordan Rafail:

You know, maybe this invoice is a bit inflated compared to that one and and coming to, I guess, that middle ground, which was that 50k reduction, yeah, actually you mentioned something there that's very, um, interesting.

Kyrillos Mansour (KM):

It's very good for people to understand there's a lot of back and forth, yeah, in your role, in my role, um, and and a lot of that back and forth doesn't get communicated to the person. You're working for the buyer in this scenario to save them a headache and the stress, but there is often a lot of back and forth. We're talking 30, 40, 50 emails that can go back and forth, and phone calls and whatnot to get to a resolution, and so it's actually very important that you, your solicitor, you, you know, use a solicitor that's able to do this job, because if they're lazy, if they can't be bothered and I've seen some of my purchases buyers use solicitors that, um, that are not our recommendation and not trinity legal and often a disaster because they're not invested, they don't care, um, they're just doing the bare minimum, yeah I've had solicitors on the other side um, where they've just completely gone dark.

Jordan Rafail:

Um, whilst we're in the midst of a cooling off period and we're trying to request um, I guess amendments yeah and changes to the contract um.

Jordan Rafail:

I've had to chase them down um find their personal mobile numbers and things of that nature to really make sure that, uh, we're getting everything that we think the the client deserves, um, in terms of amendments, um, so that they are, you know, better protected um. But yeah, you're right, if you don't have the right team around you and you're not constantly like myself, constantly in contact with you or with the broker or with the real estate agent, um, it can be very difficult to get these um yeah deals over the line I'm gonna, you know, I'm gonna snip that part up where you said um, I hunted them down.

Jordan Rafail:

I'm not joking, I did, I had to because it was cooling off period was was coming to an end and they hadn't responded to the amendment request. I had spoken to the real estate agent, who spoke to the vendor directly and had a verbal um acceptance of the amendment request yeah but without having it in writing, it means nothing yeah and I think that's also really important takeaway.

Kyrillos Mansour (KM):

No, no for sure, because um, yeah, it happens over time, obviously, and it can get quite stressful. You're getting to the end of that cooling off period or building in pest clause, whatever it is, and you're waiting for an official response. Yeah, and if you don't get, it sort of like well, what do we do? Do we? Do we terminate?

Kyrillos Mansour (KM):

we don't want to terminate like everyone's agreed, but some bloke or some chick is not responding. Yeah, because they're, you know, on a beach drinking their life away or whatever. So, yeah, you need to have solicitors that are on top of the, on top of the random, completely random question, because often I'm cc'd into these emails and and and I'm reading these back and forth emails are all solicitors passive, aggressive by nature. Or you read these emails and it's like do you guys, not you guys personally?

Kyrillos Mansour (KM):

but, do solicitors just dislike each other or is it a professional passive aggressiveness? Look?

Jordan Rafail:

I, I think you're right. I think a lot of solicitors come into these deals thinking it's us versus them, yeah, um approach. And and I think that's completely wrong. The way I approach any deal is we're trying to work together. Although we have separate clients with separate interests, there's still a common objective here, which is we're trying to get this deal done. You still want, your vendor still wants to sell my purchase, still wants to buy. So let's try and do the best that we can together to try and get this deal done. And and that's always my approach but you're right, yeah, most solicitors are very passive, aggressive in emails.

Kyrillos Mansour (KM):

It's very interesting, but no, I agree, uh, we get the same. You know, we're discussing, negotiating with, with our buyers, um, and the negotiation process, and a lot of the time people think when they hear the word negotiation, they think like car sales, yeah, and like old, sleazy car sales, and you have to like literally fight them. Um, but no, negotiation is, is not a war. Um, it's quite simple. You want to sell, we want to buy. How can we make everyone happy, exactly, um, you obviously want the most for your vendor, we want to, we want the least for our buyer, but there's a point where everyone's going to be happy, yeah, and let's just find what that point is. So I, I guess it's the same, but, yeah, yeah, some, some real estate agents are passive aggressive, so it's the same thing.

Kyrillos Mansour (KM):

Yeah, yeah, some some real estate agents are passive aggressive, so it's the same thing. I guess, um, we'll wrap it up pretty quickly, but is there any like final takeaways, any common legal myths or misunderstandings that you think investors have um anything like?

Jordan Rafail:

that I think just a, an easy one is, um, to get your solicitor to review the contract before you sign it. You know, once you sign that contract it is binding. You are making a huge commitment. It's a financial commitment that usually take. You know it's a 30 year loan, so it is a big commitment. So definitely get your solicitor to review the contract before signing it. Yeah, I mean it's an obvious one, but you know with the economic pressures with real estate.

Jordan Rafail:

You know agents putting pressure on you. Some people are blinded by the brochure and the lights and then they just sort of jump into this Buy as agents, sign it yeah.

Kyrillos Mansour (KM):

I think that to be. I mean, there is a caveat, I guess is that every state is a little bit different. I would say, if you don't have a professional working for you, definitely get your solicitors to review regardless before signing. But there are, you know, for example, in Adelaide you can, if you sign a contract, you go into a two-day cooling off period and you don't pay a holding deposit, there's nothing, and if you terminate, you terminate.

Kyrillos Mansour (KM):

And so a lot of the time we do get our purchases to sign a contract, we send it off to you guys straight away to review it in the cooling off and then if there was a problem, we just terminate and then they didn't lose anything. But the benefit is to control the asset. But in 99.99 of the times I agree with you. I'm just thinking about the point one where my clients are listening and thinking um, but you told us to sign it first no, no, look, definitely it is state by state.

Jordan Rafail:

Yeah, um, but I think yeah, especially in new south wales with with the 66w and and signing under auction conditions yeah, for sure it. It is, um, I guess, quite a big commitment to sign prior to review.

Kyrillos Mansour (KM):

Yeah, and every state is different. We do keep mentioning it. But, like, for example, in New South Wales, contracts are prepared and ready and so they're there. You can send it to your solicitor. Correct. In other states South Australia, queensland, for example there's no contract. Until you have a deal, they don't prepare a contract. And also the contract in South Australia, for example, is just a template of who's purchasing, who's selling. Where the bulk of the information is is in this thing called a form one, which is like your title search, which is a separate document which comes later a lot of the time. So you need to know the state you're buying in and the characteristics and the personality of that state. But if you don't have a solicitor to ask and make sure, then you won't know what you're doing. So it's very important.

Jordan Rafail:

Yeah, exactly.

Kyrillos Mansour (KM):

Make sure your solicitor is on top of it. Any final key takeaways, or wrap it up.

Jordan Rafail:

I think we've covered a lot already and you know we can come back for part three. Part three Bring Adriana on. That's it, yeah.

Kyrillos Mansour (KM):

If she's going to do some public appearances. No, that was really good. I think that was a really good episode. We went a little bit deeper, into a bit more complex and more specific scenarios. We can do part three genuinely if. If there are questions that come through, um, we can definitely run one. There's always going to be questions around this topic because there are so many, so many variables and we can literally do an episode a week, um about one topic one one, one clause a week we could literally do it, um, but we would bore a lot of people, um.

Kyrillos Mansour (KM):

But thank you very much, jordan, for coming on. Like I said, thank you for having me, thank you for waiting for me to fix the mic. Like I said, if you haven't listened to last week's episode, do listen to it, because it is the part one to this episode with Simon, the legal basics and the legal complexities, for example, call it that. I have to think of a more SEO appropriate name. But yeah, thank you very much for coming on. It was a good episode, I enjoyed it and very good for your first ever podcast.

Kyrillos Mansour (KM):

Thank you, we'll get you onto the football podcast a bit later on. But if anyone wanted to reach out to you and they did want to get you to check their contracts before they signed anything or wanted to get some advice, how could they contact you?

Jordan Rafail:

Yeah, so my email is jordan at trinitylegalmigrationcomau. There's also the website trinitylegalmigrationcomau.

Kyrillos Mansour (KM):

Yeah, we'll put all the details in the show notes, as per usual as well. Thank you very much. And don't forget, you can send us a text message in the um from the show notes. There will be a link right at the top before any of the notes um. Click it I'll send you to your text messaging app and you can flick us a message tell us how handsome we look on camera. Whatever you want to let us know, but thank you for listening and we'll see you next time. Thanks,

People on this episode

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Kyrillos Mansour

Host
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Fadi Youssef

Co-host
Contributor

Mark Kilada

Co-host
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Jordan Rafail

Guest