The Law Handbook 2024

548 Section 6: Houses, communities and the road Vendor terms contracts A vendor terms contract of sale allows the buyer to pay the price of the property over a longer period than usual, usually three to five years. Ownership of the property remains with the vendor until the final payment is made. Usually, the buyer pays a deposit of 10 per cent when the vendor terms contract is signed, and about one-third of the price when they take possession. The balance is paid off on terms agreed in the contract of sale. Vendor terms contracts are regulated by the Sale of Land Act 1962 (Vic) (‘ SL Act ’). Recent changes to the SL Act prohibit selling, arranging or brokering land under a vendor terms contract for residential land where the price is less than $750 000. Vendors should be wary of entering a vendor terms contract as the contract could be void if it’s not in the correct form. Vendors should seek legal advice before entering into a vendor terms contract. As soon as the contract of sale is signed, the buyer’s conveyancer should lodge a caveat on the vendor’s title with Land Use Victoria (see ‘Contacts’ at the end of this chapter) to prevent another person claiming the property, and to give notice of the buyer’s interest in the property. For buyers, there are three disadvantages to vendor terms contracts of sale: 1 the property is difficult to resell without completing the terms of the contract; 2 the buyer who defaults loses their investment, because the seller keeps the deposit and resells the property; and 3 the terms generally require the buyer to pay a large amount at the end of the contract. Funds are often difficult to obtain without mortgaging the property (what the buyer wanted to avoid). The SL Act allows vendor terms contract buyers to convert their contract into ownership with a mortgage. This requires paying stamp duty, the fees to register the mortgage and transfer the property, and the conveyancing fees. However, a buyer who converts a vendor terms contract becomes the registered owner, and the protection of their investment is increased. Help for home owners who cannot pay If a borrower is late making a repayment on a home loan, the lender can charge default interest. Any costs and expenses incurred by the lender because of the default are added to the debt and incur interest. Defaults can be very expensive to correct since lenders can charge interest on unpaid interest. If you cannot pay your loan instalments, contact your lender and explain the problem. Lenders provide advice for borrowers who find themselves in difficult financial positions. You and your lender can develop a strategy that keeps losses to a minimum. Government assistance First Home Owner Grant The First Home Owner Grant ( FHOG ) is $10000 for new homes purchased in Victoria. The FHOG scheme initially applied to the purchase of existing homes. However, for contracts entered into on or after 1 July 2013, eligibility is limited to buyers who are purchasing or building new houses. The grant is only payable where the price of the home, or the price of building the home, does not exceed $750000. Eligibility for the FHOG is also based on an applicant or the applicant’s spouse or partner: • being a natural person, not a company, and over 18 years of age; • being an Australian citizen or permanent resident; • not having owned a home in Australia, either jointly or separately; • living in the home as a principal place of residence for at least 12 continuous months, commencing within 12 months of settlement or the completion of construction;* and • not having previously received the FHOG. * Since 27 June 2017, AustralianDefence Force ( ADF ) personnel have been exempt from this residency requirement. This includes current members of the Australian army, air force or navy who are enrolled to vote in Victorian elections and who are on duty or on leave. This exemption does not apply to reservists or to Australian public service staff. The FHOG is administered in Victoria by the State Revenue Office ( SRO ). For the most recent updates on the FHOG, visit the SRO’s website (www. sro.vic.gov.au) . Usually, the buyer’s lender will apply for the FHOG for them. However, if the buyer is not applying for a loan to purchase the property, they can apply for the FHOG (via the form available at www. sro.vic.gov.au/fhogapply) and supply the required