WHAT IS THE STATUS OF BUYING OFF THE PLAN PROPERTY THAT HAS ALREADY BEEN SOLD TO A THEN DEFAULTING FOREIGN PURCHASER – CAN YOU DO IT? THE AUSTRALIAN GOVERNMENT IS STEPPING IN TO HELP.

Under the Foreign Acquisitions and Takeovers Act 1975, a residential property is considered to be sold when an agreement for sale of such property becomes binding on the parties.

This has raised an issue as to whether the Off–the-Plan property which is on-sold after the binding date, (which is usually upon execution of the contract by both parties), and prior to settlement, should be treated as an established dwelling.   If this were the case, the property then becomes property unavailable for purchase by other foreign investors under the Act. (Please refer to our previous article about FIRB for your reference).

This has raised some serious concerns from the developers who in recent times have been faced with an increasing numbers of defaulting foreign investors. This is predicted to be the effect of financial institutions’ changes to heavily clamp down on the grant of loans to foreign investors who are purchasing Off-the-Plan properties.

Fortunately, the Australian Government has responded to these concerns of the developers by allowing on-sale of Off-the-Plan dwellings which fail to reach settlement.

The government, through their release, has stated that to address the concerns of the industry, and to ensure the market is not being impacted negatively, they “will implement changes under the foreign investment framework to allow foreign buyers to purchase an Off-the-Plan dwelling when another foreign buyer has failed to reach settlement.”[1]

If you require assistance or have questions about the recent FIRB developments, please feel free to contact our office.  Koffels Solicitors are experienced in the sale and purchase of property for both Australian and Overseas buyers.  We will be happy to discuss your concerns to guide you through the sometimes complicated process to be sure you are compliant in what is always an important investment decision.

 

[1] http://sjm.ministers.treasury.gov.au/media-release/122-2016/