A House and Land package is one where the buyer purchases the land and then purchases the house. This means that two contracts are entered into simultaneously. The buyer will enter into the standard Contract for the Sale of Land which will usually be the one prepared by either the state Law Society of the State, or in QLD the contract is prepared by the Real Estate Institute of QLD.
This standard contract is drafted to be balanced in the interests of the buyer and the seller, and must comply with the requisite legislation of the respective states. However, the vendor’s solicitor will attach special conditions to the contract. These special conditions will be heavily in favour of the vendor, and it is important that a solicitor specialising in conveyancing or property advises you on these conditions.
Because a House and Land package, usually involves a developer taking a large portion of land and sub-dividing it into individual plots, the plot you are purchasing is unlikely to be in existence yet, and therefore won’t be registered with the respective land registry in the particular state. Until the land is actually registered as an individual plot it cannot be sold to a buyer. Therefore, it is usual to find that the special conditions will provide a sunset date. The sunset date will stipulate by when the land must be registered. This may be a number of months from the date you sign the contract.
The second contract will be the contract you enter into with the builder in order to build the actual house. This will be a Home Building Contract/Agreement and will be governed by state laws regulating construction, for instance in NSW the Home Building Contract or Home Building Agreement is governed by the Home Building Act 1989.
The Property will likely have a Sunset Date
A Sunset Date is a clause inserted into a House and Land Contract. This clause will be inserted individually into both the contract for the sale of land, and the contract for the building of the house. In the contract for the sale of land it will allow the developer a certain period of time in which to register his title to the land, along with the grant of any easements (rights) over the land with the respective Land Titles Office in the relevant state. As each house will need to be supplied with services such as water, drainage and electricity etc., the title to the land will need to grant a right to the respective service provider to enter on to the land to install and maintain those services. This right is called an easement, and the relevant documents take time to draft and be approved. The sunset date allows the developer a significant amount of time in order carry these things out. Often you will find that a sunset date is set significantly in the future but ultimately the developer may be ready significantly earlier than the sunset date.
The home building agreement will also have a sunset date, and again this could be set at a significant time in the future, but does not mean that it will take the builder that length of time to build the property. This time allows the builder to take into account unexpected matters.
The home building agreement will also allow a specific time for the builder to take into account weather restrictions.
Changes to the Plan you viewed
Any building in Australia requires approval from the Council. Usually plans are submitted to the Council for approval and then construction will commence. However, you may find that your council requires certain adjustments to be made to the plans in order to accommodate the land. This has the potential to increase your tender price, and your builder will discuss this with you before you sign the final contract.
Warranties and Insurance
In every state except Tasmania, home builders and renovators are required to take out insurance for contracts of $12,000 or more (or $20,000 in NSW and WA). The cost of the insurance may be borne by you, depending on the contract. It is important that you or your conveyancing solicitor obtain a copy of this insurance before works commence.
The contract will also provide that the builder warrants that the materials will be of good quality, and that the works will be carried in accordance with legal requirements, reasonable care and skill, and in accordance with industry standards.
A house and land package, will usually be paid in instalments. Firstly, you will pay your deposit in respect of the land, and possibly pay your initial deposit for the building of the house at a later stage, or they may be paid together, depending on your contract. The balance of the purchase price on the land will be paid next, once the title to the land has been registered with the relevant land registry. This cost will usually be covered by your mortgage. The payments for the build of the house are usually staggered. This means that the builder may revert to you at a number of stages and advise that payment will be due, usually in 5 days. Banks are well used to dealing with house and land packages and will stagger the payments under your mortgage to tie in with the stages of the build. Failure to pay a payment on time, will usually incur interest.
Access to the Property when it is being Built
Most contracts for house and land packages provide that you cannot access the property whilst it is being built. If you breach this there are usually implications included in the contract which will affect you, such as damages for any delay you have caused to the builder. It is common to see that the buyer can request variations but of course the builder will charge you for these variations.
Defects to the Property
It is standard practice for these contracts to provide for defects. This means that after you gain ownership of the property you will need to check through it thoroughly to ensure that no defects are present. Any defects will usually need to be notified to the developer within a certain period of time and usually the developer will rectify these defects. However, most contracts provide that the developer will not liable to fix any natural changes due to the materials used, such as shrinkage and small cracks.