Rural Land Contracts – Search Before You Sign

by | Dec 29, 2012 | Property

RHGWhen buying a rural property, it pays to do your homework. Rural conveyancing is a complex area in which purchasers need to take care to ensure they know exactly what they are buying.

The general principle of “caveat emptor” – buyer beware – applies to all land purchases, but has particular significance for rural properties. Not only is a farm a home, but also a business. Failure on the part of a purchaser to adequately investigate the property can have not only functional implications, but often monetary consequences too.

It is generally advisable for purchasers to conduct pre-purchase searches or enquiries prior to entering into the contract – once contracts are exchanged, the purchaser is locked into the deal and it will be too late to withdraw if a problem arises.

Some common searches include:

  • Livestock Health & Pest Authority – provides information regarding chemical residue and stock diseases.
  • Crown Lands – ascertains whether there is any land within the boundaries of the farm that does not belong to the Vendor and for which a rental may be payable to the government.
  • Mineral Resources – with mining and gas installations becoming ever more common, this search identifies whether any exploration or drilling licences affect the property.
  • Water entitlements – the implementation of water sharing plans is changing the nature of water licences, whereby water entitlements that were once attached to the land can in some situations now be severed from the land and sold separately. The distinction is important not only for the purchaser’s use of the water, but also as it alters the conveyancing process in terms of ensuring the purchaser receives legal title to use the water.
  • Building entitlements – the introduction of new local environmental plans is changing Council requirements regarding the lot size on which dwellings can be constructed. A farm may have no value to the purchaser if they cannot build their home on the property.

There are a plethora of other enquiries which can be made, however the searches will differ depending on the location and proposed use of the property.

Whilst the searches require money to be expended prior to securing the purchase, it is worthwhile outlaying some funds to ensure the property will meet all of the purchaser’s requirements.

If you are considering buying a rural property, contact the experienced team at Everingham Solomons where Helping You is Our Business.

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Are all intergenerational rural land transfers stamp duty free?

by | Nov 17, 2012 | Property, Superannuation

TRIt depends. It is always important to review the requirements of the Duties Act in each case before assuming that a rural land transfer will be stamp duty free.

Mum and dad have owned a rural property since the 1970s. The farming business is carried on by a proprietary limited company. The shareholders and directors are mum and dad.

As the son and daughter-in-law now run and guide the farming business, mum and dad have decided to transfer part of the farming land to them valued at about $1.5 million. Mum and dad also propose to make the son and daughter-in-law directors of the farming operations company.

As the land was acquired prior to the introduction of Capital Gains Tax, there is no pre-CGT taxation on the transfer of the land.

Will the land however attract stamp duty of about $68,000.00 or will it be stamp duty free under the intergenerational transfer provisions contained in the Duties Act?

In order to obtain the benefit of the exemption, the primary production business must be carried on by the son and daughter-in-law and be continued to be carried on by them or a member of their family.

While the word “member” in relation to the family of the transferee (the son and daughter-in-law) is defined broadly and goes both up and down the family tree, it does not include family owned or controlled entities such as companies and trusts.

Since neither the son nor daughter-in-law will be carrying on the business and as the trading company is not a member of their family, the exemption will not be available. $68,000.00 stamp duty would be incurred if the transaction proceeds.

It is always important to review closely the requirements of the Act in each particular circumstance before proceeding with a family farm transaction.

At Everingham Solomons we have the experience to assist you with all your property needs because Helping You is Our Business.

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