A clause to be wary of: Vacant Possession

August 12, 2013
Justine Bennett

When you're buying a home or investment property, there are a few clauses in contracts that you should be wary of.  The following is an excerpt from Australian Property Investor Magazine.


The 'vacant possession' clause is a pretty straightforward problem.  It's only an issue if you intent to use the property as your home.  If you don't move into the home as soon as practical after settlement, then you won't be able to begin to cover the property with your main residence capital gains tax exemption until you actually move in.

Sure, it may be only a short time before the tenant moves out, but it isn't the portion of the gain that you'll pay tax on that's the problem.  It's the fact that you'll need to keep records for the whole time you own the property in order to be able to calculate the whole gain to apply that small percentage to.

Think seriously about your circumstances.  It may well be worth delaying settlement until the seller can provide vacant possession.  This may not be a bad thing at all if you have somewhere to live.  You already have a fixed price contract so will benefit from the capital growth during this period without having the ownership costs.  It's unlikely that the rent you would have received would be more than your interest, rates, insurance, etc.  The seller is still likely to agree despite this advantage to you.  In this climate the seller will be happy just to have a sale contract so they can get on with their plans.


Source: Australian Property Investor Magazine

This information is of general nature only and does not constitute professional advice. You must seek professional advice in relation to your particular circumstances before acting.

Posted in: Property investment

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