First homebuyer? Stressed? Trust your solicitor.

In recent weeks I’ve noticed a spike in first home buyer related inquires, sales and purchases, which appeared to have some connection with the stamp duty exemption benefit ending soon that I’ve referred to recently.  

This article yesterday reports a surge in recent auction sales for the same reason, consistent with my office’s experience.

First home buyers range from the well prepared to the no so well prepared.  The common trait though is stress, anxiety and sometime anger – not uncommon emotions in the home buying experience.

No wonder, as a fair proportion of this results from the different advices, sometimes contradictory, buyers receive from numerous others, including from real estate agents, from families and friends, and from finance brokers.

My advice: trust your own solicitor, above all others, that have some connection with your transaction. Your solicitor is the one person that always offers unbiased help, guidance and advice.

If you’re feeling the pressure during your home purchase roller-coaster-like ride, your solicitor is the only professional that’s retained by you specifically to guide you, advise you, especially to protect you and your interests.  Remember that.

Tick, tock... the NSW first home buyer’s clock!

Are you a first home buyer in NSW?  If so, remember a major benefit ends at the end of 2011.  That’s just 8 weeks away.  After you factor in the usual Christmas/New Year closures or winding down of staff in the offices of many lawyers, real estate agents, mortgage brokers, conveyancers, property inspectors, and banks, not to mention your own holidays, there’s even much less time to act.

In addition to the Commonwealth’s $7,000 grant, in NSW since 2004, eligible first home buyers have been entitled to some additional very valuable stamp duty benefits under the First Home Plus Scheme.

These included exemption from paying any stamp duty on homes up to $500,000, and a sliding scale of discounts on stamp duty for homes from $500,000 to $600,000.   Even for vacant land on which you intended to build a home, stamp duty exemptions applied to such land up to $300,000 and the concessions on land between $300,000.00 and $450,000.00.

On a $500,000 house, that’s a saving on nearly $18,000.  Even for a $350,000 house, the saving is more than $11,240.

This about to change in a major way.

For contracts made from 1 January 2012 in NSW, all that will be replaced by the First Home – New Home Scheme.

Essentially, eligible first home buyers will only be entitled to the stamp duty exemption and concession benefits when buying a first home that is a new home, or a vacant block of land intended to be the site of a first home.  The benefit will no longer be available when purchasing an existing home.

If you’re a first home buyer, or soon will be, consider not only the above, but also whether the clock ticking away, as well as the recent official interest rate reduction, could combine to add a little heat in this market over the next few weeks. If you're under a little under pressure, unsure about different advices you're getting from many people, think about seeing your solicitor.

Is your will "valid"? Or, does your will achieve what you want it to?

A will is a document in which the will-maker (the “testator”) chooses who receives their belongings and assets after they die.

A will can also do other things, such as expressing wishes about cremation or burial, funeral arrangements, appointing guardians for children, and in some cases setting up simple or elaborate trusts.  A will can also be used to appoint a guardian to look after children until they can look after themselves.

Sounds fairly straightforward?  Here’s a link to A Test of Wills, an article well worth a read that appeared last week in the Sydney Morning Herald.  It adequately summarises many issues about what can go wrong and some of the challenges.  If a contested matter ends up in a courtroom, I'd suggest that the figures in the article are a little on the conservative side though.

In my many years of practice, I've acted in many deceased estate cases involving home-made wills and wills prepared from a Do-It-Yourself kits. Amongst these, I cannot recall a single instance where there wasn't some issue or problem resulting from the will not being properly prepared.  Some were minor, and some were quite serious. In the most serious, the convoluted wording in the home made will, using a will kit, meant that a rural property was to go to a charity, while everything else pointed to a contrary intention.

The starting position for will makers is that a person who isn't suffering from mental incapacity, isn't unduly influenced, under duress or the victim of a fraud, is entitled to leave their estate to whoever they choose.

This position however is modified by family provision laws, where certain classes of people can apply to the court for orders that, despite an otherwise valid will where they "miss out", provision be made to them from the estate's assets. As a will maker, this may not be your desired result.

So, as the article suggests, get good professional advice and use a lawyer to draft your will.

If your finance isn't arranged & approved, don't bid, don't buy!!

Buying real estate is a BIG deal for most of us, so don't screw it up!

Most solicitors and advisers will strenuously advise their clients buying a property to ensure their finance is unconditionally approved before committing to a purchase.

It's important to also realise that "indicative approval" or "pre-approval" for your home loan application is NOT the same thing.

Entering a purchase contract is the real thing. If you can't afford to complete your purchase, you may end up losing more than what you bargained for. The story in this article in today's Sydney Morning Herald is a simple but clear example of the possible consequences.

The buyer breached the contract they entered because they couldn't get the funds, borrowed or otherwise, to buy the property they bargained for. The seller subsequently sold the property to another buyer for significantly less than what the first buyer had contracted. The seller successfully sued the first buyer for the loss suffered resulting from the first buyer's breach of contract, being largely the difference between the price in the first contract and the lesser price in the second contract.

Take care!

Will Awareness Day - 19 August 2011

The Law Society of NSW today launched Will Awareness Day.  It is what it says!

Far too often I've been consulted regarding will and estate issues where there's a problem that could've easily been avoided or managed if only a will had been properly made, or even just made!  For example, there are many will kits, both online and paper based, available for people to make their own wills.  Usually they come with accurate and often very good instructions.  Yet, of all the matters I've been consulted about in my career that involved a home made will, I've never seen a home made that didn't have some issue or concern, many times very serious ones.

Will Awareness Day is a great opportunity to learn just a little bit more about wills and estate planning matters. There are many free talks and programmes scheduled in many places in New South Wales; if you'd like to try to attend one, here's the list on the Law Society's website.

If you prefer, for now, to read some general information, here's an informative Law Society article Should I make a will?  Also, here some links to some general information I've previously written about Wills and Estate Planning, and Deceased Estates, Probate and Estate Claims.

Do you have a will?  Or, has it been a while since you made one? Just don't leave it for too long to do something about it.

Mortgage exit fees banned, but is the money saved like gold?

Without getting involved into related issues that are more political than practical, though announced what seems like an eternity ago, as from 1 July 2011, exit fees are banned on new Australian home loan mortgages.  

Some important provisos apply here.  Firstly, the ban only applies to new mortgages, although some deals have emerged: some lenders have removed such fees on existing loans, others are offering to pay exit fees payable to your current lender if you switch your home loan to the new lender.

But… (there’s nearly always a “but”!)

There are other fees that continue to apply, which borrowers still have to be aware of – these don’t form part of the banned exit fees.  Two main ones include:

• “Break Costs”.  These usually apply when fixed rate loans for a fixed term is paid off before that term expires – more here on fixed rates and break costs
• Early repayment penalties and fees – more often called “deferred application fee”, “deferred establishment fee” or similar.  Many lenders attract customers with claims of no application fees or no fees upfront.  The loan agreement then provides that if you don’t pay off your loan for, say, at least 4 years, that fee is waived. Amounts vary, they can be as high as $4,000.00 or more, or even equivalent to 3 months’ interest! Remember, most homeowners “pay off” their mortgages each time they sell and purchase, and many times this happens within this time frame.

A sort of alternative twist of the old saying: Beware! all that glistens is not always gold!

Franchisor in trouble again! Or, why you should speak to as many franchisees as you can before buying into one!

Why are they still at it?  Last Tuesday, the Federal Court fined Australian franchisor Allfones $45,000 after finding it guilty of contempt of court by reason of its breach of an undertaking given to the Court in 2008.  Here's the Court's judgment.  Here's the ACCC's press release.

I've previously noted aspects of this saga here and here.

Eventually, and as a consequence, the company's chief executive's contract was terminated and he was escorted out of the company's headquarters, as reported here, earlier this year.

What does it take to send the message once and for all?  If fines totaling $3 million hasn't done it, will a $45,000 fine do?

Back to to the present case, the judge said 3 contempts were serious, and that the conduct engaged in by Allfones' senior personnel, contrary to the undertakings, was deliberate!

With this history, I wonder why would one want to be their franchisee?

I almost always advise prospective new franchisees, as part of their assessment of an intended purchase, to speak to as many as possible of current and past franchisees of the franchise system they're contemplating - the feedback they get is often more telling about the system and support, than the documents and sales spin.

Big retailer franchisees should've known better - fines are a reminder to small businesses too - be aware of your consumer laws obligations

Like many suburban law practices, I have my fair share of small to medium sized business clients.  A subject that regularly comes up are many of the obligations of business owners under various competition and consumer laws.  The ones most referred to are under the Commonwealth's Competition and Consumer Act (previously called the Trade Practices Act).

Many are aware of the extent of these laws.  Take wholesale for instance.  Generally, a supplier of goods to a retailer can't tell a retailer the price the retailer must sell the item for - it's anti-competitive.  That's why on many goods or catalouges you often a phrase "recommended retail price".  Then there are laws about false and misleading advertising, collusion, exclusive dealing, and the list goes on.

Part of a lawyer's role in certain cases is, I feel, not only to provide advice, but also to educate.  Many clients appreciate it and hopefully I've done my bit to help them avoid potential trouble!  

What does surprise me is when bigger players should've known better - usually because they're far more experienced and have the resources to keep their operators and franchisees informed and in line.  This week we learn from a ACCC report that 6 West Australian Harvey Norman franchisees were fined for engaging in a bait-and-switch practice.  It's where one advertises a great deal on a product, you get there, and because they originally held only a very small number of the items, you're told something like "sorry, we've sold out" and then they try to sell you another, often higher priced, item.  In this WA case, it's reported these particular franchisees didn't even stock the advertised products (cameras) in the first place!

Competition laws apply to big AND small businesses.  The penalties are substantial.  If you're unsure how certain practices in your business stack up, I suggest you play it safe and get advice sooner rather than later. 

Selling a property in or near Liverpool soon? Consider this offer about a contribution to a worthwhile charity!

Macquarie Real Estate is a local real estate agent located in Casula, near Liverpool NSW.  Yesterday its principal, Joe Romeo, informed me of the following offer he’s making.

Any property listed with his agency before 30 June 2011 that results from a referral from such as what I’m doing here in this blog, when that property is sold (even if it’s after 30 June 2011) he’ll donate 20% of his commission to a charity nominated by us.  You need to mention to them how you heard about the offer when you sign up.

If you take up this offer, sell the property through them, and mention you heard about it here, I’d be more than happy to discuss with you and come to an agreement about a worthwhile charity you’d like me to direct to have Joe’s donation sent to.

What’s the catch?  Apart from the agent getting a listing (and most sellers list the property they’re selling with an agent anyway) there isn’t one!  I don’t receive any payment, gift, commission or special favour (and I never have).  There’s no condition about which solicitor you use either.

Have a think about it.  Better still, if you’d like to ask me about Joe and his team, give me a call.

Lender’s mortgage insurance premiums - One way to “make” some money back!

While the typical average Australian home loan term is around 25 to 30 years, the average length of a home loan is reported to be 5 years, some say even as low as 3½  years.  If these figures are averages, there must be many loans that are discharged much sooner.  In my experience, it’s becoming rarer for a home buyer to live in the one home for lengthy period of 20 years or more.  Australians buy and sell their homes for a variety of reasons:  to improve their lot; so called sea changes and tree changes; moving to where the jobs are; moving out when jobs are gone….

So, the issue is, while home loans are typically designed for the long term, most often borrowers barely last the distance.  Many borrowers are also required to pay their lender’s mortgage insurance premiums.  This insurance covers the lender, not the borrower, but it’s the borrower who pays the insurance bill.  I’ve seen such premiums as high as $18,000, but typically are around the $4,000 to $8,000 mark.

The premiums are a once only payment, providing cover for the term of the loan… remember, terms that are assumed to be for 20 to 30 years!  But many of these loans are discharged within 5 years.

So, what happens for that part of the premium covering the term of the loan that’s no longer there?  Nothing, unless you do something about it!

Have you ever sold a car and then obtained a part refund of your insurance premium when you cancelled your insurance cover?  It’s a comparable situation.

Many lenders don’t tell you, but in most cases you can do something similar regarding lender’s mortgage insurance premiums you’ve paid if you pay off your home loan early.  The earlier it’s paid off (for example, you’ve sold the property) the greater the chance of a significant refund of part of the previously paid premium.

The refund amount varies, and many factors can affect it.  For example, whether the borrower has defaulted, how many (or how few) years of the loan have passed, but it can be up to 40 to 50% of the original premium!

It’s the mortgage insurer that ought to be approached, rather than the lender, but if you’re about to borrow and a lender’s mortgage insurance premium is payable, it would be very prudent to clarify with your lender their policy on refunding mortgage insurance premiums.  Be prepared to be firm and press for an answer.  Many lender’s staff and some brokers aren’t even aware of this, so they may need encouraging to find out more for you.

A little will power now, can save rather a lot later...

If you want to leave someone out of a will, the costs later may be very much higher than expected.

I regularly advise and prepare wills for clients – nothing unusual about that for a suburban law office.  Many times my advice includes that in making their will, they consider its effect on those left behind, particularly their loved ones, after they’re “gone”.  That might include thinking about the bigger picture rather than concentrating too much on getting back at someone.  This can be difficult for clients, especially when some emotion is involved and we can’t access a crystal ball that works!

For a long time we’ve all had rights and freedoms to deal with our property as we see fit for that day we’re no longer here.  But those rights and freedoms need to be exercised with other laws in mind that allow certain people who feel they’ve missed out from a share, or a bigger share of an estate, to ask the court to effectively adjust the will’s distribution of a deceased person’s estate.

For example, clients with modest to substantial estates may make little or no provision for one of their children.   Reasons can include estrangement, perceived drug issues, assumed wealth, even not getting a Christmas card!  My advice to the will maker in these cases is to inform of some consequences they may not have considered… such as exposing the estate to possible unintended but costly litigation.

An article in today’s Sydney Morning Herald describes a situation that I’ve encountered, unfortunately, many times – the risk of very high legal costs because the will maker, for whatever reason, didn’t make a gift to someone who probably expected a fair provision.

If you want to leave someone out of a will, the legal costs payable by your estate later may be very much higher than expected.

Each individual’s situation is different but if this sounds too familiar to your situation, a little prevention now, such as making a gift in a will that you may not have originally intended or wanted, can be a small cost now to help reduce the risk of much, much higher costs later.  Does this sound like you?  Have a chat with your solicitor about it!

Quality practice, better service...

Alvaro Edwards Solicitors is a quality endorsed legal practice. But don't just take our word for it!

SAI Global just completed its second Triennial Recertification Audit of Alvaro Edwards Solicitors' quality management system.  I'm proud to announce that with the support of all management and staff, we have again achieved quality standards recertification to Legal Best Practice ISO 9001/LAW 9000 - a certified standard we first attained in 2005 and continuously maintained since.  Our licence number is LAW20005; Alvaro Edwards Solicitors is one of the earliest law firms to achieve this standard in NSW.

The recent audit report states:

The firm continues to maintain and regularly update the quality management system and supporting procedures to reflect preferred best practice in the provision of quality services to its clients.

The quality system benefits the way we run our business but importantly, it translates into a commitment to better serving our clients.

The process is an ongoing one, and our journey doesn't end with the recent audit.  I'm always conscious of the need to continually improving our processes and serving our clients.

The SAI Global certification process provides an outside independent auditing and certification structure for quality systems to ensure compliance with international quality standards.

The prospect of cheap beer sure did taste good...

Recently it was milk, and now its beer!  It appears that the country's two giant supermarket chains were about to start a price war on beer by selling cases for less than the wholesale cost.  This seems to me be a variation of the old "loss leader" practice where a retailer deliberately makes a loss on a product in the expectation the great deal will attract customers and once in the retailer's store, the customer is likely to spend more on other goods.

In the case of the looming beer price war, it seems it's might be no more.  Foster's has refused to supply these supermarket giants. While cheap price beer is a tasty prospect, I guess Foster's sees such gross discounting as likely to cheapen its brand image.

But hang on.  Under our trade practices laws, a supplier can't withhold or threaten to withhold supplying goods if the retailer refuses to sell at a particular price.  This is an offence known as resale price maintenance.

But there's more.  In certain limited cases, this practice is actually allowed.  Just after the provisions prohibiting resale price maintenance in the Competition and Consumer Act (previously, the Trade Practices Act) it provides certain exceptions in cases where "…goods obtained... from the supplier at less than their cost…"  

And that's the catch!