Vendor Finance Q & A

Hi Tony, a quick question

Background: Block of land going to be subdivided. House build on front section.

There is no impediment to selling the ‘house block’ on vendor finance terms, before the subdivision is registered.

Goal – wrap front house to then build second house and sell that.

Answer

Legally, you enter into the Wrap Contract, the purchaser moves in and make payments, in the normal fashion. What is different is that completion of the contract (the cash – out) is conditional upon registration of the plan of subdivision. Normally the Contract will provide that the plan of subdivision is to be registered within 6 months of exchange of Contracts.

The approval for subdivision is not received as yet?

To set this up, you should obtain advice from a local surveyor as to the feasibility and cost of the subdivision, and as soon as you exchange Contracts for the purchase of the property, engage that surveyor to prepare a plan of the subdivision suitable for attachment to the Wrap Contract.

Is it possible to wrap the house saying that wrap house and section only is on say 400sqm not 800sqm? Or can we just insert a clause in the Wrap Contract that states they are aware the land will be subdivide during a course of Wrap Contract?

You can either exchange WRAP Contracts for the sale of the house at the front, subdivide the land, and then either sell the land at the back, or build a new house and then sell the land at the back.