Not their First Home: Investors are obtaining First homebuyer grants through Complex Ownership Arrangements
Posted 15 April 2015
Category: Strata, Levy Recovery, Conveyancing
Owners of multiple properties may be getting NSW’s first homeowner grant and stamp duty concession despite not qualifying for it, cheating the government out of taxpayer revenue.
The grant and concession is only available for buyers of new properties who can declare that they have never owned property before and are purchasing real estate for their own purposes, not on behalf of a company or trust — but industry watchdogs warned that the application system is easy to dupe.
They say applying for the benefits relies too much on applicants telling the truth with little fact checking by government, leading to recent cases where property investors received grant payments for multiple properties through complex ownership arrangements.
This included, among others, a Lidcombe property that was purchased in 2008 using the first homeowner grant, despite a trust arrangement later showing that the de facto owner held multiple properties at the time and should not have been entitled to the benefit.
Bannermans Lawyers principal David Bannerman said similar cases emerged after people who purchased homes using the benefits became embroiled in bankruptcy or divorce proceedings.
In these cases it “becomes clear that a third party is the true owner of the property because the original buyer allegedly held the property on trust for the third party,” Mr Bannerman said.
A trust is a legal relationship over property in which the apparent owner actually holds it for the benefit of another person (the beneficiary).
The first homeowner grant is only available for buyers of newly built properties who have never owned their home before and intend living in the property.
Mr Bannerman explained that the claim usually made is that the third party, normally an investor, supplied money to buy the property, giving rise to a trust over the property in their favour that prevents the home being seized in the event of a bankruptcy.
The courts have upheld these ownership claims in some cases, but Mr Bannerman pointed out that “if the trust had been disclosed at the time of purchase, the first homeowner benefit would not have been available”.
He added that it was difficult for those doing background checks on first homeowner grant applications to find out if the home was purchased through a trust since there is no requirement to register a trust at the land titles office.
Real Institute of NSW president Malcolm Gunning added that issue has come to the attention of some lenders and mortgage brokers, who have noted that the application process for the first homeowner grant has problems.
“It’s pretty well-known that the application process lacks strong checks,” Mr Gunning said.
Despite these criticisms, Mortgage Choice broker Philip Sangster said that cheating the system would still be difficult.
“The application form is six pages long and applicants have to supply a lot of information, including what other states they’ve lived in and certified copies of the purchasing contract.
“Incidents of people getting the grant unfairly are probably rare,” Mr Sangster said.
Author: Aidan Devine
Publication: The Daily Telegraph
Section: Real Estate
Date: 15/04/2015
