Having completed thousands of settlements for our clients over the last 29 years, it’s easy to understand that the team at Residential Settlements have pretty much “seen it all” when it comes to handling O & A’s and the settlement process.
However, a current case literally had us “seeing double” when an unfortunate error made by a rookie agent threatened to not only delay settlement, but also result in his buyers being hit with double the applicable stamp duty, when he inadvertently wrote up 2 contracts for the same sale.
In this instance, the agent initially wrote up the Offer and Acceptance contract for the buyers, Mr and Mrs Johnston, (not their real name) with no Finance Clause selected. This was effectively a cash contract.
Becoming aware that the buyers did in fact require finance to purchase the property, he subsequently wrote up a whole new contract including the Finance Clause and this became contract #2.
Unfortunately this mistake resulted in the submission of 2 contracts for the same deal, each attracting the corresponding stamp duty and exposing his buyers to the prospect of having to pay stamp duty twice.
To rectify this situation, both contracts were submitted to the Office of State Revenue with an accompanying explanation for the error with the 2 contracts. However, this is not a quick process and it can take up to 2 to 3 months before the case will be reviewed and one of the contracts can subsequently be cancelled to avoid having the buyers charged double the stamp duty.
In the meantime, the O and A has been set to settle according to schedule and the agent has learnt the hard way that, instead of writing up 2 contracts, he should have written a variation to the initial contract.
Some other “take home” points to this case are:
1. In some situations we will be required to lodge both contracts at the Office of State Revenue for assessment, which means that the buyer will lose their ability to use Revenue Online and they will have to come up with the duty prior to settlement.
2. As there was initially a cash contract executed, this could mean the Office of State Revenue will expect duty to be paid within 2 months of execution because it’s an unconditional contract, even though the cash contract was cancelled. This could cause a problem if settlement is due after the duty is due and the buyers don’t have the funds to pay it prior to settlement.
3. If for any reason the purchase price was changed or the settlement date was deferred on either of the 2 contracts there could be further issues with the assessment of duty.
Image by Cathy via Flickr.