We are acting for the Land Development Agency (‘LDA’) in relation to its sale of single residential blocks in the ACT’s new suburb, Moncrieff.
If you are marketing blocks in Moncrieff or are interested in the upcoming public ballot in November 2014 you will need to be familiar with the “New Land Rent Scheme”.
What are the 5 things you need to know?
- Applies to contracts entered into after 1 October 2013: The New Land Rent Scheme applies to single residential blocks of land where the buyer has entered into a contract with the LDA after 1 October 2013 (i.e. Moncrieff land). There is no change to the Land Rent Scheme for buyers that entered into contracts prior to 1 October 2013 – the changes outlined below do not apply to land acquired under those contracts (i.e. Coombs, Wright and Bonner land).
- Discount rate available: The New Land Rent Scheme is no longer available to everyone and is now targeted at those potential participants who will benefit most – low to moderate income buyers. They will pay ‘discount’ land rent of 2% of the unimproved value of the land per annum.
- Eligibility Criteria: Those buyers who are eligible are those which satisfy the following criteria: (a)The buyers combined household income is less than the ‘Threshold Income Amount’ which currently ranges depending on the number of dependents from $160,000 to $176,650 per annum; (b)The buyers have no equitable or legal interest in land or property, and (c)The buyers have an intention to live in the dwelling once completed. The LDA will not grant a Land Rent Lease to a buyer unless the ACT Revenue Office confirms that the buyer meets the eligibility criteria. This eligibility will be assessed approximately 6 weeks prior to settlement with the LDA. The LDA contract is now conditional upon the ACT Revenue Office determining that the buyer meets the eligibility criteria mentioned above. If the buyer does not meet the eligibility criteria prior to settlement, then the LDA or the buyer can rescind or decide to purchase a Nominal Crown Lease.
- Subsequent ineligibility: Once settlement has occurred, the participant must remain eligible for the discount rate in order to remain in the scheme. If they remain ineligible for 2 consecutive years, they are obligated to transition out of the scheme within a further 2 years by either converting the Land Rent Lease to a Nominal Crown Lease (by paying the unimproved value of the land to the ACT Government) or transferring the Land Rent Lease to another eligible buyer. It remains to be seen how the ACT Government will enforce this.
- LDA requirements: LDA requires a number of documents from buyers prior to exchange and settlement including a statutory declaration stating that the buyer has received legal advice on the contract, a financial advice certificate from a qualified financial advisor or practising accountant on the contract and a completed application from buyers acknowledging their compliance with the eligibility criteria. The requirements differ depending on whether the land was purchased in the Builders Ballot in June this year, or the upcoming Public Ballot.
What are the implications for you?
When purchasing and marketing blocks in Moncrieff you need to be familiar with the new scheme and the LDA’s contracts and processes that have been amended to take into account the changes. When dealing with Land Rent generally, builders and agents also need to be aware of whether they are marketing land under the “New Land Rent Scheme” or the “Old Land Rent Scheme” as different conditions apply. The Certificate of Title for blocks under the “New Land Rent Scheme” may note a restriction on transfer.
For more information contact the Property and Projects Team: