Dept of housing putting "buyer must be owner occupier" in contracts of sale

This is in part a legal question, but it also factors into the property market economics side as well - so i thought it prudent to post it here:

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A bit of a curly one has come up from my friend, who is currently trying to buy his 3rd property.....
His strategy is to buy cheap, ex-dept of housing properties, preferably with cosmetic damage - then tidy them up/renovate and rent them out at a premium.

He has done this very successfully with his first two properties, however now that he is looking for a 3rd - he has hit a snag.

When looking at all the auctions for dept of housing properties, most (if not all) of the contracts are now listing that the buyer must be an owner occupier. When looking at the listings on RE.com, or on real estate agents websites... they are often listed as below:

Auction

3 bedroom | 1 bathroom IDEAL OPPORTUNITY!
* 3 Bedroom home
* Large combined lounge & dining area
* Spacious kitchen
* Neat & Tidy bathroom
* Side access
* 657.4sqm block of land
* Close to schools, shops & public transport
* Owner Occupier (As per contract of sale)


We are wondering - can the contract REALLY stipulate that the buyer must be an owner occupier?? Talking to the REA on one particular property, the contracts say that the property cannot be leased for 7 years!!

NB: these are all very low cost areas, such as the Mt Druitt thru to Lethbridge Park and Macquarie Fields areas.


This is pretty interesting! Is the labor govt forcing investors out of the low end of the market? Can they do this??

To me it seems like the welfare state trying to keep bottom end properties away from investors. This makes NO sense to me! This will reduce the number of rental properties in these areas, drive rents HIGHER, and even further excasserbate the lack of rental affordability.

Thoughts?
 
I don't know if it is enforceable, but the thinking behind it is to repair ghetto areas by getting owner occupiers. They think that investors will just replace questionable low income HC tenants with questionable low income private tenants.

(BTW, I have been a not-questionable low income public and private tenant. I realise these are generalisations. Just quoting a REA who has a Dept of Housing contract).
 
Its funny cos my friend and I havent noticed this before, but now it is placed on pretty much every dept of housing property listed for sale.

He even bought 2 dept of housing properties this year without this clause (one last month).

Is it really a binding clause?
I mean - once you buy a property, isnt it yours to do with as you please??
 
It's not always there according to the REA we spoke to. Some are excess but not ghetto, these won't have the restriction.

I guess it probably is enforceable (breach of contract) but I don't know how they'd know.
 
Its funny cos my friend and I havent noticed this before, but now it is placed on pretty much every dept of housing property listed for sale.

He even bought 2 dept of housing properties this year without this clause (one last month).

Is it really a binding clause?
I mean - once you buy a property, isnt it yours to do with as you please??


I have come across such properties in the past where DOH put a caveat on the property.

Its obviously not all the properties they sell off but some of them.
 
if it's a caveat... then it's gay and i will be recommending my friend avoid it like the plaigue.


EDIT: waiting for a copy of a contract to see just how it's put in there.
 
Its funny cos my friend and I havent noticed this before, but now it is placed on pretty much every dept of housing property listed for sale.

I've found in the last month about half of the HC houses I have looked at have the owner occupier stipulation.

Is it really a binding clause?
I mean - once you buy a property, isnt it yours to do with as you please??

Yes to the first question. It's in the contract (as stated). It lasts for 7 years.

There is a grey area however. No-one yet has been game to test it out. I'm having my solicitor friend look into the wording.

No to the second. You buy it with conditions.
 
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It is an exaggeration. There are only a few of them with that clause in them. My daughter was going to purchase one of them, but they wanted too much. Second daughter wants one without restrictions, cause she wants to stay at home.
 
Ok here we go.


Its random added.

There are ways around this legally, but will not be giving advice. If you dig deeper, you may realise that someone in there must own 40%

What about if you wrap it? @ 40/60 with higher price??

There are different avenues for this.


It is a caveat on title.

Other option is, buy one for $135k (worth 220k) redraw the cash and service loan with equity for 7 years


Different ways of skinning a cat.

But its hairy clause. It is inserted to get private owners into the area at an affordable price. thats all. I hate labor party but it aint anything to do with them, Just dept improving these slum areas. its a shame because it destrys good homes, but it also helps negotiate with other homes on market where agents dont understand what a doh clause is.

:)

Night.
 
sounds like it will be easier to just avoid these properties with the DOH clause, and target the ones without.

Cheers for the help guys... we'll keep investigating for our own personal interests, but I'd say my mate will just target the houses without the clause.
 
Doh

You wil find this is more and more common with DOH. I have a friend in the Department, and they have found that this works in 'cleaning up' previous troublesome estates as the owner occupiers take pride and interest in their investments, whereas renters tend to not take as much interest. There are now standards for how many homes in estates have to become owner occupied. A classic example is that estate in Dubbo that made headlines a few years ago, now that a big percentage of owner occupuiers have been introduced there are no more national TV headlines. I have heard that they prosecute if you try and rent them out, so wouldn't bother going that way. Hope that helps!
 
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