I need help with my recent apartment purchase!

I recently purchased an Unilodge Apartment and it is due to settle within a week. About 2 weeks ago I found out that my solicitor was working for both the vendor and I!

I signed the contract of sale with subject to lease. My agent said this apartment can be owner occupied and managed however my new solicitor now informs me of the a 10 year lease agreement is placed on these apartments with unilodge so that they will manage the apartments and give me a return every month...the rent they are charging for a 2 bedroom apartment will be 2400 per month and I may get a return of 1000 - 1500.

If I live there, I am unsure if I need to pay them 2400 and then they will return some back to me at the end of each month, if that was the case I'd be losing a lot of money!

Has anyone else has purchased a student apartment which caused a significant long term loss in the past?

If I cannot live there because of this lease then I will also lose my FHOG!

What a mess!

Sounds like you got stiched up big time!

Did you read the Contract of Sale and the attached lease it was subject to? Do you have a copy on hand?

I did read the contract of sale and there is an apartment lease which I believe only part of the lease was given. The agent misleading and deceiving and he introduced me the solicitor on the day that I signed my contract. I only found out that the solicitor was working for both parties when he wasn't doing work for me and I decided to change solicitor and the new solicitor found out about the conflict of interest!

shim said:

I signed the contract of sale with subject to lease.....


If I cannot live there because of this lease then I will also lose my FHOG!

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I am a bit unclear about this - doesn't "subject to lease" mean you WANTED a lease in place? Otherwise you would have made it "subject to vacant posession"....

The Y-man

I think what Shim wanted to do was stay in the aparment for 6 months than move out but be guaranteed a lease? Hope you get it sorted out. About FHOG, you wouldn't lose it if you cant stay in the apartment you have bought. You can treat it as an investment property and use it the FHOG the next time when you purchase a place that you will live in. Unless of course you need the FHOG to meet the asking price.

This lease I signed to is not the lease that the tenant has with the vendor, it's an lease I have with the Unilodge Managers. So what I have signed meant that even though I am the owner, I have agreed to pass it onto Unilodge to manage for me for the next 10 years and during this time, If I decide to live there, I'll have to lease it back from unilodge. This scheme is known as an income pooling scheme, they do this with student apartments, i was unaware of it when I signed the contract. If I have to lease the apartment from Unilodge and then at the end of the month get a proportion of the money back, then I may not be eligible for the FHOG. I do require the FHOG because with purchasing an apartment you are required a 20% deposit before the bank will lend the money. Parts of the FHOG will go to the stamp duty and the other half to the deposit.

Your solicitor should have been aware and also made you aware of all this and its implications on your FHOG eligibility and ongoing serviceability.

Perhaps a call in the morning to:
* The solicitor involved and if you get no satisfaction....
* the Law Society to make a complaint

Unilodge are student accomodation, right? How the heck were you planning to justify claiming the FHOG on STUDENT accomodation? You going to go to uni forever?

Sounds like the Quest Apartments locally. They are "cheap" because they were sold with a rental guarantee and CPI type increase each year. Quest's returns have skyrocketed but the owners are locked into a watertight 15 year lease. (And regular replacement of air-cons and carpets etc)

If you weren't informed about the lease you can walk. (That ain't legal advice) If you just didn't listen, you've got problems.

I wasn't aware of the lease, my agent recommended the old solicitor for me, the solicitor was acting on behalf of me and the vendor and he did not inform me of this kind of lease during my 3 day cooling off period. On the day I signed the contract of sale, the agent said that the lease is the current tenant lease, and will end in July and I will be able to move in from then, I am still a uni student. The agent did also say that you don't have to be a student, they now allow anyone to live there. My new solicitor has found all the problems after reading my contract and section 32 and my settlement is in just over a week, it's too late to back out now

This is a royal mess, and I know it's not helpful, but I'm staggered that you've gotten yourself in so deep without more research. You should have asked all these questions before signing a contract.

How much deposit have you given them? I'd be tempted to just pull out and lose the deposit. If you have recourse against the agent and/or solicitor and can recover the deposit later, then great, but once you've settled, it's much harder to resolve. Even if you can't get your deposit back from the agent or solicitor, unless you have substantial other assets (I'm guessing not), they're unlikely to sue you if you decide to walk away, so just do it and write off your deposit. It'll be less expensive in the long term that getting into such a terrible investment.

How did you finance this? You can usually only get about 60% LVR on this kind of product. Do you have 40% of the property's value in cash?

It's going to be an expensive lesson, I imagine, but I'd really consider breaching the contract by failing to settle.

And do NOT sign a contract again without fully understanding it!

Shim, at least one thing you will learn from this is to do more research, read the documents in more detail, and ask questions.

Check the link below. Talk to Unilodge and your solicitor about the actual terms of the lease. From the way I read it, you should not have any issues.
You should be able to become an owner-occupier and opt out of the rental pool with sufficient notice (6mths). Then opt in later when you want to move out?? But check.

UniLodge Sydney Investor
http://www.unilodge.com.au/invest/investors/faqs.asp?ID=133

3. How does the rental pool work?
The majority of existing apartment owners have opted to join a rental pool that was created in the fourth year of the buildings history. All the gross income for the pooled apartments is placed into one account and all the owner costs and expenses such as strata levies, water rates, council rates and maintenance are then paid. The net figure for that particular month is then redistributed to owners based on their apartment lot entitlement. An apartment remains a pooled apartment for the duration of the registered lease period (2007) and cannot come in and out of the pool except when owner occupied. However an owner can join the rental pool at any stage as long as their apartment is tenanted at the time of joining.

17. Can I use my apartment on weekends and holidays if it is empty?
No: Investors are required to provide six months written notice prior to becoming an owner- occupier. Because of the complex nature of managing and booking hundreds of apartments weeks and months ahead temporary stay without the appropriate notice is not permitted. To be an owner - occupier an investor would still need to comply with the council's development consent, which requires an owner - occupier to be a student.

You would still need to pay the normal strata levies, water rates, council rates yourself then.
But if they rent out for 2400/mth, and your return would have been 1000 - 1500, that sounds like a lot of strata levies anyway.

Think you should be OK though. If you need to give 6mths notice to owner-occupy, then it's still within the period allowed for the FHOG.

Somersoft is a good source of information. Should have checked out previous posts regarding Unilodge.
http://www.somersoft.com/forums/showthread.php?t=45716

I have read the sydney unilodge information, however the lease agreement for the Melbourne Unilodge is a bit different. The new lease agreement allows anyone to stay there, owner is not required to be a student.
I have looked into pooling out of the contract however my solicitor thinks there's too much risks involved, I may lose my entire deposit if they cant sell for more than what I offered.
My solicitor is trying to get vacant possession on settlement for me and if that cant happen then I have 90 days after settlement to get out of the pool and if that fails again, then I will be looking to sue the agent or solicitor.

I am new to the property market and only found this forum last week, i want to thank everyone for making contribution and helping me out, this is a great forum!

shim said:

The agent misleading and deceiving and he introduced me the solicitor on the day that I signed my contract.

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Wow...this is disgusting

I think you would have grounds to rescind the contract and not settle due to mitigating factors and deceit from your solicitor....

As OZperp has said, what a mess..

What has your new solicitor suggested to yoU?

How much deposit have you paid? If you are expecting the FHOG to pay your deposit and stamp duty but you are unable to get the FHOG you will be unable to complete the purchase.
Did the first solicitor give you a letter outlining that he was also acting for the vendor? If he didn't he should have done. They have to declare interests like this.

shim said:

, my agent recommended the old solicitor for me,

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The selling agent is the Vendors agent, working in the best interesta of the Vendor. They are NOT your agent. Unless you engage an agent/buyers advocate to look for a property for you, any agent you deal with is someone elses agent and it is caveat emptor (buyer beware).

If this agent is actually a buyers advicate then you have recurse against them.

Get your new solicitor to talk to the head of the agency and tell them that you are going to sue for misleading and deceptive conduct (s52 fair trading act).

Also get the solicitor to try and get you out of the contract due to contractural mistake.

Basically try and make it easier for them to give you your money back than to go ahead.

good luck,

RightValue

shim said:

I recently purchased an Unilodge Apartment and it is due to settle within a week. About 2 weeks ago I found out that my solicitor was working for both the vendor and I!

I signed the contract of sale with subject to lease. My agent said this apartment can be owner occupied and managed however my new solicitor now informs me of the a 10 year lease agreement is placed on these apartments with unilodge so that they will manage the apartments and give me a return every month...the rent they are charging for a 2 bedroom apartment will be 2400 per month and I may get a return of 1000 - 1500.

If I live there, I am unsure if I need to pay them 2400 and then they will return some back to me at the end of each month, if that was the case I'd be losing a lot of money!

Has anyone else has purchased a student apartment which caused a significant long term loss in the past?

If I cannot live there because of this lease then I will also lose my FHOG!

Click to expand...

If the agent has told you one thing,the your legal person tells you something,then it's about time you express your disapproval to both ,there is no way this legal person should be acting for both parties,as she-he has a different opinion to the sales person,tell them both upfront but the problem may well be the way the contract is worded/I signed the contract of sale with subject to lease/good luck willair..
http://www.liv.asn.au/regulation/

My previous solicitor never wrote a letter saying he is working for the vendor, he did breach a conflict of interest. The agent said that the lease agreement was because there are tenants in the building so to how I understood it, it was a tenant and a vendor lease that I was required to sign to rather than my lease with unilodge. At the time I was confused to why I had to sign the lease, but agent was being deceiptive and said reason was because I can't have vacant possesion on settlment day until existing tenant lease ends in July.
My new solicitor picked up this lease agreement and informed me that the lease I signed was actually was with unilodge rather than the tenant, however because of the time wasted with the previous solicitor I wasn't able to let it go during the cooling period and it's too late to get the bank to reject the finance without losing my entire deposit.
I don't really want to retract from the contract anyway because I paid a good price for it, my current solicitor says it's best to settle and give them notice to take me out of the pool within 90 days and if they fail to do so I will be taking further action to sue either the agent or the solicitor.

I will keep everyone updated as to how this goes and hope that all the information posted here will be useful to the next person who wants to buy an unilodge apartment and not make the same mistakes as I did.

It is also wrong for the RE Agent to recommend the Solicitor as they would have known it was the vendors Solicitor.