Why should foreign investment be a consideration for vendor developers?
Buying off the plan has become very popular among foreign persons looking for residence or investment. Australia has a foreign investment framework where foreign persons generally need to apply to the Foreign Investment Review Board (‘FIRB’) for approval to purchase residential real estate in Australia.
What methods are available for obtaining FIRB approval?
Foreign purchasers can submit their own application to FIRB directly. Once they have paid the application fee, the Australian Taxation Office has 30 days to make a decision payment and a further 10 days to notify the applicant of the outcome. This is by far the most common method for FIRB applications.
Note that FIRB may extend timeframes for reviewing applications from 30 days to up to six months.
There is an option for vendors to apply to FIRB for a streamlined bulk approval process as an agent on behalf of purchasers. While there is still an application fee for each foreign person looking to make a purchase, the benefit is a much shorter time frame for a decision to be made. With a 10-day timeframe, the sales contract can become secure sooner.
This process is available to vendors who meet the New Dwelling Exemption Certificate requirements; have a strong compliance history; and has already marketed, and will continue to market, the development in Australia.
Vendors can apply for their development a New Dwelling Exemption Certificate. The benefit of holding this certificate is that each foreign individual does not need to seek their own FIRB approval.
There is an application fee for obtaining the certificate plus an additional fee for each new dwelling acquired by foreign persons. During the sales process, the vendor will need to make the payments and report to FIRB every 6 months with the details of each foreign purchase. As this method is particularly onerous and costly on the vendor, this is intended for vendors who are anticipating a high volume of foreign investment persons purchasing from their development.
Preparing your sales contracts
There are several ways in which we can draft your sales contracts to address foreign investment.
Standard sales contracts generally provide that the purchaser warrants they do not require FIRB approval or that if they do, they have already received FIRB approval. Until foreign persons receive FIRB approval, they are unable to enter into these standard sales contracts.
Alternatively, we can tailor your sales contract to address a chosen FIRB approval method and enable foreign persons to enter into your sales contract, even if they have not received FIRB approval yet.
Johnston Withers Lawyers: Experience You Can Trust
Johnston Withers Lawyers have experience in providing advice on foreign investment options and preparing your sales contracts to address foreign investment. If you’d like advice or direction from a lawyer, please contact Reyka Quiniones on (08) 8231 1110, or get in touch online.