Split Contract House and Land: What You Need to Know
If you`re looking to build a new home, you may have come across the term “split contract house and land”. So, what exactly does it mean? And how does it differ from a regular home building contract?
First things first, a split contract house and land is a type of contract where you buy the land separately from the house. This means that you enter into two separate contracts: one for the land and one for the construction of the house. The two contracts are split because the land purchase is often subject to different requirements, such as stamp duty and settlement, than the construction of the house.
So, what are the benefits of a split contract house and land?
Flexibility
One of the major benefits of a split contract is the flexibility it provides. With a regular home building contract, you`re often locked into a particular design or floor plan. With a split contract, you`re able to choose the land on which you want to build and find a builder who`s willing to work with you to design a custom home. This means that you can tailor your home to your specific needs and preferences, instead of being limited by a pre-designed floor plan.
Stamp Duty Savings
Another benefit of a split contract house and land is the potential for stamp duty savings. In some states, stamp duty is only payable on the land component of the purchase. This means that you can save on stamp duty by buying the land separately from the house.
Greater Transparency
A split contract also provides greater transparency in terms of costs. With a regular home building contract, the builder will often include the cost of the land in the overall price of the home. With a split contract, you`re able to see exactly how much you`re paying for the land and how much you`re paying for the construction of the house. This can help you make more informed decisions about your home building budget.
However, it`s important to note that a split contract does come with some potential downsides:
Increased Complexity
Because a split contract involves two separate contracts, it can be more complex to manage than a regular home building contract. This means that you`ll need to make sure you have a good understanding of the terms and conditions of both contracts, and ensure that everything is in order before proceeding.
Greater Risk
A split contract also involves greater risk than a regular home building contract. For example, if the land settlement falls through, you may lose the deposit you paid for the land. Additionally, if the builder goes bankrupt or fails to complete the house, you may be left with an unfinished home.
In conclusion, a split contract house and land can provide greater flexibility and potential cost savings, but it also comes with increased complexity and risk. Before entering into a split contract, it`s important to do your research and seek professional advice to ensure that it`s the right choice for you.