I learnt a lesson in my investing career in the recent weeks. I am in the process of purchasing a third property deal.
Before any contracts we’re exchanged i request up front for a ‘license to occupy’. This happened really early while we we’re in initial negotiations and chatting!
In general terms this means you can access the property to carry out minor repairs and or whatever is stated in the terms of the agreement. The agents reply was, “yep” that will be alright and that will be a clause that goes in the special conditions in the contract.
I took a special trip in to town for a pre organized appointment to meet the bank manager, to coincide with signing, who was traveling from over an hour away. I asked if it the contract was ready to sign and was told “yes”. On sitting down to sign it i noticed there was no signatures on the section 32’s from the vendor and the contract is not signed. But wait hang on where is the special conditions clause to access the property?
The women at the desk says oh i don’t know. I mean you are only dealing with thousands of dollars but don’t know why a vendor hasn’t signed the contract. I was told the ‘license to occupy’ is going to be a separate form to sign and $110 dollar fee, but it’s ok… it’s going ahead.
So i had no contract i could take to the bank manager to set the mortgage application in further progress and another week until i could get another appointment with a flat out bank manager. After three more trips into town i got to see the ‘license to occupy’ and it only has permission to store things in the shed. Oh no hear we go! I explained that i could of been more clearer in my instructions and said i wanted to begin some minor repairs to the house as well. Agent said no, i said what’s the problem? Agent says vendor are scared i will damage the property.
The lawns haven’t been mowed and the place really seriously needs attention and they are saying they actually care about the property. Yeah, right lie to me another way because I’m not believing you yet! This is how people try to take the wheel on your investment activities. If you want to take the wheel make sure you know what direction your steering!
On asking the agent more about this i was told that there solicitor had instructed them not to insert a special conditions clause into the contract and then to only allow shed access. During all this i was making plans so that i could even buy the property and was short $3,000 because in this strategy i was to get income buy putting a tenant into a current project getting finished which also freed up mortgage repayments on that and then preparing this property for a tenant and getting those funds up front.
I asked for a 60 day settlement and by now it’s getting into a full month since and no license to occupy and i don’t know how I’m going to settle with short funds. I explain this to the agent and get sent to there solicitor and after a chat with a sensible fella and requesting from the vendor he said no worries this is alright to have a license to occupy for minor repairs but MUST do no structural work or knocking out walls.
I had to put a couple and a little baby out onto the street who wanted to rent and another fella. They’ve got somewhere but it’s caused problems right down the line. I asked for 90 days settlement for this but as usual people are so greedy and want money handed out to them a.s.a.p. They would only give 60 days, burnt 36 days mucking around and I’m down to 21 days with early access with an LTO. I asked them to pay me $2000 for it but i don’t see them paying me!
The solicitor had no knowledge of my request for the license to occupy from the agent over the last month when I’d asked four times and made four separate trips into town to see the agent and not received any email or calls back from the agent. The solicitor also tells me that he had not been told about my requests for the license to occupy to carry out minor repairs to the building. Here is where it gets interesting, the solicitor advises me that next time and what i should have done this time was to include it in the contract as a special condition. Go figure!
OK, i’m writing this blog post to document my lesson learnt here with this. If getting a LTO the way to do it is to have MY legal eagle (solicitor) write a letter to the vendors solicitor and have them put it into the contract and agreed to up front with all the terms clearly requested to the vendor. If it means to make or break a deal then you really need this to happen. I was threatened that it was going to be enforced if i didn’t not have the funds to settle. DO NOT SIGN the contract until it’s all properly in place and structured.
I take responsibility for this mistake and the lesson is learnt. But in it all i did achieve my first LTO so that a bit of a thrill for me. On settlement day 28th June i am going to be flat broke.
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